The scope of the exemptions from the obligation to produce a prospectus under the Prospectus Directive were increased with effect from 31 July 2011 in the UK.

Exemptions from the Prospectus Directive

Under the Prospectus Directive a prospectus may be required when shares (or other securities) are offered to employees.  There are a number of exemptions from the requirement to produce a prospectus and 2 of these exemptions have been amended.
The amendments are:

•     The number of persons per member state exemption has been increased from 100 to 150
•     The limit for exempt offers has been increased from €2.5 million to €5 million

Details of the increased scope of these exemptions were reported in our article of 10 December 2010 (see Resources below).

Note however that while these exemptions have been increased in scope in the UK, this may not be the case throughout the remainder of the EU.  Therefore, before relying on these exemptions the limit in each relevant jurisdiction should be checked.

Future amendments to the Prospectus Directive

The exemption from the requirement to produce a prospectus in connection with offering shares to employees, the share schemes exemption, is also to be expanded.  However, member states have until 1 July 2012 to implement this change.

This expanded exemption will mean that:

• All companies with either their headquarters or a registered office in the EEA will be able to benefit from the employee share schemes exemption.
• Companies with their headquarters or a registered office outside the EEA with either
• Securities traded on a regulated market in the EEA or
• Securities  traded on a regulated market outside the EEA (a “third country”) and who satisfy some additional requirements (see below)

will be able to benefit from the employee share schemes exemption.

These additional requirements are:

• A formal decision that the third country’s legal and supervisory framework is equivalent to the framework in a regulated market has been issued by the European Commission; and
• That sufficient information, which will include an information document, “is available in a language customary in the sphere of international finance” (generally taken to include English).

Commentary

Once the ‘share schemes exemption’ comes into effect and the exemptions are harmonised throughout the EU, it will be simpler and less expensive for companies who qualify for a relevant exemption to introduce share schemes.  However, companies listed on AIM in the UK with their head office or registered office outside the EEA will continue to fall outside the exemptions as AIM is not a ‘regulated market’.

Resources

Amended Prospective Directive finalised – extended exemption for employee share schemes

For further information or to discuss the issues raised, please contact Guy Abbiss or Stephen Wright on +44 20 3051 5711.