EU Cuts Red Tape to Ease Companies' Access to Capital Markets

  • EU to propose changes to rules on prospectus requirements
  • EU's Jonathan Hill is due to announce overhaul on Sept. 30

The European Union plans to make it easier for small companies to tap capital markets by reducing requirements to issue documentation, according to draft changes to the bloc’s prospectus directive.

Companies with a market capitalization of as much as 200 million euros ($224 million) would be eligible for the “proportionate disclosure regime,” a paperwork-reducing protocol that is available for small and medium-sized businesses, according to draft documents seen by Bloomberg. This compares with the current limit of 100 million euros and is designed to increase take-up of the small-business rules.

The EU also wants to eliminate required prospectuses at both the national and European levels for companies seeking to raise as much as 500,000 euros per year, up from a prior cap of 100,000 euros, the draft says. Countries would have discretion over whether to require prospectuses for companies looking to raise as much as 10 million euros per year, up from a prior limit of 5 million euros.

Jonathan Hill, the EU’s financial-services chief, will unveil the prospectus proposals on Sept. 30, when he rolls out his plan for improving capital markets union across the 28-nation European single market. Updating the prospectus rules is expected to be one of the politically easiest elements of the plan, which aims to expand financing alternatives to bank lending and which also will tackle tougher goals like tax and insurance regulation.

Frequent issuers could be granted a fast-track approval process in exchange for a commitment to file a “universal registration document” every year, containing all relevant information on the issuer, according to the EU document. This would help companies take advantage of financing windows and avoid being shut out of capital markets by red tape.

The EU plans to adjust the rules for companies that trade privately or on multilateral trading facilities, compared to those that trade on listed exchanges. They also would streamline assessment of risk factors, require online publication of key disclosures and seek more common rules on how to apply administrative sanctions when needed.

The plans must be approved by nations and the European Parliament to take effect. The European Commission declined to comment on the draft documents, which are not final recommendations.

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