EU seeks to reduce capital-raising costs for companies

LONDON: The European Union has proposed exempting more companies from having to issue a costly formal prospectus for investors in a bid to encourage more market-based financing across the region. EU financial services commissioner Jonathan Hill published on Monday his draft revisions to the 28-country bloc’s prospectus rules for companies that want to issue stocks or bonds to raise funds. He has proposed that companies be exempt from issuing a prospectus when they want to raise less than 500,000 euros, five times the current 100,000-euro threshold. Member states would also be able to set higher thresholds for their domestic markets, up to 10 million euros, double the current maximum. The measure is part of the EU’s Capital Markets Union project aimed at encouraging companies to raise more funds on markets rather than turning to banks for cash, as most currently do. “We need a prospectus regime that gives investors the information they need, but that does not pile up unnecessary costs and put companies off raising money on the public markets,” Hill said in a statement. “Today’s proposal strikes a better balance.” Hill also proposes allowing companies with a market capitalization of under 200 million euros to publish a less onerous prospectus, doubling the current threshold. “We will take action to support shorter and clearer prospectuses by specifying more clearly the amount of information that is needed,” Hill said. Listed companies that are returning to markets for secondary issuance would also benefit from a lighter regime based on an updated annual “universal registration document”, or URD. Issuers who regularly maintain an updated URD with their supervisors would benefit from a 5-day fast-track approval when they actually want to tap into capital markets by issuing shares, bonds or derivatives, Hill said. The EU’s markets watchdog ESMA would also for the first time provide free and searchable online access to all prospectuses. Approval from the European Parliament and EU states is needed for Hill’s draft revisions to prospectus rules to become law.

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