EU Markets Become More Accessible to Small and Medium-Sized Enterprises Thanks to Changes to the EU Prospectus Regulation: A Welcome Development for Companies Active in the Medical Sector

The European Union ("EU") Listing Act, approved by the EU Council on October 8, 2024, introduces key changes to the EU Prospectus Regulation, offering greater flexibility to access and issue securities on EU markets for small and medium-sized enterprises ("SMEs"), including in the biotech and med-tech sector. These changes address some of the hurdles to funding that these companies have faced in the past by both expanding the exemptions from the obligation to publish a prospectus, making the prospectus disclosures less onerous and adding flexibility in the offering process itself. The Listing Act's changes to the Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the "EU Prospectus Regulation") will phase in over time from December 4, 2024, to June 5, 2026.

As of December 4, 2024, a number of improvements to the EU Prospectus Regulation have entered into force, including:

• The dilution threshold in case of admission to trading on a regulated market is now set at 30% of the share capital over a 12-month period against 20% previously.[1] This will allow SMEs to issue securities more easily, as no prospectus will be required for issuance below the 30% dilution threshold.
• New exemptions from the prospectus requirement are now applicable to SMEs listed on a regulated market in the EU or an SME Growth Market. In particular, the exemptions concern[2]: (i) public offering of securities representing no more than 30% of the share capital over a 12-month period; and (ii) admissions to trading on a regulated marker or public offerings of securities fungible with securities admitted to trading on the same market continuously for at least 18 months. This exemption is not available in case of exchange tender offers, mergers, or demergers.
  Instead of a full prospectus, under the above exemption, SMEs are entitled to file (with the competent authority which has jurisdiction in the country of issuance) an 11-page, short-form information document with standardized content. No prior review or approval is required for such information document, which represents a significant advantage compared to requirements under the previous rules. Those rules required a comprehensive prospectus involving significant resources and time (several months from drafting to approval).
• An issuer of debt securities is exempted from the requirement to publish a supplement to the base prospectus to incorporate new annual or interim financial information, if such information is made available within the 12-month period for which the base prospectus is valid (the issuer can still publish a supplement on a voluntary basis if it so wishes).[3]
• The IPO prospectus has to be made available to the public only three business days before the offering closes (as opposed to six previously), allowing for reduced execution risks in light of market fluctuations.[4]
• The withdrawal period of investors in cases of a supplement is extended from two to three business days, thereby increasing investor protection.[5]

  Starting March 5, 2026, SMEs contemplating an IPO or a follow-on offering will also benefit from the following improvements:

• SMEs contemplating an IPO on an SME Growth Market will be able to prepare either a prospectus under the current classic format or an EU growth issuance prospectus (which is simplified and standardized) consisting of a single document and limited to 75 pages for equity securities (no page limit for non-equity securities). The EU growth issuance prospectus will also be available for issuers conducting a follow-on offering on an SME Growth Market.
• SMEs either listed on a regulated market or an SME Growth Market and contemplating a follow-on offering will have the option to use the new EU follow-on prospectus (which is simplified and standardized compared to the current prospectus format), consisting of a single document limited to 50 pages for equity securities (no page limit and no mandatory single document format applies to non-equity securities). This format will not require an operating and financial review from the issuer.
  The EU follow-on prospectus will have to be reviewed by the national competent authority within a seven-day period (except when prepared by SMEs transferring from an SME Growth Market to a regulated market), instead of the 10-day period that ordinarily applies to other prospectuses. In addition, the EU follow-on prospectus and the EU growth issuance prospectus will both require only one year of audited financial accounts.

  Starting on June 5, 2026, the following key changes to the EU Prospectus Regulation will enter into force:

• The exemption threshold for small public offerings will be increased from €8 million to €12 million (calculated over a 12-month period). EU Member States may opt for a lower threshold of €5 million or require that an information document be provided to investors for issuance made under this exemption.
• The "standard" prospectus currently in use will also be simplified and standardized, with a 300-page limit. This new standard prospectus will only require two years of audited financial accounts as opposed to three and will have to follow a fixed outline that will be set in future rulemaking.

However, this new format requirement will not apply in the event of a concomitant offer or private placement in a non-EU country where an offering document is required by law, regulation, or market practice. This will reduce the burden on issuers seeking admission to trading on a regulated market in the EU who simultaneously offer securities or place them privately with investors in a third country.

Following the changes made to the EU Prospectus Regulation by the Listing Act, a EU directive on multiple voting rights was also adopted to remove obstacles for SMEs to have access to multiple-vote structures and to further facilitate access to market financing without jeopardizing the control of SMEs by their founders. Unlike EU Regulations, which do not technically require implementation at national level before becoming applicable at national level, Member States must adopt the legal and administrative provisions necessary to comply with this directive by December 4, 2026.