Mackay Carter Shaw LLP
NOTE ON WHEN PROSPECTUSES ARE NOT REQUIRED UNDER
ENGLISH LAW
Under the Financial Services and Markets Act 2000 and its related legislation
either (or both) of the following triggers the requirement for a prospectus:
1. A public offer of transferable securities in the EU;
2. The admission of transferable securities to trading on an EU regulated
market.
There are certain exemptions to both or either of the triggers contained the in
Financial Services and Markets Act 2000 and the Prospectus Rules.
This note will first examine which circumstances will cause each of the two
triggers to arise, and then will examine which exemptions are available to each
of those triggers.
1. PUBLIC OFFER TRIGGER
What is a Public Offer?
This is defined1 widely. There is an offer of transferable securities to the
public if there is a communication to any person which presents
sufficient information on the securities and the terms on which they are
to be offered to enable an investor to decide to buy or subscribe for the
securities in question. The communication can be in any form and by
any means and includes a placing of securities through a financial
intermediary. The following are not offers to the public:
 a communication in connection with the trading on a regulated
market or a multilateral trading facility2;
1
2
S 102B(1) Financial Services and Markets Act 2000
S 102B(5) Financial Services and Markets Act 2000
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 a bonus or scrip issues3;
 most new issues under a scheme of arrangement 4.
What are Transferable Securities?
They are defined5 as classes of securities which are negotiable on the
capital market except instruments of payment. They include:
 shares in companies or partnerships including depositary receipts
in respect of such shares;
 bonds or other forms of securitised debt including depositary
receipts in respect of such securities;
 any other securities giving the right to acquire or sell any such
transferable securities or giving rise to a cash settlement
determined by reference to transferable securities, currencies,
interest rates or yields, commodities or other indices or measures;
 Note that money-market instruments (as defined in MiFID) which
have a maturity of less than 12 months are not transferable
securities for these purposes.
2. ADMISSION TRIGGER
What is a regulated market?
In the UK the following markets are “regulated markets” for the purpose
of the prospectus requirements6:
 The Regulated Market of the London Stock Exchange;
 ICE Futures Europe;
 The London Metal Exchange;
3
S 102B(5) Financial Services and Markets Act 2000
List! Issue number 10 Published by the UK Listing Authority and the Financial Services Authority
5
S. 102A(3) Financial Services and Markets Act 2000 (as amended by Companies Act 2006) by reference to the
Markets in Financial Instruments Directive
6
S. 103 Financial Services and Markets Act 2000 and Markets in Financial Instruments Directive
4
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



EDX;
LIFFE;
The PLUS-listed market
Note that AIM is not a “regulated market” and so admission to
AIM will not require a prospectus (provided there is no offer to
the public).
What is an admission to trading?
The following are generally accepted not to be admissions to trading and
therefore do not require a prospectus:
 Grant of an option under an employee share scheme7;
 Exercise of an option under an employee share scheme8;
 Non-transferable loan notes or loan notes with limited transfer
rights (even when offered as an alternative to cash on a takeover
offer)9.
Once it has been decided that there has been either a public offer or an
admission to trading on a relevant market, or both, a prospectus will be
needed unless there is a relevant exemption. Where transferable securities
are being offered to the public and are being admitted to a regulated market,
the issuer will need to find exemptions that apply to both the public offer
trigger and the admission to market trigger in order to avoid the need for a
prospectus. This must be considered carefully; certain exemptions apply to
both triggers while others apply to only one trigger or the other. The following
sections deal with the exemptions for each of the triggers. Where the
exemption applies to both triggers, it is mentioned in each section.
7
List! Issue number 10 Published by the UK Listing Authority and the Financial Services Authority and CESR
FAQs 10 Feruary 2009
8
List! Issue number 10 Published by the UK Listing Authority and the Financial Services Authority
9
If loan notes are offered as an alternative to cash on a takeover offer, a prospectus will be required if the loan
notes are constituted as transferable securities: UKLA technical note: Prospectus Rules, note on PR 1.2.1.
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EXEMPT PUBLIC OFFERS
 Consideration less than EUR 5 million: Where the total consideration of
the offer is less than EUR 5 million.
 CIS: Units in an open-ended collective investment scheme10;
 Government securities: Certain other securities issued by EEA
governments, public bodies and central banks11;
 Share Substitution: Shares issued in substitution for shares of the same
class if there is no increase in issued share capital12;
 Takeover: Where the transferable securities are offered in connection
with a takeover by means of an exchange offer (PROVIDED there is a
document containing equivalent information) 13;
 Merger: Where securities are offered or allotted in connection with a
merger (PROVIDED there is a document containing equivalent
information) 14;
 Scrip Dividend: Free of charge scrip dividend15;
 Employee Offer: Offer of securities to existing or former directors or
employees by their employer of by and affiliated undertaking;
 Qualified Investors: Offers made or directed at qualified investors;
 150 Persons: Offers made or directed at fewer than 150 persons, other
than qualified investors, per EEA state16. Note that offers by financial
intermediaries are treated as those of the issuer.
 Minimum Consideration: Where the minimum consideration that may
be paid by any person is at least EUR 50,00017;
 Minimum Denomination: Where the transferable securities being
offered are denominated in amounts of at least EUR 50,00018;
10
Schedule 11A Financial Services and Markets Act 2000
Schedule 11A Financial Services and Markets Act 2000
12
Prospectus Rules 1.2.2 R(1 ) and (2)
13
Prospectus Rules 1.2.2 R(2 ) and (3)
14
Prospectus Directive
15
Prospectus Rules 1.2.2 R(4)
16
S 86 Financial Services and Markets Act 2000
17
S 86 Financial Services and Markets Act 2000. The amount will increase to EUR 100,000 by 1 July 2012.
18
S 86 Financial Services and Markets Act 2000. The amount will increase to EUR 100,000 by 1 July 2012.
11
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 Maximum Consideration: Where the total consideration for the
transferable securities being offered cannot exceed EUR 100,000 (to
include all offers open at any time within the last 12 months relying on
this exemption)19.
EXEMPT ADMISSIONS TO TRADING ON REGULATED MARKET
 Share Substitution: Shares issued in substitution for shares of the same
class if shares of the same class are already admitted to trading on the
same regulated market20;
 Takeover: Where transferable securities are offered in connection with a
takeover by means of an exchange offer (PROVIDED there is a document
containing equivalent information)21;
 Merger: Where securities are offered or allotted in connection with a
merger (PROVIDED there is a document containing equivalent
information)22;
 Scrip Dividend: Free of charge scrip dividend if the shares are of the
same class as the shares already admitted to trading23;
 Employee Offer: Offer of securities to existing or former directors or
employees by their employer of by and affiliated undertaking if the
shares are of the same class as the shares already admitted to trading24;
 10% Exemption: Where the shares offered represent less than 10% of
the number of shares of the same class already admitted to trading on
that market;
 Share Exchange: Where shares result from the conversion of exchange
of the transferable securities provided that the shares are the same class
as shares already admitted to trading on that market;
19
S 86 Financial Services and Markets Act 2000
Prospectus Rules 1.2.3 R(2)
21
Prospectus Rules 1.2.2 R(2 ) and (3)
22
Prospectus Directive
23
Prospectus Rules 1.2.2 R(4)
24
This will be extended before 1 July 2012 to cover certain employee share schemes of companies that are not
listed on a regulated market
20
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 Shares Already Admitted: Where shares are already admitted to trading
on another regulated market provided certain conditions are met (eg
they have been admitted elsewhere for at least 18 months)25.
For further advice contact Jennifer Carter Shaw or Tom Mackay at Mackay
Carter Shaw LLP
Jennifer: 0207 193 1016
Tom: 0207 193 1009
25
PR 1.2.3 R(8)
Shares – Selling Note on Prospectuses