UK Prospectus Regime Outcome - 1 March 2022

England and Wales

On Tuesday 1st March 2022 the UK Government (through HM Treasury) announced the Review Outcome of its consultation to reform the UK Prospectus Regime. CMS has been actively involved in discussions that have resulted in this Review Outcome, which in our view represents a fundamental reform of the UK Prospectus Regime.

Below is a summary of the main changes:

  • FCA’s rule-making powers - under the new regime the FCA will be granted enhanced rule-making powers (responsibilities to include setting the prospectus requirements in the context of admission to trading and the requirements applying to regulated crowdfunding platforms)
  • Admissions to trading on UK Regulated Markets - IPO candidates and listed companies will still be subject to the prospectus requirements which will continue to apply to the admission of securities to trading on UK Regulated Markets
  • Public offerings - the prospectus will no longer be a feature of the UK public offerings regime, there will be a general prohibition on public offerings of securities and companies wishing to conduct a UK public offer will need to fall within one of the exemptions; the exemptions will be expanded and include:
  1. offers of securities that are, or will be, admitted to trading on UK Regulated Markets;
  2. offers of securities to those who already hold equity securities in the offering company, subject to certain conditions, including that the offer is made pro-rata to a person’s existing holding - this means that pre-emptive share offerings (such as rights issues and open offers) will only need a prospectus if required by the FCA’s new rules that will apply when securities are admitted to trading on UK Regulated Markets;
  3. offers of securities that are or will be admitted to trading on certain multilateral trading facilities (such as AIM)
  4. offers by private companies made through a platform operated by a firm specifically authorised for the purpose (such as equity crowdfunding platform)
  5. offers extended into the UK on the basis of offering documents prepared according to the rules of the relevant overseas jurisdiction and market
  6. 'qualified investors', '150 persons' and ‘directors/employees’ exemptions
  • Private companies – private companies will have more options for structuring fundraisings, given the expanded list of public offer exemptions, incl. a regulated crowdfunding platform as mentioned above
  • ‘Necessary information’ test – the intention is to retain a single statutory 'necessary information' test as a basic standard of preparation for a prospectus, this may vary according to whether an offer of securities relates to a first-time admission to a market or is a secondary issuance
  • Forward-looking information - in prospectuses forward-looking information will be subject to a higher "recklessness" threshold for liability
  • Overseas companies - offers by overseas companies (on certain designated overseas stock markets) into the UK may be conducted through a new regulatory deference regime

In terms of next steps, the UK Government will introduce new legislation to replace the existing prospectus regime when parliamentary time allows, and the FCA will need to consult on new rules.