Before and after 21 July 2019, debt prospectuses and the new universal registration document (URD): The AMF takes a pragmatic approach
On 24 October 2018, the AMF published a notice on the new registration document, referred to as the “universal registration document” (a French English translation of the AMF’s note is available here).
Regulation (EU) 2017/1129 of 14 June 2017 (the “Prospectus Regulation”), which repeals and replaces Directive 2003/71/EC, as amended (the “Prospectus Directive”), will fully enter into application on 21 July 2019 (certain articles having already entered into application on 20 July 2017 and 21 July 2018).
The Prospectus Regulation provides for a new registration document, the “universal registration document” (or URD).
Since, however, a company’s registration document must be published within
4 months following its fiscal year-end (Art. 4 of the Transparency Directive), i.e., by
30 April 2019, a company could obtain its filing or registration number in April 2019 and comply with the Prospectus Directive, but not with the Prospectus Regulation.
From 21 July 2019 and the introduction of the universal registration document, French companies will find that their existing registration documents will not require substantial revision, as the existing French registration document requirements are already closely aligned with those of the Prospectus Regulation and ESMA’s report of 28 March 2018. However, the presentation and selection of the risk factors will need to be revisited by each company. Additional information with respect to this matter will be published by ESMA following the consultation commenced in July 2018. Participants’ responses to this consultation were published by ESMA on
30 October 2018.
Consequently, if a company launches an issue of debt securities after 21 July 2019, could it incorporate by reference its registration document in its prospectus, base prospectus, or supplement to the base prospectus?
This is precisely what the AMF sought to address in its publication of 24 October 2018. The AMF requests that, starting from the first half of 2019, companies reflect in advance the changes provided for by the Prospectus Regulation, adapt their registration documents to the new requirements of the universal registration document and discuss with their contact person in the AMF’s Corporate Finance Division (Direction des émetteurs).
For companies seeking to issue debt securities after 21 July 2019, the first question that must be asked of an issuer is: Did you consult with the AMF prior to the filing or registration of your 2018 registration document? In particular, are your risk factors in line with Prospectus Regulation requirements?
If the answer is “yes”, the incorporation by reference process will go more smoothly and the AMF’s review period and comment list on the prospectus will be potentially shortened.
If the answer is “no”, then the new presentation and selection of risk factors will need to be included in extenso in the debt prospectus.
If the issuer has an existing EMTN program and did not modify its registration document as requested by the AMF, either (a) it updated its EMTN program prior to 21 July 2019 by incorporating by reference its registration document, and its base prospectus will be, notwithstanding any other updates, valid for a period of one year (Art. 46 of the Prospectus Regulation), or (b) the EMTN program is updated after 21 July 2019 and the section relating to risk factors will need to be included in extenso and conform with the Prospectus Regulation.
In the case of (a), it is possible that the AMF will require the risk factors section to comply with the new regulation should an issuer seek AMF approval of a supplement that modifies the risk factors during the base prospectus’ one-year validity period. This point was not specifically addressed by the AMF.
We can only welcome the AMF’s publication of 24 October 2018 and its pragmatism. Nevertheless, for companies, preparing a registration document requires substantial work. Having to transform that document as early as the first half of 2019, before the entry into application of the new regulation, may prove even more difficult.