How to Facilitate Presentations to Investors for Smaller Companies

The Commission proposes, among other things, that all companies raising less than 500,000 euros are not required to prepare an investment prospectus. Member states will be able to raise this threshold further.

Attempts to simplify procedures in the European Union continue with the proposal to revise the rules on investment prospectuses (a legal document that describes the company, what it does, its financial status, and shareholder structure for investment purposes), which should primarily facilitate access to financing for small and medium-sized enterprises. This is a chronic problem that the crisis has particularly exacerbated, and it has not yet been adequately resolved, despite the recovery of the European economy.

The European Commission therefore aims to facilitate financing for SMEs that struggle to obtain the necessary funds with this proposal, although the new rules will also benefit companies already listed on the stock exchange that wish to raise fresh capital, as well as small and medium-sized enterprises that are looking to go public. Although it is a technical matter, preparing a prospectus can be expensive, complicated, and time-consuming, especially for smaller companies with limited resources, and investors often do not want to sift through long, detailed, and incomprehensible documents.

Less, shorter, clearer

To make both parties happier, the Commission proposes: raising the threshold for preparing a prospectus from 100,000 to 500,000 euros (all those raising less than this amount are not required to prepare a prospectus, although member states will be able to raise this threshold to ten million), an easier concept for preparing a prospectus for small businesses, and raising the threshold for those entitled to it from 100 to 200 million euros, shorter and clearer necessary information in the prospectus, simpler rules for companies already listed on the stock exchange, an accelerated system for frequent users of the capital market (an annual ‘universal registration document’ that will be approved within five days if updated), and a single access point for all prospectuses approved in the European Economic Area (a kind of free, public archive).

Easier for investors too. A public consultation conducted earlier this year highlighted several shortcomings of the existing directive adopted in 2003 and revised in 2009, emphasizing excessive legal paperwork and incomprehensible terminology that creates unnecessary costs for companies and does not provide investors with the necessary information clearly.

− We need a prospectus regime that provides investors with necessary information but does not create unnecessary costs and deter companies that want to raise money in the market. This proposal creates a better balance, makes the system simpler, cheaper, and faster. It will protect investors while simultaneously facilitating fundraising for small and medium-sized enterprises and others, commented Jonathan Hill, Commissioner for Financial Stability, Financial Markets, and Capital Markets.