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20 December 2005
The EU Prospectus Directive (2003/71/EC) of November 4 2003, which deals with the prospectus to be published when securities are offered to the public or admitted to trading, provides certain exemptions from the obligation to prepare and publish a prospectus. These exemptions are set forth in Article 4 of the directive. One such exemption is that the obligation to publish a prospectus shall not apply to the admission to trading of shares representing, over a period of 12 months, less than 10% of the number of shares of the same class already admitted to trading on the same regulated market (Article 4(2)). Austria implemented the directive on August 10 2005.
This exemption from the obligation to publish a prospectus has been implemented into Austrian law in Section 75(1) of the Stock Exchange Act. This provision is identical to the exemption in the directive. The exemption mainly applies to so-called 'small' capital increases. In order to benefit from this exemption, the following requirements must be fulfilled:
The 10% threshold is calculated using the number of shares of the same class already admitted to trading (ie, not necessarily using all outstanding stock).
Before the implementation of the EU Prospectus Directive in Austria, the Capital Markets Act set out a specific exemption from the obligation to publish a prospectus for the public offer of securities, to the effect that securities could be offered publicly without an obligation to publish a prospectus under the Capital Markets Act if such securities were listed on the stock exchange and if there were an exemption available under the Stock Exchange Act. However, since the implementation of the directive, this provision of the Capital Markets Act no longer exists. No comment is made in the legislative materials as to why this exemption was deleted (and whether the legislature excluded it on purpose).
This new legal situation has led to some uncertainty as to whether the exemption from the obligation to prepare and publish a prospectus for a small capital increase under the Stock Exchange Act will be available in practice at all, as a prospectus may still be required under the Capital Markets Act.
Such an interpretation is inconsistent and unsystematic. Furthermore, one of the goals of the EU Prospectus Directive was to establish, as far as possible, uniform rules for prospectuses for listings and the public offer of securities.
In certain instances such a small increase in share capital can be made without the need to publish a prospectus. However, the reasoning behind this is somewhat different. If an increase in share capital is made and the new shares are offered exclusively to the present shareholders by observing their pre-emptive rights, and if no trading of the pre-emptive rights is arranged at the stock exchange, this is not a public offer of securities. Whereas Austrian legal precedent is not very specific regarding this question, this is the prevailing opinion of German legal precedent. The mere publication in the official newspapers of the listed company that the increase in share capital has been resolved upon and that the shareholders may subscribe to the new shares should not be seen as a public offer.
This interpretation has been confirmed by the Austrian regulator, the Financial Markets Supervisory Authority. It held that the exemption from the obligation to publish a prospectus pursuant to the Stock Exchange Act will apply to a small increase in share capital that does not require a prospectus under the Capital Markets Act, provided that pre-emptive rights will not be traded and that those new shares that are not subscribed for by the existing shareholders will be offered exclusively:
In summary, the shares not subscribed for by the existing shareholders will, in no event, be offered publicly.
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