Do We Need A Prospectus Notes

Do We Need a Prospectus?

Structure:

Do we need to become a public company?

Companies Act 2006

• s755 Private companies may not offer shares to public

  • s756(1) What is a public offer?

    • s756(2) To any section of the public howsoever selected (including Shareholders)

    • s756(3) Exceptions:

      • Deal is a private matter between the VC and the company

      • Deal is not going to allow the buyer to then resell onto the public

        • s756(4) Connected persons are not the public

Do we need a prospectus?

FSMA 2000

• An approved prospectus is needed if:

  • s85(1) There is an offer of Transferable Securities to the Public

  • s85(2) There is a request for Transferable Securities to be admitted to trading on a Regulated Market

• It is a criminal offence to not do this

Examples

A Private Company offering Shares to Venture Capitalists and Existing Shareholders

Do we need to become a public company?

• No, this is not an offer to the public as it is a private deal (s756(4))

Do we need a prospectus?

s85(1) Do we have Transferable Securities to the Public?

Transferable Securities?

• S102(A)(3) defines Transferable Securities

  • MiFID (Shares are Transferable Securities)

• Therefore, any shares are always Transferable Securities

• s85(5) provides exemptions to this rule:

  • Sch 11A (para 9)

    • Not Transferable Securities if the total value of the shares being offered is under 5,000,000

  • PR 1.2.2

    • (See rule for more details)

To the Public?

• ss102(B)(1) – (3) Is there a communication which:

  • Presents sufficient information on the securities

  • To enable an investor to decide to buy or subscribe them

• If yes, this is an offer to the public

• s86(1) provides exemptions to this rule:

  • s86(1a) The offer is to qualified investors only

  • s86(1b) The offer is to fewer than 150 people (other than qualified investors)

  • s86(1c) Investing more than 100,000 each

• This is a mixed offer, so s86(1) pushes the exemption through and this example does not constitute an offer to the public

Verdict

• Transferable Securities are present here. There are no exemptions.

• There is an offer to the public, but it falls under the s86(1) exception.

• Therefore, s85(1) is not triggered and a prospectus is not necessary.

• They are not looking to list so there is no need to consider s85(2)

An Unlisted PLC offering 10,000,000 of new shares to Professional Investors (also listing on LSE MM)

Do we need to become a public company?

• No, we are already a public company (s755)

Do we need a prospectus?

s85(1) Transferable Securities to the Public?

Transferable Securities?

• S102(A)(3) defines Transferable Securities

  • MiFID (Shares are Transferable Securities)

• Therefore, any shares are always Transferable Securities

• s85(5) provides exemptions to this rule:

  • Sch 11A (para 9)

    • Not Transferable Securities if the total value of the shares being offered is under 5,000,000

    • (This is for 10,000,000 so no)

  • PR 1.2.2

    • (See rule for more details)

To the Public?

• ss102(B)(1) – (3) Is there a communication which:

  • Presents sufficient information on the securities

  • To enable an investor to decide to buy or subscribe them

• If yes, this is an offer to the public

• s86(1) provides exemptions to this rule:

  • s86(1a) The offer is to qualified investors only

    • s86(7) A qualified investor is as described in MiFID Annex 11 s1 (1-4)

  • s86(1b) The offer is to fewer than 150 people (other than qualified investors)

  • s86(1c) Investing more than 100,000 each

• This bypasses via exemption s86(1) (A) or (B).

Verdict

• Transferable Securities are present here. There are no exemptions.

• There is an offer to the public. However, there are exemptions under s86(1).

• Therefore, s85(1) is not triggered and a prospectus is not necessary under this rule.

s85(2) Transferable Securities to a Regulated Market?

Transferable Securities?

• S102(A)(3) defines Transferable Securities

  • MiFID (Shares are Transferable Securities)

• Therefore, any shares are always Transferable Securities

• s85(6) provides exemptions to this rule:

  • Sch 11A (para 9)

    • Not Transferable Securities if the total value of the shares being offered is under 5,000,000

    • (This is for 10,000,000 so no)

  • PR 1.2.3

    • (See rule for more details)

To the Regulated Market?

• ss103(1) and MiFID

  • Definition of regulated market place

    • Includes LSE Main Market but not LSE AIM

Verdict

• Transferable Securities are present here. There are no exemptions.

• There is an offer to a regulated market here.

• Therefore, s85(2) is triggered and an approved prospectus will be necessary.

A Listed PLC (60,000,000 shares at 20p each par value) wants to offer 1,000,000 new shares to Directors.

Do we need to become a public company?

• No, we are already a public company (s755)

Do we need a prospectus?

s85(1) Transferable Securities to the Public?

Transferable Securities?

• S102(A)(3) defines Transferable Securities

  • MiFID (Shares are Transferable Securities)

• Therefore, any shares are always Transferable Securities

• s85(5) provides exemptions to this rule:

  • Sch 11A (para 9)

    • Not Transferable Securities if the total value of the shares being offered is under 5,000,000

    • (Unknown – 20p par value, unsure what market value is now though (we don’t know what 1,000,000 x ? will be.))

  • Sch 11A (para 8)

    • 5,000,000 issue must be over 12 months

    • (Prior listing was 2014 so may have full 5,000,000 quota available)

  • PR 1.2.2

    • (See rule for more details)

To the Public?

• ss102(B)(1) – (3) Is there a communication which:

  • Presents sufficient information on the securities

  • To enable an investor to decide to buy or subscribe them

  • Already listed, so likely

• If yes, this is an offer to the public

• s86(1) provides exemptions to this rule:

  • s86(1a) The offer is to qualified investors only

    • s86(7) A qualified investor is as described in MiFID Annex 11 s1 (1-4)

  • s86(1b) The offer is to fewer than 150 people (other than qualified investors)

  • s86(1c) Investing more than 100,000 each

• This will bypass via exemption s86(1b) (provided there are less than...

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