The Listing Act – The European Commission’s proposed initiative to facilitate for companies listing shares and companies acting in a listed environment

To facilitate for companies seeking to list shares or companies whose shares are already listed within the EU, the European Commission has prepared the proposed initiative the “Listing Act”. The proposal implies changes to the EU Prospectus Regulation, the EU Market Abuse Regulation, and the EU Regulation and Directive on markets in financial instruments (MiFIR and MiFID II), as well as the repeal of the EU Listing Directive.

In 2020, the Commission presented a new extended action plan for the Capital Markets Union. A central core aim of the Capital Markets Union has been to improve access to market-based sources of financing for small and medium-sized companies as a complement to bank financing. In later years, several regulatory acts have been implemented and amended following this purpose. On 7 December 2022, the European Commission presented a new initiative, the Listing Act, with the aim to reduce the administrative and financial burden for especially small and medium-sized listed companies. The purpose is to make the capital markets within the EU a more competitive alternative for companies choosing to list on a public market.

The Listing Act consists of three proposals: (i) a Regulation on amendments to the Market Abuse Regulation[1], the Prospectus Regulation[2], and MiFIR[3], (ii) a Directive amending MiFID II[4] and repealing the Listing Directive[5], and (iii) a new Directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market.

Selected changes of interest proposed in the Listing Act are presented below.

Changes to the Market Abuse Regulation

• The proposal sets out that the disclosure obligation of the issuer does not cover the intermediate steps of a process in a multi-staged event, so-called protracted process. Instead, only the information relating to the event that is intended to complete the protracted process shall be disclosed. The aim is to improve cost efficiency for issuers and to reduce the amount of information investors receive. Since the proposal does not change the meaning of the term “inside information” in Article 7 of the Market Abuse Regulation, the prohibition on insider dealing continues to be triggered also by an intermediate step of a protracted process that qualifies as inside information.
• In regard to delaying disclosure of inside information, it is proposed that the general condition that the delay should not mislead the public is replaced with a list of specific conditions the inside information that the issuer intends to delay must satisfy. Moreover, it is proposed that the timing of the notification of the delay to the Swedish Financial Supervisory Authority is moved to the moment immediately after the decision to delay disclosure is taken by the issuer. Today, the timing of notification is the moment immediately after the information is disclosed to the public.
• Issuers’ managing of insider lists is proposed to become considerably easier. As a general rule, insider lists are proposed to only include persons having regular access to inside information relating to that issuer due to their function or position within the issuer, so-called permanent insider lists. ESMA has in a letter to Elisabeth Svantesson (which, as a consequence of Sweden’s EU Presidency, is President of the Council of Economic and Financial Affairs), dated 10 March 2023, expressed concerns regarding this part of the proposal as it will, inter alia, limit the ability of the National Competent Authority’s supervision.
• In regard to transactions conducted by Persons Discharging Managerial Responsibilities or Persons Closely Associated, it is proposed that the threshold above which transactions shall be notified is raised to EUR 20,000 during a calendar year, instead of the current threshold of EUR 5,000.
• The proposal changes the regulation on market soundings in the Market Abuse Regulation. In the proposal, it is clear that the market sounding regime and the relevant requirements aim to protect against allegations of unlawful disclosure of inside information (i.e., so called safe harbour).

Changes to the Prospectus Regulation

• The Commission proposes that the threshold for the prospectus requirement is harmonised and raised to EUR 12 million in the whole Union (the threshold is currently EUR 2,5 million in Sweden). Member states can choose to supplement with national legislation as long as such legislation is proportionate. If Sweden chooses to do so remains to be seen.
• The exemption from the obligation to publish a prospectus for the admission to trading on a regulated market provided that the newly admitted securities represent, over a period of twelve months, less than 20 per cent of the number of securities already admitted to trading on the same regulated market is proposed be increased to 40 per cent and, in addition, is also proposed to apply to the offer of securities to the public following certain requirements.
• A new exemption is proposed for a large number of secondary issuances on the market including, following certain conditions, companies transferring to a regulated market. Instead, the issuer is required to publish a so-called short summary document of a maximum of ten pages. Secondary issuances essentially mean that a company has been admitted to trading for at least 18 months and offers securities of the same kind that is already being traded.
• Prospectuses are proposed to be more standardised and streamlined (i.e., a fixed order of disclosure of the information contained therein).
• It is proposed that prospectuses can be drawn-up in English only, except for the summary (without an exemption from the Swedish Financial Supervisory Authority). In Sweden, prospectuses can still be drawn-up in Swedish only.
• The EU Growth prospectus is replaced by a standardised EU Growth issuance document of a maximum of 75 pages. The EU Growth issuance document is mandatory to draw-up and publish (unless an exemption is applicable) for certain categories of issuers, including small and medium-sized companies and issuers whose securities are admitted or to be admitted to trading on an SME growth market.
• The simplified prospectus for secondary issuances and the EU Recovery prospectus are replaced by a standardised EU Follow-on prospectus of a maximum of 50 pages.

Changes to MiFID II and repeal of the Listing Directive

• The Listing Act also includes proposed changes to MiFID II, and one proposal is that the minimum percentage of a share class that must be in the hands of public investors, so-called free float, is reduced from 25 per cent to 10 per cent. The purpose is to enable listings when, for example, the company’s management wishes to maintain a controlling share.
• In addition, it is proposed – to prevent market fragmentation and increase the harmonisation within the EU – that the Listing Directive is repealed.

New Directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market

The proposed new directive will enable companies listing on SME growth markets for the first time to have a multiple-vote share structure. The purpose is to make SME growth markets more attractive to companies, reduce the differences between companies seeking admission on the internal market and contribute to remove obstacles for listings. In Sweden, only public companies are affected by the proposal and most of the proposed changes are in large already applicable in Sweden.

Setterwalls’ comments

The proposals presented imply a substantive review of several central regulatory frameworks of the European capital markets. Several of the proposals are estimated to facilitate and imply cost savings for companies, especially in connection with raising capital. An initiative to create improved financing opportunities for companies and to strengthen the competitiveness of the capital markets within the EU is deemed to be of great value but Setterwalls would also like to underline the importance of a stabile governance system that ensures a well-functioning capital market. Alleviations and simplifications of the regulatory frameworks on the capital markets are desirable provided that the investor protection remains high and that adequate access to information and strong confidence in the capital markets are maintained. The Listing Act is, at the time of this article, in negotiations in the Council of the European Union and the proposal is expected to be negotiated during the Swedish EU Presidency which lasts until 30 June 2023. Setterwalls will continue to monitor the development. For further information or questions, you are welcome to contact Setterwalls’ capital markets team.

[1] Regulation No 596/2014 of the European Parliament and of the Council.

[2] Regulation (EU) 2017/1129 of the European Parliament and of the Council.

[3] Regulation No 600/2014 of the European Parliament and of the Council.

[4] Directive 2014/65/EU of the European Parliament and of the Council.

[5] Directive 2001/34/EC of the European Parliament and of the Council.