The requirement to disclose information about public offers of securities and admissions to trading in the regulated market is regulated in the European Union by the Prospectus Regulation, Regulation (EU) 2017/1129 of the European Parliament and of the Council. The Prospectus Regulation is intended to ensure that investors have access to sufficient, understandable and consistent information about the issuer, the securities being offered, and the conditions for the offer or admission to trading before they make their decision to invest. The Prospectus Regulation is extended in Estonia by the Securities Market Act, in which § 15 regulates the requirement to publish a prospectus and information document for an offer of securities.
Who should compile and publish the documents?
The obligation to compile and publish the documentation may fall on the issuer, the offeror or the person who applies for the securities to be admitted to trading. To identify the person who bears the obligation, it must be considered in whose name or whose interests the offer or the admission to trading is being made, and who is disclosing information to investors.
If several parties are involved in organising the offer, it may be necessary to assess the role of each of them individually. The issuer, offeror, intermediary, and person applying for the securities to be admitted to trading must be identified first of all.
When does the obligation to publish documentation arise?
The requirement to publish documentation must be assessed above all if securities are being offered to the public or admitted to trading on the regulated market. The requirement to publish a prospectus or information document for a public offer depends primarily on the size of the offer, who it is addressed to, and the exemptions contained in the Prospectus Regulation.
The type of place of trading matters primarily for distinguishing admission to trading in regulated markets from other places of trade, including multilateral trading systems. Admission to trading in First North is not directly admission to trading on a regulated market in the sense of the Prospectus Regulation, but it may become necessary to compile a prospectus or other disclosure document if there is also a public offer of securities or if the regulations require it for some other reason.
Limits on public offers
Be aware that different countries have set different limits on the obligation to publish a prospectus. These can be found from the ESMA website https://www.esma.europa.eu/sites/default/files/library/esma31-62-1193_prospectus_thresholds.pdf
The obligation to publish documentation for a public offer depends primarily on the total size of the offer in a 12-month window and on whether any exemptions under the Prospectus Regulation or the Securities Market Act apply to it. The Securities Market Act § 15 states that a prospectus generally needs to be published for public offers of at least 12 million euros if not stated otherwise in Article 1 of the Prospectus Regulation or in the Securities Market Act.
| Total public offer within 12 months | General starting point |
|---|---|
| Up to 1,000,000 euros | A prospectus or information document on the offer of securities is generally not required. |
| 1,000,000 – 12,000,000 euros | The requirement to publish an information document for an offer of securities set in § 15(6) of the Securities Market Act must be considered. |
| Over 12,000,000 euros | A prospectus generally needs to be compiled and published unless an exemption under the Prospectus Regulation applies. |
Exemptions under the Prospectus Regulation
The requirement to publish a prospectus does not apply in cases where the Prospectus Regulation allows an exemption. The application of any exemption must assess the specific circumstances of the offer or the admission to trading. The information here is not a substitute for the full list in the Prospectus Regulation, but an indication of the most common circumstances.
An offer that is only for professional or qualified investors (click to open)
The obligation to publish a prospectus does not apply if the offer of securities is addressed only to professional investors. If the offer or information about the offer becomes available to retail investors or to undetermined groups of people as well, the application of the exemption needs to be reassessed.
The offer is made to fewer than 150 people per country (click to open)
The obligation to publish a prospectus does not apply to offers that are made to fewer than 150 people or legal entities other than professional investors in each country in the European Union. The application of this exemption must assess the offer in its entirety, including who the information is actually available to.
If the information about the offer is spread publicly on the internet, in social media or through another channel that is indiscriminately available to people, it may be difficult to demonstrate that the offer is actually limited to fewer than 150 people.
The nominal value or minimum investment is 100,000 euros (click to open)
The obligation to publish a prospectus does not apply if the nominal value of the security offered is at least 100,000 euros or if the investors are buying at least 100,000 euros of securities per investor for each separate offer.
It must be considered with this exemption whether the conditions are met for each offer and each investor separately, and whether the communication of the offer does not create an obligation to publish a prospectus on other grounds.
An additional issue of securities and securities that are already traded (click to open)
The Prospectus Regulation allows an exemption in cases where the securities offered or admitted to trading can be exchanged in the same market for securities that have already been admitted to trading and they account fewer than 30% of the number of securities already admitted to trading in the same market within a 12-month period.
Amendments to the Listing Act allow an exemption in certain cases as long as no reorganisation or insolvency proceedings have been started against the issuer and that a document containing the information required in Annex IX of the Prospectus Regulation has been made available to the authorities in the country of origin and to the public.
The securities already have an 18-month history of trading (click to open)
The Prospectus Regulation grants an exemption for securities that are exchanged for securities that have been admitted for trading on a regulated market or an SME growth market for at least 18 months before the offer or admission to trading of the new securities.
It must be assessed with this exemption whether the securities are being issued because of a takeover, exchange offer, merger or separation, whether there is a reorganisation or insolvency proceeding against the issuer, and whether the Annex IX document has been filed and published as required.
The Annex IX document of the Prospectus Regulation (click to open)
Which document must be compiled?
Which document is published depends on which legal regime applies in the given case. Prospectuses, Base Prospectuses, EU Follow-on Prospectuses and EU Growth Issuance Prospectuses are covered by § 15 (1)–(4) of the Securities Market Act. If the obligation to publish a prospectus does not arise, it may be necessary in some cases to issue an information document about the offer of securities.
Forms of prospectus
The general prospectus (click to open)
The general prospectus is the main document to be published under the Prospectus Regulation and is used for public offers of securities or admission of them to trading on the regulated market if no exemption or simplified prospectus form applies. The general prospectus should give investors sufficient, understandable and consistent information about the issuer, the securities, the offer or admission to trading, and the related risks.
The prospectus can be compiled as a single document that contains all of the information needed about the issuer, the securities being offered, and the offer or admission to trading. A one-part prospectus is the usual solution for a specific offer or admission to trading when the issuer does not want or need to compile the prospectus as a set of separate documents.
The prospectus may be compiled as a set of separate documents. A three-part prospectus consists of the registration document of the prospectus, a description of the securities, and a summary. The registration document contains information that is required about the issuer, a securities note describing the specific securities, and information needed about the offer, while the summary gives the investor a brief resume of what is required under the Prospectus Regulation.
Frequent issuers can use a universal registration document that contains the information needed about the issuer and that can be used for compiling later prospectuses. The universal registration document can be simplified when repeat emissions are prepared, as the information about the issuer need not be compiled again from scratch each time.
The content of the general prospectus depends on the type of security, the type of issue, the nature of the offer and whether the securities are being admitted for trading on the regulated market. The prospectus must be compiled in accordance with the Prospectus Regulation and the relevant annexes of Commission Delegated Regulation (EU) 2019/980.
Approval of the prospectus means that Finantsinspektsioon has reviewed whether the prospectus is complete, understandable and consistent in the sense of the Prospectus Regulation. It does not imply any assessment of the economic position of the issuer or of whether the investment is beneficial.
The base prospectus (click to open)
The base prospectus is a form of prospectus defined in Article 8 of the Prospectus Regulation that can be used for offers or admission to trading on the regulated market of non-equity securities including bonds. The base prospectus is particularly relevant for scheduled issues where the issuer plans several issues or offers within a single programme.
The base prospectus contains general information about the issuer and the programme and the main conditions of the security. The final conditions of a specific series of issues are defined later in the final terms. The final terms do not replace the base prospectus and may not contain new important information that should be presented in the prospectus or annexed to the prospectus.
For an offer or admission to trading under a base prospectus, the base prospectus must be presented to investors together with the final terms and if necessary a summary of the issuance. If important new circumstances, a serious error or a major inaccuracy that could change the assessment of investors about the security appear after the base prospectus has been approved, an annex to the prospectus must be compiled to describe them.
The base prospectus is particularly appropriate if the final terms of the securities have not been fully defined at the time the prospectus is approved, but the general framework of the programme and the probable conditions of the securities have been described sufficiently for investors.
The EU follow-on prospectus (click to open)
The EU follow-on prospectus is a simplified form of prospectus for repeat issuers and offerors whose securities have been traded for at least 18 consecutive months on a regulated market or an SME growth market. It can be used for the public offer or admission to trading on the regulated market of securities under the terms of Article 14a of the Prospectus Regulation.
An EU follow-up prospectus must give investors the information they need to understand the prospectus and the financial results of the issuer, major changes, rights relating to the securities, the reason for the issue, the impact on the equity structure of the issuer, and how the revenues will be used. The maximum length of an EU follow-up prospectus for shares is generally 50 sides of A4 without the summary, information contained in references, and certain additional information.
The EU follow-on prospectus is not automatically available for use by all issuers. It cannot be used for example by an issuer of equity securities for admission to trading on the regulated market if they have only had non-equity securities previously admitted for trading on a regulated market or an SME growth market.
The EU growth issuance prospectus (click to open)
The EU growth issuance prospectus is a simplified and proportional form of prospectus for SMEs and other issuers and offerors named in the Prospectus Regulation that do not have any securities admitted to trading on the regulated market. It is used for public offers of securities under the terms of Article 15a of the Prospectus Regulation.
An EU growth issuance prospectus must contain abridged information for investors on the prospectus and the financial results of the issuer, major changes, the strategy for growth, rights relating to the securities, the reason for the issue, the impact on the equity structure of the issuer, and how the revenues will be used. The maximum length of an EU growth issuance prospectus for shares is generally 75 sides of A4 without the summary, information contained in references, and certain additional information.
The EU growth issuance prospectus is intended for public offers. It is not used for admission to trading on the regulated market.
Other documents to be published
The Annex IX document of the Prospectus Regulation (click to open)
The document required under Annex IX of the Prospectus Regulation must be compiled when certain exemptions to the obligation to publish a prospectus are applied. The Annex IX document is not a prospectus and Finantsinspektsioon does not approve it or publish it. The document must be submitted electronically to Finantsinspektsioon and made available to the public as defined in the Prospectus Regulation.
The Annex IX document may be particularly relevant in cases where securities are being offered or admitted to trading that are being exchanged for securities already trading, and the conditions in the Prospectus Regulation have been met.
There is no processing fee for submitting an Annex IX document.
The information document for an offer of securities
The information document for an offer of securities is the publication document defined in § 15(6) of the Securities Market Act that is used for a public offer without a prospectus under the conditions set by law and in a regulation of the Ministry of Finance. The information document is not a prospectus or a prospectus summary under the Prospectus Regulation.
The requirements for the information document for an offer of securities have been harmonised across the Baltic states. This means in practice that the same information document can be used for public offers in Estonia, Latvia and Lithuania.