Recent amendments to the European prospectus rules may make the operation of certain employee stock plans in Europe, by multinationals listed outside Europe, cheaper and more straightforward. However, it appears that any major relaxation of the rules for such companies might not actually come into force (if indeed it does) for some time yet.

Background

One issue Asia-based multinationals have had to address in recent years has been whether a prospectus is required for the operation of their employee stock plans in Europe, particularly employee stock purchase plans.

Under the Prospectus Directive (now enacted into law by the relevant European countries), a prospectus is required where any transferable securities are offered to the public in the European Economic Area (EEA). The EEA comprises the countries of the European Union (EU) together with Norway, Liechtenstein and Iceland. Various exemptions may apply to employee stock plans, but if no exemptions apply then a prospectus is required.

Preparation of a prospectus is a costly and time-consuming process requiring the approval of the appropriate securities regulator in the issuer's "home member state". Once approved, the prospectus can be used in other EEA countries under the "passporting" procedure.

This Legal Update discusses three levels of relief which, in view of recent changes, Asia-based issuers may be able to rely on to ease the prospectus requirements:

  • Partial exemption for employee offers
  • Full exemption
  • Short-form prospectus 
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