EU Prospectus Directive in action The Impossible Dream!

Transcription

1 EU Prospectus Directive in action The Impossible Dream! April 2006 Janet Cooper and James Jaques Partner and Consultant Linklaters and

2 Background Need to create a single capital market 25 member states 650+ million people Ageing population Pension crisis Political union?

3 Introduction Prospectus Directive Money Laundering Directive Transparency Directive 2007 Market Abuse Directive MIFID 2007 Tax harmonisation IAS Regulation Corporate Governance Takeover Directive European Company 2007 Law Statute 42 Savings Directive and Information & Consultation Directive European Employment Directive

4 Threat from China and India GDP by Country 2005 GDP 2005 ($ m) US UK European Union China India

5 Threat from China and India: labor rates % GDP from Industrial 60% 50% 40% 30% China Russia Brazil Mexico Canada Italy Japan Germany 20% India UK USA France 10% 0% Source IMD: BCG Analysis G7 economies Manufacturing labor Cost $/hr $/hour

6 Introduction New rules for offers of securities to the public One set of rules across EU New securities laws can apply to share plans Some plans may require a prospectus and/or other filings

7 Introduction Various get-outs from issuing a prospectus for stock plans but: different in each country different for different kinds of plans different for different companies But for most plans in most countries, no prospectus is required

8 Introduction How to avoid doing a prospectus Exclusions Exemptions What s involved in doing a prospectus Survey results

9 How to avoid doing a prospectus

10 How to avoid doing a prospectus Exclusions Exemptions Not a public offer Can t use exemptions Local rules may apply Will not fix home member state Is a public offer but exempt No local rules May fix home member state

11 How to avoid doing a prospectus exemptions EU-listed companies ESP Exemption Exemption for most stock plans where issuer has a listing on an EU regulated market In most countries, a debt listing is enough Applies to offers under all kinds of share plans No limit on number of employees/directors

12 How to avoid doing a prospectus exemptions EU-listed companies ESP Exemption Need to make available information about the offer and the company No requirement to file it or have it approved Wording in explanatory booklet or on intranet Some countries imposing formal requirements If in doubt, put the wording in!

13 How to avoid doing a prospectus exemptions Small offers Offers to fewer than 100 people per member state Some countries look just at that member state Some countries look at all member states The simplest and most consistently applied exemption Often sufficient for executive plans

14 How to avoid doing a prospectus exemptions Other exemptions Not often useful: Offers to sophisticated investors Securities with denominations of 50,000 But can be used in addition to the small offers exemption

15 How to avoid doing a prospectus exclusions Monetary thresholds Directive does not apply to offers where consideration is less than 2.5 million Tested over a 12 month period Should, in theory, exclude free rights e.g.: RSUs restricted stock options (arguably) stock settled SARs

16 How to avoid doing a prospectus exclusions Monetary thresholds Different thresholds in different countries Some countries look at value of shares not consideration given Some countries count: offers in that country only offers throughout the EU offers worldwide

17 How to avoid doing a prospectus exclusions Non-transferability Directive only covers offers of transferable securities Options, RSUs etc normally not transferable Some countries treat grants as exempt But possibility that: treated as an offer of underlying shares exercise of options is treated as an offer!

18 How to avoid doing a prospectus exclusions Non-transferability May be useful for option plans, RSUs in some countries Difficulties with share purchase plans: Share Incentive Plans (UK) Section 423 Plans (US) Restricted Stock Awards

19 How to avoid doing a prospectus

20 How to avoid doing a prospectus Exclusions Exemptions Non-transferable option/award Monetary thresholds Fewer than 100 people Employee share plans of EU-listed companies

21 How to avoid doing a prospectus Effect on home member state Home member state regulates any public offers Country of incorporation (if in the EU) Otherwise: first public offer after 31 December 2003 first admission to trading Does not include offers which are subject to an exclusion

22 How to avoid doing a prospectus - summary Summary Companies with EU listings: Should be able to avoid a prospectus Include special wording Watch for local law requirements! Companies with no EU listing: RSUs and options OK in most countries Smaller grants OK in most countries Problems most likely with broad-based plans and share purchase plans

23 How to do a prospectus Once issued in one country can use anywhere else in the EU. Civil liability and statutory compensation against directors (among others) Responsibility statement by issuer and directors (among others)

24 How to do a prospectus Contents of a prospectus: Information necessary to make investment decision Risk factors Financial information (IAS or equivalent ) Overview of business, markets and history including material contracts Management and their remuneration Rights attached to securities

25 How to do a prospectus Contents of a prospectus: Summary document (not more than 2,500 words in the UK) Directors normally have to take responsibility Needs updating whenever the plan is operated

26 Linklaters EU Prospectus Directive Survey surveyed, US, Swiss and Australian companies adversely affect EU plans currently operating broad-based plans in the EU producing a prospectus details of the passporting process limited the operation of employee stock programs cost any perceived benefit Please complete it at our booth, or us and we will send it to you

27 And there s more. Transparency Directive MIFID Takeover Directive Savings Directive

28 Questions? Thank you Janet Cooper Tel.: (0) James Jaques Tel.: (0)