Further Considerations in Preparing a Prospectus

What are the exemptions from the requirement to prepare a prospectus?

There are some exemptions to the Prospectus Regulations requirement to prepare a prospectus, which include that:

• The offer is made to qualified investors only
• The offer is made to fewer than 150 persons per EEA state
• The minimum consideration paid is at least Euro 100,000
• The denominations are at least Euro 100,000
• The total consideration is not more than Euro 1,000,000

What are investor’s preferences regarding a prospectus?

Majority of the investors prefer their securities to have a listing. Investors are, on the whole, fairly neutral about where the bonds are listed. Equity offerings are usually listed on the company’s home stock exchange (e.g. Frankfurt or Tokyo) but may also be listed on additional international stock exchanges (such as New York) to make them attractive to investors in other jurisdictions. Bond offerings are rarely listed on multiple stock exchanges.

Why do investors prefer a listing?

It is frequently because their "investment mandate" clearly indicates that they will invest in publicly traded stocks. The investment mandate may also impose other criteria, such as only investing in:

• Investment grade securities
• Specific currencies
• Specific industry sectors
• Specific products

What is Due diligence?

The process of reviewing the prospectus to ensure that it contains all material information, and that, importantly, it does not omit any information, is known as due diligence.

What are the forms of Due diligence?

The forms of due diligence may involve:

• Meetings and/or interviews with key representatives of the issuer
• Third parties, such as auditors, who will review the prospectus and provide a comfort letter

What are ICMA’s recommendations on due diligence?

The ICMA recommendation states that:

• The appropriate level of due diligence to be performed in the context of each issue should be considered carefully.
• It is impossible to prescribe whether or what due diligence procedures would be appropriate in the circumstances of each issue, and procedures will vary greatly from issue to issue (depending, for example, on the type of securities being issued, the rights attached to those securities and the nature of the issuer and its business).

What is a Subscription agreement?

The Subscription agreement is the contract entered into by the issuer and the underwriters. It deals with the practicalities of the issuance of the bonds and how the underwriters will subscribe for the bonds, and sets out the respective roles and responsibilities of the parties.

In this important contractual document between the underwriters and the issuer, the issuer will give representations and warranties including confirmation of:

• The accuracy of the prospectus
• The accuracy of the financial information it includes
• The existence and good standing of the issuer
• The proper authorisation and the legality of the issue/notes

What is the impact of Brexit on the listing process and the rules applying to prospectus content?

The UK is currently conducting a “Listing Review” led by Lord Hill, which could result in some changes to the UK regime and the EU is due to review the Prospectus Regulation by July 2022. So over time we could start to see some divergence between the two regimes.