Capital Markets and Securities

The European Union aims to bolster European capital markets by reducing the regulatory burden, time, and effort for issuers and facilitating access to the capital market, particularly for small and medium-sized enterprises (SMEs), with the EU Listing Act that came into effect on December 4, 2024. The EU Listing Act introduces the most significant changes to the EU prospectus regime in recent years. While the new exemptions from prospectus requirements (see para. 1 below) took effect at the end of 2024, most of the other changes, particularly regarding reduced prospectus content and the new prospectus format, will take effect sequentially on March 5 and June 5, 2026.

Extended Prospectus Exemptions

The EU Listing Act facilitates secondary issuances by expanding existing prospectus exemptions and introducing a simplified prospectus format called the EU Follow-on Prospectus. The newly introduced exemptions are as follows:

1. Under the new regime, the prospectus exemption applies both for public offerings and for listings of shares, provided they represent less than 30% of the existing securities fungible with new securities on the same regulated market over a period of 12 months.
2. The exemption described in a) was extended to include public offerings of securities listed on an SME Growth Market (an open market trading venue with reduced regulatory requirements, such as the Scale segment of the Frankfurt Stock Exchange). The EU Prospectus Regulation does not apply to listings of securities on an SME growth market without a public offering.
3. Furthermore, a new exemption independent of volume has been introduced for public offerings and admission to trading. This exemption applies when the issuer’s securities, which are fungible with the new securities, have been listed on a regulated market for at least 18 months. This exemption also applies to public offerings if the securities are listed on an SME growth market. However, the exemptions do not apply if the issuer is subject to restructuring or insolvency proceedings or the securities are issued in connection with a takeover by means of an exchange offer, a merger, or a split-up.

Summary Document

In case an issuer wants to make use of the new prospectus exemptions, it has to publish a short-form summary document of no more than 11 pages. This document must contain the following: (i) a responsibility statement, (ii) a compliance statement, (iii) the reasons for the offer and use of proceeds, and (iv) the conditions for the offer. However, if the company only applies for the listing of securities using the volume-dependent exemption, a summary document is not required.

EU Follow-on Prospectus

Another simplification for secondary issuances, admissions to trading, or uplistings to the regulated market is the new EU Follow-on Prospectus. It must be approved by the relevant financial regulatory authority within seven business days from the submission of the draft Follow-on Prospectus at the latest. The provisions implementing the Follow-on Prospectus will take effect on March 5, 2026. Issuers whose shares have traded on a regulated or SME growth market for at least 18 months may publish a simplified prospectus with reduced content requirements and a maximum length of 50 pages. For example, only the financial statements from the past 12 months must be included.

Simpler Capital Market Access for SME Issuers

Effective March 5, 2026, a new, simplified prospectus format for public offerings will be introduced: the EU Growth Issuance Prospectus. This new format aims to reduce complexity, particularly for first-time issuers in the SME segment. The EU Growth Issuance Prospectus is a lighter version of a full prospectus and is available to SMEs and other issuers whose securities are or will be traded on an SME growth market. It is also available to small, unlisted companies with an annual public offering of less than €50,000,000 and no more than 499 employees. This new prospectus format requires significantly less information to be disclosed than a regular prospectus and is limited to a maximum of 75 pages. Issuers whose shares are traded on a regulated market cannot use this new prospectus format. Furthermore, the EU Growth Issuance Prospectus cannot be used for listing on an EU-regulated market.

Reduced Content and a Standardized Format for the Regular Full Prospectus

Under the new regime, the requirements for the content of a standard full prospectus have also been reduced. Financial statements now only need to cover the last two years, rather than three. Furthermore, rather than including a separate chapter on operating results, financial position, and outlook (OFR or MD&A), issuers must include the consolidated management report from their regular financial reporting, either by reproduction or by incorporation via reference. However, since the content of the management report falls significantly short of investors’ informational needs, relying on its limited content is problematic.

Significant changes to the format are also to come. Starting June 5, 2026, regular prospectuses will be limited to 300 pages. Information incorporated by reference will not count against the page limit. This will likely lead to extensive incorporation of financial data by reference. The European Securities and Markets Authority (ESMA) will provide further guidelines on comprehensibility, language, and technical standards regarding the template, layout, font size and style requirements for prospectuses.

Practical Implications

It remains to be seen whether the exemptions and alternative prospectus formats will become market standard. The simplifications established by the EU Listing Act may be insufficient to meet investor expectations, particularly for international, high-volume offerings and U.S. private placements. To meet such information demands and avoid liability risks resulting from reduced or insufficient information, issuers may choose to (i) publish on a voluntary basis a regular full prospectus, or (ii) make use of the exemptions and publish an offering memorandum equivalent to a full prospectus which does not require approval by the supervisory authority. Regarding the reduced content and new standard form requirements for a regular full prospectus, for the same reason it is unlikely that prospectuses with this new reduced content will completely replace the well-established prospectus format, particularly in international transactions. The new formal requirements in particular, are not a suitable basis for an international offering when securities are offered or placed privately to investors in third countries, particularly in the U.S. under Rule 144A of the Securities Act of 1933.