On 1 March 2022, the Treasury released a policy document setting out its approach to reforming the UK Prospectus Regime following the recommendations of Lord Hill’s review of UK listings in March 2021. The UK government’s aim was to make the UK “a destination for initial public offerings (IPOs)” by simplifying the current regime and making the UK capital markets more competitive in the wake of the UK’s exit from the EU and a fall in the number of companies choosing to go public in London over the last decade.

The key changes

• The FCA will be given greater powers including the ability to set prospectus requirements
• The requirement for a prospectus for secondary and subsequent issues is to be scrapped
• An expanded list of public offer exemptions, increasing the number of options for structuring fundraising
• A revised disclosure standard, introducing a varying ‘necessary information’ test and raising the threshold for liability on forward-looking information included in prospectuses
• A new regulatory deference for overseas companies

Public offerings of securities by UK private companies

The FCA will be given greater powers to determine the requirements for prospectuses, including having flexibility to set the content of the prospectus and the freedom to scrap the requirement for a prospectus for further issues. It is hoped the new regime will be more agile and able to quickly adapt to market conditions. 

The prospectus will no longer be a feature of the UK public offerings regime. A general prohibition on companies undertaking public offers has been introduced subject to an expanded list of exemptions which include:

• Offerings to ‘qualified persons’
• Offerings to greater than 150 persons
• Offerings of securities which are, or will be, admitted to UK Regulated Markets
• Offering of securities to those who already hold equity securities in the offering company. Such offerings will be pro-rata to a person’s existing holding and will not apply where the person holds equity securities as a result of a merger or acquisition
• Offerings of securities to be admitted to certain multilateral trading facilities
• Offers made by private companies through designated platforms monitored by the FCA

Overseas public offerings

A new regime of regulatory deference is to be introduced for overseas listed companies making offers into the UK which will allow companies to use existing documentation that has been accepted in overseas regimes when making an offering in the UK. 

Liability for prospectuses

The ‘necessary information’ test is to be updated and will differ depending on the type of security being offered. The threshold for liability on forward-looking information in prospectuses is to be increased to make it easier for companies to make such statements, together with a requirement to clearly label the information as forward-looking. 

Further information

If you have any questions on the changes to the Prospectus Regime or their implementation, Druces’ Capital Markets team will be happy to assist. Please contact your usual Druces representative or speak to:

• Mark Lamph on +44 (0)20 7216 5563 or m.lamph@druces.com