The EU listing act and UK prospectus reform were set to reduce the regulatory burden on companies, enhancing market accessibility.

In an ambitious bid to make public capital markets in the European Union and the United Kingdom more welcoming for businesses of all sizes, two significant legislative reforms, the EU Listing Act and UK Prospectus Reform, have emerged. These reforms focus on easing the pathway for companies, particularly small- and medium-sized enterprises (SMEs), to access public funding through stock exchange listings. By cutting down on the costs and bureaucratic hurdles associated with public listings, the reforms maintain a careful balance, ensuring the integrity of the market while fostering investor confidence.

The EU Listing Act, coming into provisional agreement on February 1, 2024, as part of a comprehensive legislative package initiated by the European Commission in December 2022, seeks to overhaul key EU capital markets regulations. This package includes amendments to the Prospectus Regulation, Market Abuse Regulation, Markets in Financial Instruments Regulation, and Directive, alongside the introduction of a new directive focused on multiple-voting share structures. The essence of the Listing Act is to simplify the listing process for companies by reducing regulatory and compliance costs, thereby making public markets more attractive for EU companies and facilitating SMEs’ access to capital.

The UK’s response, the Prospectus Reform, stems from a series of recommendations outlined in Lord Hill’s UK Listing Review, aiming to redesign the prospectus regime to better fit the UK capital markets post-Brexit. The Reform advocates for a separation of the regulation of public offers of securities from admissions of securities to trading, empowering the Financial Conduct Authority (FCA) with greater discretion to draft rules that adapt the new regime.

Both sets of reforms share a common thread: simplifying the prospectus requirements for companies. This includes exemptions for secondary offerings, a new EU Follow-On Prospectus, the introduction of the EU Growth Issuance Prospectus, and adjustments in the obligation to disclose inside information. In the UK, discussions revolve around the need for a prospectus in secondary equity issuances, the prospect of protected forward-looking statements, and regulations around non-equity securities.

The EU’s Market Abuse Regulation proposals aim to narrow the obligation for companies to disclose inside information during prolonged processes, such as mergers or significant M&A transactions. Similarly, the conditions under which companies can delay the disclosure of inside information are being refined to ensure clarity and maintain market integrity.

The reforms also touch upon the controversial topic of multiple-voting share structures, aiming to provide companies with more flexibility in choosing capital and governance structures that best suit their developmental stage while safeguarding shareholder rights.

As these provisional agreements move towards formal adoption, they represent a pivotal step in making the EU and UK markets more attractive for public listings, potentially leading to an increase in IPOs and offering companies, especially SMEs, a more streamlined path to access public capital.