July 2012 Implementation of the PD Amending Directive in Luxembourg. The aim hereof is to provide you with a short overview of the main changes and new requirements that will be relevant for issuers making an application to have or having securities (debt and equity securities) admitted to trading on an EEA regulated market and issuers offering securities to the public further to the implementation into Luxembourg law of directive No 2010/73/EU (the PD Amending Directive ) by a law dated 3 July 2012 (the Law ) with effect of 1 July 2012. The Law was published yesterday in the Luxembourg official gazette (Mémorial). This note also highlights certain changes and new requirements because of the coming into force on 1 July 2012 of certain directly applicable European Union legislation detailed here below. In a context of enhancing the competitiveness of companies in the EU and reducing administrative burdens without compromising the protection of investors and the proper functioning of the securities markets, the PD Amending Directive amending the Prospectus Directive No 2003/71/EC and the Transparency Directive No 2004/109/EC came into force in December 2010 and had to be implemented by Member States into national law by 1 July 2012. In Luxembourg, the PD Amending Directive was implemented by the Law, which amended both the law of 10 July 2005 relating to prospectuses for securities (the Prospectus Law ) and the law of 11 January 2008 on transparency requirements for issuers of securities (the Transparency Law ). In addition, pursuant to the PD Amending Directive, the European Commission (the Commission ) was granted powers to adopt delegated acts. Further to this, on 30 March 2012, the Commission adopted a first Delegated Regulation (EU) No 486/2012 amending Commission Regulation (EC) No 809/2004 (the PD Regulation ) as regards the format and the content of the prospectus, the base prospectus, the summary and the final terms and as regards the disclosure requirements (the Part I Regulation ). This Part I Regulation was published in the Official Journal of the European Union in June 2012 and is applicable since 1 July 2012. Contents Key Changes and New Requirements under the Law... 2 Part I. Prospectus Law... 2 New Definition of Qualified Investors... 2 Increase of Certain Thresholds for Exemptions to Publish a PD Compliant Prospectus or a Simplified Prospectus... 2 Additional Exemptions to Publish a PD Compliant Prospectus or a Simplified Prospectus... 3 Prospectus and Issue Summaries... 3 Key Information... 3 Validity Period of a Prospectus... 4 Publication of the Prospectus... 4 Annual Document... 4 Supplements and Withdrawal Rights... 4 Retail Cascades... 5 Member State Guarantors.. 5 Passporting... 5 Debt Issuance Programmes Final Terms (Part I Regulation)... 5 Lighter Regime for Rights Issues (Part I Regulation)... 6 Part II. Transparency Law... 6 Increase of Certain Thresholds... 6 Grandfathering Provisions for Obligations under the Transparency Law... 7 Implementation of the PD Amending Directive in Luxembourg 1
On 4 June 2012, the Commission adopted a draft second Delegated Regulation amending the PD Regulation as regards information on the consent to use of the prospectus, information on underlying indexes and the requirement for a report prepared by independent accountants or auditors (the Part II Regulation and together with the Part I Regulation, the Regulations ). The Part II Regulation has not yet been published in the Official Journal of the European Union and has not yet entered into force. Key Changes and New Requirements under the Law Part I. Prospectus Law New Definition of Qualified Investors The definition of qualified investors now relates to investors who are professional clients or who, upon their own request, are considered as professional clients or are recognised as eligible counterparties, unless they have requested to be treated as non-professional clients, all in accordance with MiFID (directive No 2004/39/EC). In connection with such amendment, the registers of persons (natural persons and small and medium-sized enterprises) considered as qualified investors under the former definition have been abolished. Offers to qualified investors do not require a PD compliant prospectus (under Part II of the Prospectus Law) nor a simplified prospectus (under Part III of the Prospectus Law). Increase of Certain Thresholds for Exemptions to Publish a PD Compliant Prospectus or a Simplified Prospectus No PD compliant prospectus nor simplified prospectus needs to be prepared in the following cases: > an offer of securities made to less than 150 investors (other than qualified investors) per Member State (or, for a simplified prospectus, in Luxembourg) (previously 100 investors); > an offer of securities made to investors who acquire securities for a total consideration of at least EUR 100,000 (previously EUR 50,000) per investor, for each separate offer; > an offer of securities whose denomination per unit amounts to at least EUR 100,000 (previously EUR 50,000). No PD compliant prospectus needs to be prepared in the following cases (but possibly a simplified prospectus): > securities included in an offer where the total consideration for the offer in the European Union is less than EUR 5,000,000 (previously EUR 2,500,000) calculated over a period of 12 months; > debt securities issued in a continuous or repeated manner by credit institutions over a period of 12 months up to EUR 75,000,000 (previously EUR 50,000,000). Implementation of the PD Amending Directive in Luxembourg 2
No simplified prospectus needs to be prepared for an offer of securities with a total consideration of less than EUR 1,500,000 over a period of 12 months (previously EUR 100,000). Additional Exemptions to Publish a PD Compliant Prospectus or a Simplified Prospectus > The exemption from publishing a prospectus for an offer in connection with a merger has been extended to spin-offs and any other similar restructuration processes. > The Law clarifies the exemptions concerning (i) dividends paid out to existing shareholders in the form of shares of the same class as the shares in respect of which such dividends are paid and (ii) securities offered, allotted or to be allotted to existing or former directors or employees by their employer or an affiliated undertaking. The latter also applies to undertakings established in third countries (outside the EEA) whose securities are admitted to trading either on a regulated market or, subject to certain conditions, on a third-country market. Prospectus and Issue Summaries The Law provides that the summary (required for PD compliant prospectuses of securities other than in relation to the application for admission to trading on a regulated market of debt securities with a denomination of at least EUR 100,000) is to be drafted in a standard format in order to enable a comparison of similar securities by investors. This applies both to debt and equity securities. According to the Part I Regulation, the summary needs to be made up of five main sections in a mandatory order (A - Introduction and warnings, B - Issuer and any guarantor, C - Securities, D - Risks, E - Offer) and must contain the information specified in its Annex XXII. According to the Part I Regulation, the summary should not contain cross-references to specific parts of the prospectus. In addition, the length of the summary may not exceed 7% of the length of a prospectus or 15 pages, whichever is the longer. Under the Part I Regulation, for each individual issue under a base prospectus, an issue summary based on the summary of the base prospectus and the content of the final terms is required and will need to be annexed to the final terms. Each summary needs to contain the key information items as further set out in Annex XXII of the Part I Regulation. Key Information Key information is defined as being essential and appropriately structured information which is to be provided to investors with a view to enabling them to understand the nature and the risks of the issuer, the guarantor(s) and the securities that are being offered to them or admitted to trading on a regulated market and to decide which offers of securities to consider further. Implementation of the PD Amending Directive in Luxembourg 3
Key information includes the five following topics: > a short description of the risks associated with the issuer and guarantor; > a short description of the risks associated with the investment; > the general terms of the offer; > details of the admission; > reasons for the offer. Validity Period of a Prospectus The Law retains the current twelve months validity period, but has amended the relevant provision to clarify that such period runs from the date of approval of the prospectus, rather than the date of its publication. Publication of the Prospectus If the prospectus is only made available to the public in paper form, meaning (i) by insertion in one or more newspapers circulated throughout, or widely circulated in the Members States in which the offer to the public is made or the admission to trading is sought or (ii) in a printed form to be made available, free of charge, to the public at the offices of the market on which the securities are being admitted to trading, or at the registered office of the issuer and at the office of the financial intermediaries placing or selling the securities, including paying agents, then the prospectus must also be published in electronic form on the issuer s website or, if applicable, on the website of the financial intermediaries selling or placing the securities, including paying agents. Annual Document The provision regarding the annual document has been repealed as this document is considered unnecessary in light of the obligations imposed under the Transparency Law. Supplements and Withdrawal Rights The Law clarifies that: > an issuer s obligation to publish a supplement only applies until the close of the offer or the admission of the securities to trading, whichever is the later; > investors may only exercise the 2 days walk away right if the prospectus being supplemented relates to a public offer of securities. On this basis, the walk away right does not apply if a supplement is published in respect of a prospectus which has been prepared for admission to trading purposes only. The walk away right will only be available where the circumstances which gave rise to the publication of the supplement arose before the close of the offer and affect the particular securities. Implementation of the PD Amending Directive in Luxembourg 4
Retail Cascades The Law clarifies that no other prospectus is required in case of the resale of securities or the final placement of securities through financial intermediaries if a valid prospectus is available. Indeed, financial intermediaries placing securities or selling them on to retail investors may use the issuer s prospectus, subject to the issuer (or person responsible for drawing up such prospectus) consenting in writing to such use; the issuer (or person responsible for drawing up such prospectus) will then remain responsible for the content of the prospectus. In case such consent is withheld, the financial intermediary will have to prepare a separate prospectus and will be responsible for its content, including any information incorporated by reference. In the case of a base prospectus, the relevant financial intermediary will also be responsible for providing and filing the final terms. The Part II Regulation contains requirements for additional information to be included in prospectuses in relation to the consent given by means of a written agreement by the issuer or the person responsible for drawing up such prospectus for the use of the prospectus. Note however that the entry into force of the Part II Regulation is still pending. Member State Guarantors Where, notwithstanding Article 2 of the Law, a prospectus is prepared voluntarily in relation to securities that are guaranteed by a Member State, it is not necessary to provide information in relation to the Member State which is the guarantor. Passporting The Law now provides expressly that an issuer or person responsible for drawing up a prospectus shall be notified of the certificate of approval at the same time it is provided by the Commission de Surveillance du Secteur Financier to the host Member State authority. The Law also provides that final terms that are filed with the Commission de Surveillance du Secteur Financier also need to be filed with the host Member State authority. Debt Issuance Programmes Final Terms (Part I Regulation) A new era has started with the coming into force of the Part I Regulation in relation to the use of final terms in the context of debt issuance programmes. The Part I Regulation has categorised the disclosure requirements in the PD Regulation as Category A, B or C information: > Category A information may not be contained, amended or supplemented in the final terms; any change would require a supplement or a new base prospectus. > Only specific details relating to Category B information, which are unknown at the date of approval of the base prospectus, may be Implementation of the PD Amending Directive in Luxembourg 5
included in the final terms the general principles relating to Category B information must be included in the base prospectus. > Category C information may be included in the final terms. Final terms cannot be used to amend or replace any information in the base prospectus. This is the case even if the amendments are not prejudicial (or are, in fact, beneficial) to the interests of the holders or are actually requested by investors. Wholesale programmes will need to comply with the approach described above where the securities being issued are to be admitted to trading on a regulated market in an EEA Member State. Examples of Category A information include risk factors, responsibility statements, governing law, the form of the securities and their ranking and the credit ratings assigned to the issuer. Examples of Category B information include the description of the securities and the rights relating to the securities, provisions relating to interest and methods of calculating interest, pay-out formulae, the details of the representatives of bondholders and the method of determining pricing. Examples of Category C information include the reasons for the offer, the total expenses and estimated net proceeds, the ISIN details, the currency of the issue, the maturity date, information on due dates for interest/indication of yield, the details of the underwriters, paying agents and intermediaries and the credit ratings assigned to the securities. Lighter Regime for Rights Issues (Part I Regulation) An issuer having the same class of shares already admitted to trading on a regulated market or, under certain conditions, on a multilateral trading facility benefits from a lighter prospectus regime. The audited historical financial information to be disclosed only covers the last financial year (previously the last three financial years had to be disclosed). In addition, the operating and financial review is no longer required in that case. Part II. Transparency Law Increase of Certain Thresholds For the purpose of consistency, the Law has increased certain thresholds from EUR 50,000 to EUR 100,000 in the Transparency Law. This change impacts: > the exemption to publish annual financial reports, half-yearly financial reports and interim management statements; > the possibility for issuers to choose any Member State as venue of a meeting of holders of debt securities (rather than the Member State in which the debt securities are admitted to trading on a regulated market); Implementation of the PD Amending Directive in Luxembourg 6
> the choice of the language in which regulated information may be published. Grandfathering Provisions for Obligations under the Transparency Law The Law provides for grandfathering provisions in respect of the increase of the thresholds from EUR 50,000 to EUR 100,000 under the Transparency Law. In the three scenarios set out in the section before, the grandfathering clause only applies to debt securities the denomination per unit of which is at least EUR 50,000 (or its equivalent in any other currency) and which have been admitted to trading on a regulated market before 31 December 2010, for as long as such debt securities are outstanding. For issuers which have issued debt securities with a denomination per unit below EUR 100,000 on 31 December 2010 or after such date, this means they will have to comply with all the transparency requirements which prior to the Law applied to issuers having issued debt securities with a denomination per unit below EUR 50,000 (or its equivalent in any other currency), including the requirement to prepare annual and half-yearly financial reports. Where Luxembourg is the home Member State for such an issuer under the Transparency Law, these obligations apply to such an issuer as from 1 July 2012. The above has been confirmed by the Commission de Surveillance du Secteur Financier in a press release 10/24 dated 20 December 2010. Contacts For further information please contact: Janine Biver of Counsel Capital Markets and Banking janine.biver@linklaters.com Patrick Geortay Partner Capital Markets and Banking patrick.geortay@linklaters.com Nicki Kayser Partner Capital Markets and Banking nicki.kayser@linklaters.com Jean-Paul Spang Partner Mainstream Corporate jean-paul.spang@linklaters.com Author: Nicki Kayser, Alexandra Cabannes, Bart Vermaat This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or contact the editors. Linklaters LLP. All Rights reserved 2012 Linklaters LLP is a limited liability partnership registered in England and Wales with registered number OC326345. It is a law firm authorised and regulated by the Solicitors Regulation Authority. The term partner in relation to Linklaters LLP is used to refer to a member of Linklaters LLP or an employee or consultant of Linklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of the members of Linklaters LLP and of the nonmembers who are designated as partners and their professional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ, England or on www.linklaters.com. Please refer to www.linklaters.com/regulation for important information on our regulatory position. We currently hold your contact details, which we use to send you newsletters such as this and for other marketing and business communications. We use your contact details for our own internal purposes only. This information is available to our offices worldwide and to those of our associated firms. If any of your details are incorrect or have recently changed, or if you no longer wish to receive this newsletter or other marketing communications, please let us know by emailing us at marketing.database@linklaters.com. 35 Avenue John F. Kennedy P.O. Box 1107 L-1011 Luxembourg Telephone (+352) 26 08 1 Facsimile (+352) 26 08 88 88 Linklaters.com Implementation of the PD Amending Directive in Luxembourg 7 A15240549/0.1/05 Jul 2012