TAX NEWS - 2010

European Parliament adopts amended European Union Prospectus Directive

Background

The European Parliament adopted, on June 17, 2010, an amended version of the European Union Prospectus Directive (EUPD) which, when enforceable, will impact employee share plans being offered into the EU.

The EUPD requires companies wishing to offer shares in the European Union to publish a Prospectus. Where a Prospectus is required, the filing must contain extensive information, including details of the company's financial accounts and future prospects, and the rights attaching to the shares. This requirement generally extends to equity awards offered by employers to their employees.

Under the existing EUPD, there is an exemption from the obligation to publish a Prospectus for employee share plans, but this only applies to companies with securities traded on an EU Regulated Market.


Changes brought in by the new amendment

The newly passed amendment will extend this exemption for employee share plans to:

- All European companies with their head office or registered office in the EU; and
- Companies based outside the EU with securities traded on a market outside the EU, where the supervisory regime of that market has been declared to be "equivalent" to that for EU Regulated Markets.

These changes are likely to impact a wide range of companies which have previously been hindered by the onerous requirements to produce a Prospectus for employee share plan offers (particularly for share purchase plans), including:

- Unquoted EU companies;
- EU companies with securities traded on a non-EU Regulated Market inside the EU, such as the Alternative Investment Market (AIM) in the U.K.; and
- Non-EU companies traded on well regulated markets outside the EU, such as the New York Stock Exchange.

In addition, the existing numerical qualifications on the requirement to produce a Prospectus are to be broadened, as follows:

- The exemption for offers to less than 100 persons per EU State is to be raised to 150 persons;
- The exemption for offers with a total consideration throughout the EU in a 12 month period of less than Euros 2.5 million, is to be raised to Euros 5 million; and
- The exemption for offers with aggregate consideration of less than Euros 100,000 in a 12 month period is to be clarified so that it is measured across the whole EU not per Member State.

The amended Directive will become enforceable following approval by the Council of Europe. Member States will then have 18 months to enact it into their domestic law. This could give rise to some temporary variations in the implementation of the EUPD across Europe. We will continue to monitor the status of the amendment and will release any further developments as they arise.


Action

Pending enactment of the EUPD amendment by Member States, it is important that companies obtain professional advice with respect to their employee share plan offerings in the EU.