Offers of securities to the public

• There will no longer be a requirement to publish a prospectus for a public offer. Instead, there will be a general prohibition on offering transferable securities to the public, subject to specific exemptions.
• Exemptions and exclusions from the general prohibition on public offers will include those available under the current rules, with thresholds generally restated on a one-for-one basis in sterling. The usual exemptions for offers to qualified investors and fewer than 150 other persons, and offers to directors and employees, will therefore continue to apply, but there will also be a new exemption for pro rata offerings by a company to its existing equity investors. The government intends to reduce the current €100,000 exemption threshold for offers of wholesale non-equity securities to £50,000.
• Offerings of securities which are, or will be, admitted to trading on the London Stock Exchange’s Main Market and other UK regulated markets, or certain multilateral trading facilities (MTFs) such as AIM, will also be exempt from the prohibition on public offers. As now, AIM and other MTFs will be able to decide their own admission and disclosure requirements, including the content of an admission document (which may be classified as a form of prospectus). As discussed above, the FCA will decide the prospectus requirements for UK regulated markets.
• The government intends to remove the current requirement to publish an FCA-approved prospectus for offers over €8 million in size. Instead, unquoted companies will be allowed to offer their securities to the public provided the offer is made through a regulated crowd-funding platform. Operating a crowd-funding platform will become a specific FCA-regulated activity, with the FCA determining the due diligence and disclosure levels required for offerings on these platforms.
• The government is still considering the threshold below which offers of securities from unquoted companies will be exempt from the prohibition on public offers (but still subject to the ‘equality of information’ requirement, which will continue to apply to all exempt offerings).
• The government also intends to permit offerings into the UK by overseas companies listed on certain designated overseas stock markets on the basis of their own regulatory-compliant offering documents, without requiring further FCA scrutiny. The FCA will have appropriate powers to intervene to protect UK investors in exceptional circumstances.
• To better protect retail investors, the government’s preferred option is also to include non-transferable debt securities, such as ‘mini-bonds’, which have been the subject of a separate consultation, within the scope of the new public offerings prohibition. However, the categories of security or offer currently listed in article 1(2) and article 1(3) of the UK Prospectus Regulation (such as units in an open ended fund) will continue to be entirely out of scope of the new public offerings regime.

The government intends to put forward the necessary legislation when parliamentary time allows. The FCA will also need to consult on the significant changes required to its rulebooks to establish the new regulatory regime.

Client Alert 2022-071