International selling restrictions by jurisdiction - 2019-2021

Thursday 7 March 2024

The Capital Markets Forum has undertaken a project to monitor international selling restrictions. In the dropdown panels below, you will see information on selling restrictions in various jurisdictions that apply to offerings of equity securities by companies incorporated outside the jurisdiction. The information is accurate as of the date provided within the relevant link. This guide is provided for information only and should not be relied upon as professional legal advice. Download submission template

Argentina

Introduction

Law No. 26,831, as modified by Law No. 27,440 (the ‘Securities Law’), states that only the issuers of securities, Argentinian banks and certain individuals and entities registered with the Comisión Nacional de Valores (the ‘CNV’; the Argentinian Securities and Exchange Commission) may engage in the public offering of securities as a regular business in Argentina. In addition, the public offering of securities is subject to prior approval by the CNV.

The definitions of ‘public offering’ and ‘securities’ are very broad. The Securities Law establishes that a public offering is an invitation, made by an issuer or by individuals or companies engaged fully or partially in the purchase and sale of securities, to the general public, or certain sectors or groups, made through personal offers, newspaper advertisements, radio or television broadcasts, films, billboards, signs, programmes, circulars, printed notices or by any other means, to enter into any transaction involving securities. ‘Any transaction’ includes the Initial Public Offering (IPO) and sale of securities as well as any subsequent resale of such securities either through a traditional stock exchange or trading platform. ‘Securities’ include financing or investment instruments that, due to their form and transmission system, may be bought and sold in financial markets, such as bonds, shares of capital stock, units of investment funds, trust certificates, futures, options and other derivatives traded in authorised markets.

In addition, persons that wish to advise in Argentina on investments in the capital markets, manage transaction orders, and/or manage investment portfolios on a regular basis, require a licence as global investment advisers (‘AAGI’, after its Spanish acronym) from the CNV.

Failure to comply with the Securities Law may give rise to administrative and criminal sanctions. Section 310 of the Criminal Code imposes criminal penalties – imprisonment, fines and special disqualification – on those persons who accept savings from the public in the stock market or provide intermediation services for the acquisition of securities without a proper licence as required and issued by the relevant authority. Even though the Securities Law contemplates that the CNV may regulate private placement exemptions, to date the CNV has not.

Restrictions for sales to institutions and to ‘sophisticated’ or high-net-worth individuals

the offer is made to a limited number¹ of sophisticated investors;²
the offerees are not selected and approached as a result of their meeting certain predetermined requirements or falling within a category (eg, insurance companies), but rather as persons who have been specifically selected (eg, on the basis of a previous business relationship)³;
no mass media advertising, marketing or other selling efforts are conducted within Argentina;
the offering and subscription materials are sent from outside Argentina to prospective investors in Argentina at their express written request;
the investors are requested to send their subscription agreement to the underwriter for acceptance outside Argentina; no subscription agreement or other transaction documents are signed in Argentina⁴; and accordingly, the closing of the subscription takes place outside Argentina⁵;
the funds for the payment for the securities are sent or wired to an account outside Argentina;
no websites are used for providing information or services, unless they are password protected, and provided that any such passwords are given to individuals on the same terms as described above; websites should not have contact information of individuals or entities located in Argentina; and
the offering is made exclusively by employees of a foreign entity that has no presence in Argentina (ie, subsidiaries or agents).

Additional selling restrictions for sales by investment companies or closed-end funds

The restrictions are the same whether the securities are sold through an underwriter or investment companies or closed-end funds. The main requirement is to check if these companies are registered within the CNV as agents, and as such, are authorised to publicly offer securities in Argentina.

Transfer restrictions

In Argentina there are currently no transfer restrictions on securities of a foreign company listing its shares on a stock exchange in its home jurisdiction. Argentinian taxes may apply to this operation.

Roadshows

Roadshows may not be conducted by underwriters who are not registered as agents with the CNV. All meetings must be made on a one-to-one basis.

Legends

It is recommended that the following investor representation should be included in the subscription agreement for purchasers in Argentina (adapting capitalised terms as appropriate to meet the defined terms of the subscription agreement):

The Purchaser confirms that it is aware that the securities have not been registered with the Comisión Nacional de Valores and may not be offered or sold publicly in Argentina. Accordingly, the Purchaser acknowledges, confirms and agrees that: 1. it has not been solicited by the Underwriters, Placement Agent or any person acting for or on behalf of either of the foregoing in connection with the distribution to the Purchaser of the offering document or its purchase of the securities; and 2. it contacted the Underwriter outside Argentina in connection with the distribution to it of the offering document and its purchase of the securities.

Foreign exchange restrictions

Since the beginning of December 2001, the Argentinian government has implemented monetary and foreign exchange control measures that included restrictions on the withdrawal of funds deposited with banks and on the transfer of funds abroad without prior approval by the Argentinian Central Bank, some of which are still in effect. The exchange controls were reinstated by the government in September 2019. For more information about the current foreign exchange restriction, please consult with Argentinian counsel.

Name, law firm and contact details for submitter

Cecilia M Mairal
Marval O’Farrell Mairal, Buenos Aires
CMM@marval.com

Sergio Tálamo
Marval O’Farrell Mairal, Buenos Aires
STAL@marval.com

^{1 Argentinian counsel advise the offer should be made to a limited number of offerees. Please note that it is the number of offerees in Argentina, and not the number of such offerees who subscribe the securities. In the past, the market considered that an offer made to no more than 50 offerees would normally be treated as private. However, there can be no assurance that this is still the case.}

^{2 There is no definition of what constitutes a sophisticated investor for these purposes and no express safe harbour for offers to sophisticated investors. However, it is arguable that an offer may be made to persons who are sufficiently experienced in making investments and that they do not need the protections afforded to retail investors under the Securities Law. Should you seek to rely on the fact that a prospective investor in Argentina is a sophisticated investor, always seek independent legal advice from Argentinian counsel.}

^{3 Cold calls entail more risk than offers to existing clients; however, the analysis depends on the totality of the facts and circumstances.}

^{4 The Argentinian investor may execute the subscription agreement in Argentina if, under the law governing the subscription agreement, the subscription agreement is treated as being concluded outside Argentina, even though the investor executes it in Argentina.}

^{5 he execution of a securities sale agreement, service agreement or other agreements for consideration may be subject to stamp taxes in Argentina.}

Brazil

Introduction

In case of an offering of non-Brazilian securities to investors who are resident and domiciled in Brazil (‘Securities’ and ‘Investors’, respectively), the following should be taken into consideration. On 30 September 2005, the Brazilian Securities Commission (CVM – Comissão de Valores Mobiliários) issued Guidance Opinion No 33 (‘Opinion 33/05’), dealing with the intermediation of transactions and offerings of securities issued and admitted to trading in other jurisdictions (such as the Securities) and the procedures to advertise such securities to investors residing in Brazil.

Pursuant to Opinion 33/05, only members of the securities distribution system duly registered with the CVM are authorised to: (1) perform the activity of intermediating transactions involving securities in Brazil; or (2) exercise an intermediation activity in Brazil. Therefore, only a member of the Brazilian securities distribution system registered with CVM may conduct activities in Brazil involving the marketing of securities issued and admitted to trading in other jurisdictions to investors residing in Brazil. Entities that are not members of the Brazilian securities distribution system are prohibited from the marketing, sale, promotion or underwriting of securities.

On the other hand, the intermediation of transactions involving securities issued and admitted for trading in other jurisdictions may not be considered as an irregular public offering in Brazil provided that: (1) the activity of prospecting investors is performed solely overseas by foreign agents duly authorised to perform such activities overseas; and (2) the offering is not characterised as a public offering in Brazil under Law No 6385 of 7 December 1976 (‘Law 6385/76’). The coexistence of the factors mentioned in items (1) and (2) above may not be sufficient to disqualify as public an offering of securities in Brazil. CVM shall consider the characterisation of a certain offering of securities as an irregular public offering based on the analysis of each case. Nonetheless, private placements directly to individuals do not face the same restrictions as public offerings.

Law 6385/76 establishes that no public offering of any kind of securities in the Brazilian capital markets may occur without prior registration with CVM. The following activities characterise a public offering of securities under Law 6385/76:

use of sale or subscription lists or slips, leaflets, prospectuses or advertisements targeted at the public;
seeking securities subscribers or purchasers through employees, agents or brokers; and
trading conducted at shops, offices or facilities open to the public or through the use of public communication services.

In case a non-Brazilian intermediary intends to publicly offer securities issued in other jurisdictions to investors resident and domiciled in Brazil by prospecting investors in Brazil, they have to: (1) register with CVM as members of the Brazilian securities distribution system or retain an institution within the Brazilian securities distribution system to perform the intermediation in Brazil; and (2) register the public offering with CVM. Nevertheless, CVM's instructions, guidance opinions and decisions only provide for specific procedures for the registration of public offerings of foreign stocks (through Brazilian Deposit Receipts – BDR), excluding other foreign securities.

Restrictions for sales to institutions

Without prejudice of the above, insofar as a private placement is concerned, the Securities may be directly offered on an individual basis to investors resident and domiciled in Brazil who have a pre-existing relationship with any of the foreign agents (‘Distributors’) in charge of the distribution of the Securities. Accordingly, the private placement should be aimed at investors who have had a close and regular previous commercial, credit, partner or work relationship with any of the Distributors.

The number of investors is irrelevant in determining whether an offering is public or private. It depends on how such investors are approached. Provided that the offering efforts are made on an individual basis with investors that have had a close and regular previous commercial, credit, partner or work relationship with any of the Distributors, there is no restriction on the number of investors to be approached.

Brazilian regulations do not specify the procedures for the private placement of securities. The CVM has the discretion to characterise an offering of securities as an irregular public offering based on the analysis it may make on a case-by-case basis, which means a private placement may be deemed an irregular public offering.¹

Close-ended pension funds

Brazilian close-ended pension funds cannot invest directly in shares of non-Brazilian companies.²

Open-ended pension funds

Brazilian open-ended pension funds (and also insurance companies, reinsurance companies and capitalisation companies) cannot invest directly in shares of non-Brazilian companies.³

Alternative investment funds

In general, Brazilian alternative investment funds, such as receivables funds and real estate funds, cannot invest outside Brazil. There are exceptions for private equity funds targeted at qualified investors, who can invest up to 20 per cent of their investments outside Brazil. Likewise, private equity funds targeted at professional investors can invest up to 100 per cent of their investments outside Brazil. CVM Rule No 539, dated 13 November 2013, as amended, defines professional investors as follows:

financial institutions and other institutions authorised by the Central Bank of Brazil;
insurance companies and capitalisation companies;
open-ended and close-ended pension funds;
individuals or legal entities with investments in the financial markets greater than BRL10m;
investment funds; and
non-resident investors, among others.

In addition, CVM Rule 539 defines qualified investors as follows:

professional investors; and
individuals or legal entities with investments in the financial markets greater than BRL1m, among others.

Mutual investment funds

Investments outside Brazil by Brazilian mutual investment funds may be limited or unlimited, depending on their target investors. CVM Rule No 555, dated 17 December 2014, as amended, has raised the concentration limits for investments outside Brazil applicable to certain types of mutual investment funds. Accordingly, mutual investment funds targeted at professional investors may invest up to 100 per cent of their net asset value (NAV) outside Brazil. In turn, mutual investment funds targeted at the public at large are limited to investing up to 20 per cent of their NAV outside Brazil, while mutual investment funds targeted at qualified investors are limited to invest up to 40 per cent of their NAV outside Brazil. Pursuant to Article 101, s1, of CVM Rule 555, investment funds targeted at qualified investors may raise the 40 per cent threshold up to 100 per cent and thus invest up to 100 per cent of their NAV outside Brazil, provided that the following requirements are met:

their investment policies set forth that at least 67 per cent of their NAV are comprised by assets outside Brazil; and
their by-laws detail the types of assets to be invested, the assets’ geographical location, whether the portfolio management is passive or active and the risks to which the assets outside Brazil are subject.⁴

Restrictions for sales to sophisticated or high-net-worth individuals

Brazilian regulations do not provide selling restrictions for sales of non-Brazilian securities to sophisticated or high-net-worth individuals in Brazil. Furthermore, current Brazilian regulations do not prohibit private placements directly to individuals.

Transfer restrictions

None.

Roadshows

Roadshows are only allowed within the context of a public offering, which must be previously registered with the CVM. Individual meetings with clients are permitted within the context of private placements.

Legends

Within the scope of a private placement of Securities, as referred to above and without prejudice of the paragraphs above, it is advisable that any document provided to the Investors should contain the following disclaimer:

‘This is a strictly privileged and confidential document for the purposes of a potential investment in foreign securities on a one-on-one basis with potential investors with a pre-existing relationship with the [name of the distributor]. This document contains information addressed only to a specific individual and is not intended for distribution to, or use by, any other person. This document (i) is provided for informational purposes only, (ii) should not be construed in any manner as any solicitation or offer to buy or sell any securities or any related financial instruments, (iii) should not be construed in any manner as a public offer of any securities or any related financial instruments, and (iv) and will be addressed to a potential investor with restricted access of information. The relevant securities have not been, and will not be, registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários – CVM), and must not be offered or sold in Brazil except in circumstances which do not constitute a public offering or distribution under Brazilian laws and regulations. Any public offering, placement or distribution, as defined under Brazilian laws and regulations, of securities in Brazil, is not legal without prior registration under Law No 6,385 of 7 December 1976, as amended. Documents relating to the offering of the relevant securities, as well as information contained therein, must not be supplied to the general public in Brazil (as the offering of the relevant securities is not a public offering of securities in Brazil) or used in connection with any offer for subscription or sale of the relevant securities to the general public in Brazil.’

Name, law firm and contact details for submitter

Alexei Bonamin
TozziniFreire Advogados, São Paulo
abonamin@tozzinifreire.com.br

July 2019

^{1 Any individual or legal entity resident or domiciled in Brazil may freely remit outside Brazil any amounts from Brazil, without prior authorisation from the Central Bank of Brazil (BACEN – Banco Central do Brasil). The only requirement for such remittances is that the individual or legal entity must enter into a foreign exchange transaction with a bank duly authorised to deal in the foreign exchange market by BACEN. Once the funds are remitted, the individual or the legal entity will have to report any amounts and assets kept outside Brazil annually to the tax authorities and periodically to BACEN as the case may be. With respect to the report to BACEN, such report is mandatory for individuals and legal entities holding assets outside Brazil, at the end of a base-year, equal or above USD100,000. ln addition, such report is mandatory, quarterly, for individuals and legal entities holding assets outside Brazil equal or above USD100m. For the purposes of the investments outside Brazil, there is neither asset allocation nor amount restrictions.}

^{2 Brazilian close-ended pension funds, pursuant to Resolution No 4.661/2018 of the National Monetary Council (CMN) can invest up to ten per cent of their resources outside Brazil exclusively in the following assets: (i) shares of investment funds and shares of fund of funds classified as ‘Fixed Income – External Debt’, pursuant to CVM regulation; (ii) shares of investment funds referenced to foreign indexes, listed on the Brazilian stock exchange; (iii) shares of open-ended external debt investment funds that, pursuant to CVM regulation, invests at least sixty-seven per cent of its net worth in shares of foreign investment funds; (iv) shares of open-ended investment funds classified as ‘External Debt’, pursuant to CVM regulation; (v) Brazilian Deposit Receipts (BDR) linked to shares issued by listed companies or a company similar to Brazilian listed companies, with a registered office located overseas, according to the regulation defined by CVM (Brazilian Close-Ended Pension Funds cannot invest directly in shares of non-Brazilian companies); and (vi) foreign financial assets contained in the portfolio of Brazilian investment funds, pursuant to CVM regulation, that are not listed in items (i) to (v). In addition, Brazilian close-ended pension funds cannot invest more than ten per cent of their resources in a single issuer. Moreover, investments made by Brazilian close-ended pension funds cannot exceed 25 per cent of the net worth of the investment vehicles mentioned in items (ii), (iv) and (vi) of the previous paragraph. With regards to the investment vehicle mentioned in item (iii) (shares of open-ended external debt investment funds that, pursuant to CVM regulation, invests at least sixty-seven per cent of its net worth in shares of foreign investment funds), such limit is reduced to 15 per cent.}

^{3 Brazilian Open-Ended Pension Funds, pursuant to Resolution No 4.444/2015 of the CMN can invest up to ten per cent of their funds under the modality ‘Exchange Fluctuation’. Within this modality, (i) up to 100 per cent of the investments can be made in shares of investment funds and shares of fund of funds classified as ‘Fixed Income, Stocks, Mutual Fund or Exchange – External Debt, pursuant to CVM regulation; (ii) up to 75 per cent in (a) Brazilian Deposit Receipts (BDR) linked to shares issued by listed companies or a company similar to Brazilian listed companies; (b) shares of open-ended investment funds classified as ‘Stocks – BDR Level 1’, pursuant to CVM regulation (Brazilian open-ended pension funds cannot invest directly in shares of non-Brazilian companies); (iii) up to 50 per cent in corporate debt represented by securities listed and traded in a foreign jurisdiction issued by Brazilian publicly-held companies; (iv) up to 25 per cent in fixed-term (up to six months maturity, renewable) deposits or deposit certificates issued or unconditional guaranteed by financial institutions. In addition, open-ended pension funds cannot invest more than 49 per cent of their funds in investment funds. This threshold is reduced to ten per cent for international financial institutions. Moreover, investments made cannot exceed 25 per cent of the net worth of a single investment fund. Finally, investments of open-ended pension funds with survival coverage, structured as variable contribution, whose remuneration is based on the profitability of investment portfolios, must be made, during the deferment period, with exclusive funds, specifically incorporated for such purpose. Also, investments of open-ended pension funds destined to the coverage of deficits under certain circumstances must be also made in such exclusive funds.}

^{4 Additionally to raise the limits for investments outside Brazil by certain types of mutual investment funds, CVM Rule 555 has also increased the obligations applicable to administrators, custodians and portfolio managers insofar as investments outside Brazil are concerned. For instance, whenever a Brazilian mutual investment fund invests in an investment fund outside Brazil, the portfolio manager of the Brazilian mutual investment fund must ensure that the investment fund outside Brazil complies with certain requirements, such as:}

^{be regulated and supervised by a recognised local authority;}
^{valuates its shares after each redemption and investment, and at least every 30 days;}
^{has an experienced and reputable administrator, portfolio manager, custodian and other service providers, duly authorised to perform their duties by a recognised local authority;}
^{its financial statements must be audited by an independent auditor; and}
^{has risk control policy and leverage limits compatible with the Brazilian mutual investment fund.}

^{Mutual investment funds are only authorised to invest in derivatives outside Brazil if the relevant transaction observes one of the following requirements:}

^{be registered in a depository system, held by a custodian, recorded by a bookkeeper, or registered in a settlement system, approved by a recognised local authority;}
^{be traded on stock exchanges or electronic platforms, or settled through a central counterparty;}
^{have, as counterparty, a financial institution which adheres to the rules of the Basel Committee, supervised by a recognised local authority and with low credit risk, according to the assessment of the relevant portfolio manager.}

Canada

Introduction

Canadian securities regulation is governed by legislation, rules and regulations made at the provincial and territorial level, although the overall regimes are similar, and an effort has been made to harmonise regulation through national and multi-lateral regulatory instruments.

An offering of shares may only be conducted under a prospectus for which a receipt has been obtained by the issuer from the applicable securities regulators in each relevant province or territory, or under an exemption from the prospectus requirement.

Any type of marketing or disclosure material (other than a very short-term sheet) will be considered to be an ‘offering memorandum’¹ under applicable Canadian securities laws, and for some provinces or in some circumstances must contain (or in some cases, to be accompanied or preceded by delivery of) mandatory notices and disclosure, which are often included in selling restrictions included in the material or in a Canadian wrapper to the material.

Sales of shares (and related marketing) may only be conducted by or through dealers registered with the applicable securities regulators or international dealers who have taken the steps to qualify for an exemption from the dealer registration requirement.

Restrictions for sales to institutions

International private placement sales to Canadian institutional investors are most frequently conducted using the ‘accredited investor’ prospectus exemption, for sales to banks, trust companies, insurers, credit unions, dealers, pension funds, certain investment funds, fully managed accounts, certain charities, governments, certain entities with net assets of C$5m and other entities that are purchasing as principal and not with a view to resale. The full list of accredited investors is set out in the definitions section below.

Where an international dealer is relying on an exemption from the registration requirement, sales must be restricted to a super-accredited class of investors, called ‘permitted clients’. These include most financial institutions, fully managed accounts, certain charities, governments and certain entities with net assets of C$25m. The full list of permitted clients is set out in the definitions section below.

Restrictions for sales to sophisticated or high-net-worth individuals

Although the definition of accredited investors includes certain high-net-worth individuals, unless an individual is also a permitted client (net financial assets of C$5m), the sales process must include additional risk disclosure and acknowledgement procedures which are not typically undertaken in international private placements. Even in the case of an individual permitted client, special privacy consents and disclosures are required and, accordingly, individuals are typically excluded entirely from international private placements.

Additional selling restrictions for sales by investment companies or closed-end funds

For investment companies and closed-end funds, if the offering is being made in Ontario, Quebec or Newfoundland, the fund manager (not the portfolio manager, but the entity responsible for overall administration of the fund; eg, the board of the investment company, the general partner of a limited partnership, or an alternative investment fund manager) is also required to be registered with the applicable securities regulators or to have taken steps to qualify for a registration exemption (and as a result the offering must be restricted to permitted clients). A more liberal regime applies to venture capital and private equity funds.

Transfer restrictions

Unless the issuer is or becomes a public company in Canada by filing a prospectus or listing on an exchange, any resale must be made in accordance with applicable Canadian securities laws, which may require resales to be made in accordance with Canadian prospectus and registration requirements, pursuant an exemption from those requirements or in a transaction not subject to those requirements. In certain circumstances, it may be possible to resell outside Canada without complying with any Canadian requirements and purchasers should seek legal advice prior to any resale whether within or outside Canada.

Roadshows

Attendance at roadshows should be restricted to prospective purchasers who are targeted in the offering, such as ‘accredited investors’ or ‘permitted clients’, and a representative from a registered dealer or an international dealer that has qualified for an exemption from the dealer registration requirement should be present.

Legends

In Ontario and certain other provinces, an offering memorandum is required to contain (or in some cases, to be accompanied or preceded by delivery of) a notice of the purchasers’ rights in the event of a misrepresentation. The following is suitable for an offering being made primarily outside of Canada restricted to ‘permitted clients’ in Canada by an issuer with minimal contacts with Canada (formed outside Canada, not a public company in Canada, head office outside Canada, majority of executive officers and majority of directors outside Canada):

A share is an ‘eligible foreign security’, as defined in section 1 of Ontario Securities Commission Rule 45-501 – Ontario Prospectus and Registration Exemptions and in section 1 of Multilateral Instrument 45-107 – Listing Representation and Statutory Rights of Action Disclosure Exemptions of all of the Canadian Securities Administrators other than British Columbia and Ontario. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment hereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal adviser.

If the issuer is a ‘connected issuer’ (a relationship where there is a lack of independence, such as a material lending relationship) or ‘related issuer’ (a voting or equity relationship) with respect to any of the underwriters or dealers distributing the securities in Canada, then additional disclosure regarding such relationships is required. Where there is a simultaneous United States offering, it may be possible to rely on an exemption from such disclosure, where the offering memorandum complies with Financial Industry Regulatory Authority (FINRA) rule 5121, if applicable.

Unless there will be a separate subscription agreement to be executed by purchasers, it is recommended to include deemed representations, warranties, certifications and covenants from purchasers as to various matters relevant to the prospectus and registration exemptions being relied on. The following is an example:

By virtue of placing an order to purchase share, each Canadian purchaser who purchases shares will be deemed to represent, warrant, and certify to the issuer, the underwriters and the dealer with whom the order was placed that such purchaser is: 1. an ‘accredited investor’ as defined in section 1.1 of National Instrument 45-106 – Prospectus Exemptions (NI 45-106) and, if applicable, subsection 73.3(1) of the Securities Act (Ontario); 2. a ‘permitted client’ as defined in section 1.1 of National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations; 3. [is not an individual and]² is resident or domiciled in one of the Canadian provinces or territories in which the offering is being made; 4. has not been created or used solely to purchase or hold securities as an accredited investor; 5. is purchasing as principal for investment purposes and not with a view to re-sale or further distribution; and 6. is basing its investment decision solely on this offering memorandum and not on any other information concerning the issuer or the offering in Canada. Such purchaser will be deemed to covenant to the issuer, the underwriters and the dealer with whom the order was placed to provide sufficient information to assist them to determine that the purchaser is a ‘permitted client’ and an ‘accredited investor’ and the paragraph of the definition of ‘accredited investor’ in section 1.1 of NI 45-106 that applies to such purchaser, and permit them to complete the relevant portions of Form 45-106F1 Report of Exempt Distribution to be filed in connection with the distribution of shares in Canada.

If individuals are permitted to purchase, it would be common to include deemed consents of purchasers to disclosure of personal information to securities regulators and acknowledgements from purchasers of required notices in relation to such disclosure.

If the offering is made to individuals in Quebec, the following is recommended:

En vertu de la souscription pour les actions offertes par ce document, l’acquéreur serait censé avoir requis que tous les documents s’y rattachant soient rédigés en anglais seulement.

By virtue of the subscription for the shares offered hereby, a purchaser shall be deemed to have required that all documents relating thereto be drawn up in the English language only.

Unless notices to permitted clients have been separately provided by international dealers (and if applicable, international investment fund managers) relying on registration exemptions, these notices may also be provided in the selling restrictions.

Definitions

Definition of ‘accredited investor’ under Canadian securities laws (modified for this purpose)

Under section 1.1 of Canadian National Instrument 45-106 Prospectus Exemptions (NI 45-106), the term ‘accredited investor’ means (commonly relied upon categories for individual or other non-institutional investors are highlighted in bold):^3,4

Definition of ‘permitted client’ under Canadian securities laws (modified for this purpose)

Under section 1.1 of Canadian National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), the term ‘permitted client’ means:⁵

Certain defined terms:

Certain terms used above are specifically defined by applicable Canadian securities legislation, regulation, or rules, as follows:

‘Canadian financial institution’ means:

an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act; or
a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorised by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

‘company’ means any corporation, incorporated association, incorporated syndicate, or other incorporated organisation;

‘director’ means:

a member of the board of directors of a company or an individual who performs similar functions for a company; and
with respect to a person that is not a company, an individual who performs functions similar to those of a director of a company;

‘eligibility adviser’ means:

a person that is registered as an investment dealer and authorised to give advice with respect to the type of security being distributed; and
in Manitoba, it also means a lawyer who is a practising member in good standing with a law society of a jurisdiction of Canada, or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants, or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:
1. have a professional, business, or personal relationship with the issuer, or any of its directors, executive officers, founders, or control persons; nor
2. have acted for or been retained personally or otherwise as an employee, executive officer, director, associate, or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders, or control persons within the previous 12 months;

‘executive officer’ means, for an issuer, an individual who is:

a chair, vice-chair, or president;
vice-president in charge of a principal business unit, division or function including sales, finance, or production; or
performing a policy-making function in respect of the issuer;

‘exempt market dealer’ means a person or company registered in the category of exempt market dealer;

‘financial assets’ means: 1. cash; 2. securities; or 3. a contract of insurance, a deposit and evidence of a deposit that is not a security for the purposes of securities legislation (the value of the subscriber’s personal residence or other real estate is not included in the calculation of financial assets);

‘foreign jurisdiction’ means a country other than Canada or a political subdivision of a country other than Canada;

‘fully managed account’ means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

‘individual’ means a natural person, but does not include:

a partnership, unincorporated association, unincorporated syndicate, unincorporated organisation, trust; or
a natural person in the person’s capacity as trustee, executor, administrator or other legal personal representative;

‘investment dealer’ means a person or company registered in the category of investment dealer;

‘managed account’ means an account of a client for which a person or company makes the investment decisions if that person or company has discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

‘mutual fund dealer’ means a person or company registered in the category of mutual fund dealer;

‘net assets’ means all the subscriber’s assets minus all of his, her or its liabilities;

‘person’ includes:

an individual;
a corporation;
a partnership, trust, fund and an association, syndicate, organisation, or other organised group of persons, whether incorporated or not; and
an individual or other person in that person’s capacity as a trustee, executor, administrator or personal or other legal representative;

‘related liabilities’ means:

liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets; or
liabilities that are secured by financial assets;

‘Schedule III bank’ means an authorised foreign bank named in Schedule III of the Bank Act (Canada);

‘spouse’ means, an individual who:

is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual;
is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender; or
in Alberta, is an individual referred to in clause (a) or (b), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta);

‘subsidiary’ means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary;

Control:

A person (first person) is considered to control another person (second person) if:

the first person beneficially owns or directly or indirectly exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only to secure an obligation;
the second person is a partnership, other than a limited partnership, and the first person holds more than 50 per cent of the interests of the partnership; or
the second person is a limited partnership, and the general partner of the limited partnership is the first person.

Name, law firm and contact details for submitter

Alfred Page
Borden Ladner Gervais, Toronto
apage@blg.com

Philippe Tardif
Borden Ladner Gervais, Toronto
ptardif@blg.com

January 2021

^{1 In Ontario and certain other provinces, a limited partnership conducting an offering using a prospectus or offering memorandum is deemed to be carrying on business in the province, with the result that the limited partnership and its general partner must register to do business there before completing a sale of the offering. In many cases the time required to complete these registrations results in a limited partnership being unable to sell in those provinces.}

^{2 See discussion above regarding exclusion of individuals from international private placements.}

^{3 See under ‘Certain defined terms’ for the definitions of certain terms used.}

^{4 In Ontario, paragraphs (a) to (h) of subsection 73.3(1) of the Securities Act (Ontario) correspond to paragraphs (a) to (d) and paragraphs (f) to (i) of the definition of ‘accredited investor’ in section 1.1 of NI 45-106.}

^{5 Under section 1 of Canadian Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Managers, the term ‘permitted client’ has the same meaning as in section 1.1 of NI 31-103, except that it excludes paragraph (m) and (n) and includes a registered charity under the Income Tax Act (Canada) that obtains advice on the securities to be traded from an eligibility adviser, or an adviser registered under the securities legislation of the jurisdiction of the registered charity.}

Finland

Introduction

The offering of securities in Finland is governed by the Finnish Securities Markets Act (FSMA) and the European Prospectus Regulation (Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (as amended)) and regulations issued thereunder, which are directly applicable law in Finland as a European Union (and European Economic Area (EEA)) member country.

According to the general principles of the FSMA, which apply irrespective of whether a prospectus has been prepared (and irrespective of whom the targeted investors are: ie, these principles also apply in a private placement context):

it is prohibited to act contrary to the good practice of the Finnish securities market;
it is prohibited to provide false or misleading information in the marketing and exchange of securities and other financial instruments;
if new material information comes up or an omission is discovered after information has been provided to prospective investors, the information provided earlier must be corrected or supplemented with such new material information without delay in an adequate manner; and
anyone who offers securities must keep sufficient information on factors that may have a material effect on the value of the securities equally and consistently available to the investors.

Whether a prospectus approved by the Finnish Financial Supervisory Authority (FIN-FSA) or another competent EU regulatory authority and notified to Finland is required depends, inter alia, on the size of the offering and the number and type of the investors targeted in the offering. The obligation to publish a prospectus, exemptions therefrom, and the contents of the prospectus are contained in the FSMA and the following EU regulations:

the Prospectus Regulation;
Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (as amended); and
Commission Delegated Regulation (EU) 2019/979 of 14 March 2019, supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council with regard to regulatory technical standards on key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus and the notification portal (as amended).

According to the FSMA, there is no obligation to publish a prospectus for offerings where the aggregate consideration of the offering is below €8m (calculated as the aggregate amount of all non-prospectus offerings during the previous 12-month period within the EEA). There is, however, an obligation to prepare a basic information document for an offering when the aggregate consideration is between €1m and €8m (calculated as the aggregate amount during the previous 12-month period within the EEA). The contents of the basic information document are fairly simple and are set forth in the Finnish Ministry of Finance’s decree. The basic information document must be provided to FIN-FSA, but FIN-FSA does not review or approve the document.

Restrictions for sales to sophisticated or high-net-worth individuals

The following types of offerings do not require a prospectus to be published in Finland under the Prospectus Regulation:

an offer of securities addressed solely to qualified investors; (1)
an offer of securities addressed to fewer than 150 natural or legal persons in Finland, other than qualified investors;(2)
an offer of securities whose denomination per unit amounts to at least €100,000; and • an offer of securities addressed to investors who acquire securities for a total consideration of at least €100,000 per investor, for each separate offer. (3)

There are certain other prospectus exemptions available relating to special situations, such as offerings to employees.

Consequently, sales to institutions only are typically exempted from the prospectus requirement, provided such institutions qualify as qualified investors (as defined in the Prospectus Regulation) or another prospectus exemption described above is applicable.

Restrictions for sales to sophisticated or high net worth individuals

Please see the answer above. Individuals can fall under the category of a qualified investor, to which a prospectus exemption applies, if they request to be treated as professional clients and fulfil the required criteria.(4)

Additional selling restrictions for sales by investment companies or closed-ended funds

The Prospectus Regulation applies to the offerings by investment companies or closed-ended funds. There are specific requirements for the contents of a prospectus to be prepared for the offerings of closed-ended investment undertakings.

Where an investment company or closed-ended fund meets the criteria of an ‘alternative investment fund’ (within the meaning of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (as amended) (AIFMD)), the selling restrictions regarding such funds also apply. (5)

As a general rule, foreign alternative investment funds can be marketed only to professional clients (within the meaning of Directive 2014/65/ EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments, amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II), as transposed in the Finnish law), subject to certain disclosure requirements. (6)

Additionally, depending on the regulatory status and home jurisdiction of the alternative investment fund manager, and subject to certain additional requirements and conditions, an alternative investment fund can also be marketed to non-professional clients. (7) Such conditions include a requirement regarding certain legal forms of the fund, a requirement that the fund must be domiciled in the EEA, a requirement on suitability assessment and an obligation to prepare a key information document (in either Finnish or Swedish). (8)

A process with FIN-FSA must be completed before marketing in Finland can commence. Depending on the regulatory status and home jurisdiction of the alternative investment fund manager, such process entails either marketing passporting under the AIFMD (which covers only professional clients) or a marketing notification sent directly to the FIN-FSA followed by an approval from the FIN-FSA. If marketing is directed to any non-professional investors, a marketing notification and an approval thereof is always required (regardless of whether the alternative investment fund manager has relied on the marketing passport).

Transfer restrictions

Under Finnish law, there is no concept of restricted stock and there are no transfer restrictions to certain type of investors. Once the shares have been issued to the first investor, the shares are fully fungible and exchangeable.

If the shares issued in an IPO are later offered to the public (for example, through a share sale), the offering would be subject to the same disclosure rules as an initial offering: ie, the same general principles of the FSMA and an obligation to publish a prospectus applies to such offering, unless any of the exemptions under the Prospectus Regulation apply.

Roadshows

It is common practice in Finland to hold roadshows for institutions in connection with a securities offering.

The obligation to keep information equally and consistently available to investors requires that essential information that has been provided only to some of the prospective investors should be equally provided to all investors to whom the offering is directed. If new essential information is provided at, for example, roadshows or events for analysts or investors, the relevant information should be made available to all investors at the same time. New essential information that has inadvertently been provided on such occasions or events should be made available to all investors without delay.

In an exempted offering in Finland, it is advisable that a reference to a non-Finnish English language prospectus or offering memorandum should be made. Considering the general principles of the FSMA applicable to the offering of securities, it is advisable for the marketing material to be based on such prospectus or offering memorandum.

Legends

A legend or disclaimer is not mandatory. The content of a possible legend or disclaimer depends on the context. If a foreign offering is directed to Finnish investors under an applicable exemption under the Prospectus Regulation, this type of a generic disclaimer could be used with respect to an offering in Finland:

The Finnish Financial Supervisory Authority has not reviewed or approved this [memorandum] [offering circular].

The securities may not be offered or sold in Finland, directly or indirectly, other than in situations where at least one of the exemptions to prepare a prospectus under the Regulation (EU) 2017/1129 is applicable.

This [memorandum] [offering circular] or any other communication relating to the offering may not be distributed or otherwise made available in Finland in any such circumstances that would require a prospectus to be prepared or in which the delivery of the document would be subject to any other restrictions or obligations imposed by law.

Name, law firm and contact details for submitter

Mia Mokkila
Borenius Attorneys, Helsinki

mia.mokkila@borenius.com

Notes

Qualified investors means: (1) Entities which are required to be authorised or regulated to operate in the financial markets. The list below shall be understood as including all authorised entities carrying out the characteristic activities of the entities mentioned: entities authorised by an EU Member State under a directive, entities authorised or regulated by an EU Member State without reference to a directive, and entities authorised or regulated by a third country: (a) credit institutions; (b) investment firms; (c) other authorised or regulated financial institutions; (d) insurance companies; (e) collective investment schemes and management companies of such schemes; (f) pension funds and management companies of such funds; (g) commodity and commodity derivatives dealers; (h) locals; (i) other institutional investors.

(2) Large undertakings meeting two of the following size requirements on a company basis: a) balance sheet total: €20m; b) net turnover: €40m; c) own funds: €2m.

(3) National and regional governments, including public bodies that manage public debt at national or regional level, central banks, international and supranational institutions such as the World Bank, the International Monetary Fund, the European Central Bank, the European Investment Bank and other similar international organisations.

(4) Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions. (5) Persons or entities who satisfy certain criteria and are, on request, treated as professional clients, or recognised as eligible counterparties in accordance with MiFID II (investment firms, credit institutions, insurance companies, undertakings for the collective investment in transferable securities (UCITS) and their management companies, pension funds and their management companies, other financial institutions authorised or regulated under EU law or under the national law of an EU Member State, national governments and their corresponding offices including public bodies that deal with public debt at national level, central banks and supranational organisations) unless they have entered into an agreement to be treated as non-professional clients. In the context of an IPO, this exemption would likely not be applicable. This requirement may not be circumvented by an intermediary subscribing for the shares and offering the same securities to the final investors. See supra 1. The criteria relate to the expertise, experience and knowledge of the client and are further defined under Annex II of MiFID II. As per Directive (EU) 2019/1160 of the European Parliament and of the Council of 20 June 2019 with regard to cross-border distribution of collective investment undertakings (amending, inter alia, the AIFMD), alternative investment funds may also be ‘pre-marketed’. The descriptions herein cover only the restrictions on the actual ‘marketing’ (defined as offering or placement of shares, units or other interests in an alternative investment fund). Such disclosure requirements are outlined in Article 23 of AIFMD and Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (as amended). Non-professional client means an investor other than a professional client. Professional clients are defined under MiFID II. The form and contents of such document are stipulated in Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (as amended).

Hong Kong

Restrictions for sales to institutions

The circulation of offering documents in respect of shares¹ in Hong Kong normally requires the prospectus to comply with certain content and approval requirements in accordance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance and/or the Securities and Futures Ordinance, unless the relevant offering falls under one or more of the following exemptions (amongst others):

1. an offering made to not more than 50 persons in Hong Kong;
2. an offering in respect of which the total consideration payable for the shares offered in Hong Kong does not exceed HKD5m;
3. an offering in respect of which the minimum denomination of, or the minimum consideration payable for the shares is not less than HKD500,000; and/or
4. an offering made only to professional investors.

The circulation of offering documents in respect of structured products² in Hong Kong would also require approval in accordance with the Securities and Futures Ordinance, unless an exemption applied. The exemptions set out at points one to three above are not available for exchangeable bonds, but the professional investor exemption set out in point four is.

Professional investors generally include large companies or partnerships (with a minimum portfolio of HKD8m or total assets of HKD40m), financial services institutions, government entities and high-net-worth individuals. Where an issuer seeks to rely on the professional investor exemption, there is an obligation on the issuer to verify (on the basis of evidence provided by recipients) that the recipient of the offering documents meets the criteria to qualify as a professional investor.

The above exemptions apply regardless of the country of incorporation of the issuer.

Restrictions for sales to sophisticated or high-net-worth individuals

See above. Professional investors who are individuals must have a minimum portfolio of HKD8m.

Transfer restrictions

None.

Roadshows

Roadshows are permissible in Hong Kong. If any offering is distributed in roadshows, the requirements above apply (save that the first exemption is avaliable where 50 or fewer members of the Hong Kong public attend a roadshow, and the fourth exemption is avaliable where only professional investors attend a roadshow).

The marketing and offering of securities to investors in Hong Kong could also constitute the regulated activity of dealing in securities, which requires a licence from the Securities and Futures Commission if it is carried on by way of business in Hong Kong.

Legends

1. [Manager] has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any [Securities] [(except for [Securities] which are a ‘structured product’ as defined in the Securities and Futures Ordinance (Cap 571) of Hong Kong)] other than (a) to ‘professional investors’ as defined in the Securities and Futures Ordinance [(Cap 571) of Hong Kong] and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a ‘prospectus’ as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance;³

2. [Manager] has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the [Securities], which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to [Securities] which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘professional investors’ as defined in the Securities and Futures Ordinance and any rules made under that Ordinance; and

3. the contents of this [document] have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this [document], you should obtain independent professional advice.

Paragraphs (1) and (2) are based on standard language agreed by a number of Hong Kong law firms for use in securities offerings. It is not a legal requirement to include them, but it is strongly recommended to do so when seeking to rely on the professional investor exemption. It is a legal requirement under the Companies (Winding Up and Miscellaneous Provisions) Ordinance that paragraph (3) be included when seeking to rely on any of the exemptions one to three above. It is not a legal requirement to include paragraph (3) when seeking to rely on the professional investor exemption, but again we strongly recommend doing so.

Name, law firm and contact details for submitter

Royce Miller
Freshfields Bruckhaus Deringer, Hong Kong
royce.miller@freshfields.com

Italy

Introduction

The Italian legal and regulatory framework which regulates the offer of securities to the public has been aligning over the years with other European jurisdictions, mainly due to the implementation of several European Union directives and regulations.

As for the offering of shares in Italy, the legal framework is primarily set by:

• Legislative Decree No 58 of 1998, as amended (the Italian Financial Act, ‘TUF’); and
• Commissione Nazionale per le Società e la Borsa – Companies and Exchange Commission (CONSOB) Regulation No 11971 of 1999, as amended (‘Issuers Regulation’).

However, starting from 21 July 2019, the legislation of reference regulating the content, the authorisation procedure and the publication of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market shall be [Prospectus] Regulation (EU) No 2017/1129 of 14 June 2017 (‘PR’), directly applicable in each EU Member State.

Accordingly, at the time of writing, the Issuers Regulation is under review by CONSOB in order to reflect the new European legislation. The TUF could also be subject to amendments in light of the new regulation.

Restrictions for sales to institutions

As a general principle, the offer of securities to the public (meaning an offer addressed to an indefinite plurality of subjects) requires the approval and publication of a prospectus, while an offer only addressed to institutions is exempt from such obligation.

Article 1(1)(t) of the TUF and Article 2 of the PR define an offer of securities as ‘a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities. This definition also applies to the placing of securities through financial intermediaries.’

Prior to the offer of securities to the public in the EU, Article 3 of the PR prescribes the publication of a prospectus, the content of which is set forth in Article 6 of the PR; this shall contain the necessary information that is material to an investor for making an informed assessment of:

• the assets and liabilities, profits and losses, financial position and prospects of the issuer and of any guarantor;d
• the rights attaching to the securities; and
• the reasons for the issuance and its impact on the issuer.

As a general rule, the information in a prospectus must be written and presented in an easy-to-analyse, concise and comprehensible form. The issuer or the offerer may draw up the prospectus as a single document or as separate documents; in the latter case, the required information shall be divided into:

• a ‘registration document’ containing the information relating to the issuer;
• a ‘securities note’ containing the information concerning the securities offered to the public or to be admitted to trading on a regulated market; and
• a ‘prospectus summary’, which shall provide the key information that investors need to understand the nature and risks of the issuer, the guarantor and the securities that are being offered. The prospectus summary is to be read together with the other parts of the prospectus to aid investors when considering whether to invest in such securities. It shall be drawn up as a short document, written in a concise manner and of a maximum length of seven pages.

Pursuant to Article 20 of the PR and Article 94 of the TUF, the prospectus may not be published, unless the relevant competent authority has approved it. For Italy, according to Article 94-bis of the TUF, the competent authority for the approval of the prospectus is CONSOB.

Several exceptions to the obligation to publish a prospectus are provided for in Article 1(4) of the PR. In particular, the obligation to publish a prospectus shall not apply to any of the following offers of securities to the public:

1. when the offer is addressed only to ‘qualified investors’;
2. when the offer is addressed to a restricted circle of investors, who are not qualified investors (fewer than 150 natural or legal persons per Member State);
3. when the denomination per unit amounts to at least €100,000;
4. when the offer of securities is addressed to investors who acquire securities for a total consideration of at least €100,000 per investor, for each separate offer;
5. when shares are issued in substitution for shares of the same class already issued, if the issuing of such new shares does not involve any increase in the issued capital;
6. when securities are offered in connection with a takeover by means of an exchange offer, provided that a document is made available to the public in electronic form on the website of the issuer, the financial intermediary or the regulated market, containing information describing the transaction and its impact on the issuer;
7. securities offered, allotted or to be allotted in connection with a merger or division, provided that a document is made available to the public in electronic form on the website of the issuer, the financial intermediary or the regulated market, containing information describing the transaction and its impact on the issuer;
8. when dividends are paid out to existing shareholders in the form of shares of the same class as the shares in respect of which such dividends are paid, provided that a document is made available containing information on the number and nature of the shares and the reasons for and details of the offer;
9. when securities are offered, allotted or to be allotted to existing or former directors or employees by their employer or by an affiliated undertaking, provided that a document is made available containing information on the number and nature of the securities and the reasons for and details of the offer or allotment;

One additional exception should be kept by CONSOB after its review in the Issuers Regulation:

10. when securities’ total denomination in the EU, calculated over a period of 12 months, is less than €8m.

Furthermore, there are other exceptions for the offer of non-equity securities.

The PR also clarifies that exemptions from the obligation to publish a prospectus should be able to be combined for an offer of securities to the public, where the conditions for those exemptions are fulfilled at the same time. For example, where an offer is addressed simultaneously to qualified investors, non-qualified investors that commit to invest at least €100,000 each, the employees of the issuer and to 150 or less non-qualified investors, that offer should be exempt from the obligation to publish a prospectus.

Restrictions for sales to sophisticated or high-net-worth individuals

Offers to sophisticated or high-net-worth individuals may fall within the exceptions to the obligation to publish a prospectus, where, for example, they requested to be treated as professional clients and, therefore, are eligible as qualified investors, the offer is addressed to fewer than 150 natural or legal persons who are not qualified investors or the denomination per offered unit amounts to at least €100,000.

According to Recital 15 of the PR, where an offer of securities is addressed exclusively to a restricted circle of investors who are not qualified investors, drawing up a prospectus represents a disproportionate burden in view of the small number of persons targeted by the offer. That would apply, for example, in the case of an offer addressed to a limited number of relatives or personal acquaintances of the managers of a company.

Additional selling restrictions for sales by investment companies or closed-end funds

The offer of securities by investment companies or closed-end funds is now entirely governed by the PR as they are included in the definition of ‘securities’. ‘Securities’ here comprises classes of securities which are negotiable on the capital market, bonds or other forms of securitised debt and any other securities giving the right to acquire or sell any such securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures. The PR expressly states that it does not apply to units issued by collective investment undertakings ‘other than the closed-end type’.

Article 98 and 98-bis of the TUF provide that, in case of EU and non-EU closed-end funds issuers, the prospectus must be published at the end of the procedure envisaged in Article 44 of the TUF.

Article 44 subjects the commercialisation in Italy of alternative investment funds (AIF) units, or shares not reserved for the qualified investors, to a notification sent by the fund manager to CONSOB for each AIF which it intends to market.

The notification letter shall include:

• the prospectus for publication;
• the AIF rules or the statute of the AIF that is the subject of commercialisation; and
• a document containing additional information to be made available prior to the investment, which indicates the absence of preferential treatment for one or more investors or categories of investors.

Where non-EU and EU AIF managers can sell the shares or quotas to retail investors in the country of origin of the AIFs and intend to market these AIFs in Italy to retail investors, they must present a request for authorisation to CONSOB. CONSOB, in agreement with the Bank of Italy, authorises the marketing if the following conditions are met:

1. the fund managers have completed the procedures provided for in Article 43 (which envisages, likewise, a notice to be sent to CONSOB for approval);
2. the operating schemes and the risk mitigation and spreading rules for these AIFs are compatible with those envisaged for Italian AIFs;
3. the discipline of the AIF depositary is equivalent to that applicable to Italian AIFs non-reserved for qualified investors;
4. the rules or the statute of the AIF does not allow preferential treatment towards one or more investors or categories of investors;
5. the organisational module adopted ensures the exercise of the property rights of investors in Italy; and
6. the information to be made available to retail investors before investing is complete, consistent and understandable.

Transfer restrictions

Article 100-bis of the TUF (as well as Article 5 of the PR), responds to the need to avoid securities which were originally offered exclusively to qualified investors being transferred to retail customers without a proper publication of a prospectus.

Article 100-bis of the TUF provides that any subsequent resale to the public of securities that were previously offered in the context of an offer exempted from the obligation to publish a prospectus, must be regarded as a separate offer to the public within the meaning of Article 1, paragraph 1(t) of the TUF, unless it is exempted from the rules on public offers pursuant to Article 100 of the TUF and Article 34-ter of the Issuers Regulation.

It also provides that the systematic reselling to retail customers of securities in the 12 months following a placement, in Italy or abroad, reserved to qualified investors, where the reselling does not fall in any of the exemptions provided for by Article 100-bis of the TUF, is considered as a public offering.

Failure to comply with such rules may result in the subsequent resale of such shares being declared null and void and in the liability of the intermediary transferring the shares for any damage suffered by the investors.

Roadshows

Article 101(5) of the TUF provides that, regardless of the obligation to publish a prospectus, the relevant information provided by the issuer or the offerer to qualified investors or special categories of investors – including information disclosed during meetings concerning offers of financial products – must be disclosed to all qualified investors or all special categories of investors to whom the offer is exclusively addressed.

Legends

The TUF and the PR do not specifically require the insertion of a specific legend in the offering documentation. Where an offering targets qualifying Italian investors, however, it is advisable (and it is market practice) to include an Italian-specific legend as suggested below:

‘This offering circular has not been submitted to CONSOB for clearance and will not be subject to formal review or clearance by CONSOB.

The shares may not be offered, sold or delivered, directly or indirectly in the Republic of Italy or to a resident of the Republic of Italy, unless such offer, sale or delivery of shares or distribution of copies of the offering circular is:

(a) pursuant to the TUF, made only to ‘qualified investors’ (investitori qualificati), as defined pursuant to Article 34-ter (1)< /br> (b) of the Issuers Regulation, as subsequently amended, provided that such Italian qualified investors will act in their capacity and not as depositaries or nominees for other shareholders or third parties; or< /br> Any such offer, sale or delivery of the shares or distribution of copies of the offering circular or any other document must be in compliance with the selling restrictions under (a) and (b) above, in accordance with all Italian securities, tax, exchange control and other applicable laws and regulations, and must be made:
(i) by authorised persons (soggetti abilitati) (including investment firms, banks or financial intermediaries, as defined by Article 1, first paragraph, letter (r), of the Consolidated Financial Act), to the extent duly authorised to engage in the placement and/or underwriting and/or purchase of financial instruments in the Republic of Italy in accordance with the relevant provisions of the Consolidated Financial Act, CONSOB Regulation 16190 of 29 October 2007, as amended (in particular, by CONSOB Regulation 20307 of 15 February 2018), the Consolidated Banking Act, and any other applicable laws and regulations; and< /br> (ii) in compliance with any other applicable requirements or limitations which may be, from time to time, imposed by CONSOB, the Bank of Italy or any other Italian regulatory authority.’
In accordance with Article 100-bis of the TUF, the subsequent resale on the secondary market in the Republic of Italy of the shares (which were part of an offer made pursuant to an exemption from the obligation to publish a prospectus) constitutes a distinct and autonomous offer. This offer must be made in compliance with the public offer and prospectus requirement rules provided under the TUF and the Issuers Regulation, unless an exemption applies. Failure to comply with such rules may result in the subsequent resale of such shares being declared null and void and in the liability of the intermediary transferring the shares for any damage suffered by the investors.

G Massimiliano Danusso
Bonelli Erede Pappalardo, London
massimiliano.danusso@belex.com

Notes

^{(1) CONSOB is the market supervisory authority in Italy.}

^{(2 ) The PR defines ‘qualified investors’ as entities which are required to be authorised or regulated to operate in the financial markets, including: credit institutions, investment firms, other authorised or regulated financial institutions, insurance companies, collective investment schemes and management companies of such schemes, pension funds and management companies of such funds, commodity and commodity derivatives dealers, locals, other institutional investors, as well as large undertakings meeting certain size requirements on a company basis. National and regional governments, including public bodies that manage public debt at national or regional level, central banks, international and supranational institutions and other institutional investors whose main activity is to invest in financial instruments are also considered ‘qualified investors’. Finally, the definition of ‘qualified investors’ also includes persons or entities which are treated, on their request, as professional clients.}

New Zealand

Introduction

New Zealand has a securities offering disclosure regime under the Financial Markets Conduct Act 2013 (the ‘FMC Act’). If an offering is extended to investors in New Zealand, a product disclosure statement is required unless an exemption applies. The principal exemption is an offering to ‘wholesale investors’ only. The representations below are intended to assist the issuer/offeror in establishing that the persons to whom the offer is made are ‘wholesale investors’ and therefore fall within exemption. There are also class exemptions that are generally consistent with those observed in other jurisdictions, eg, for rights offerings to existing investors.(1)

Restrictions for sales to institutions

The following is the typical formulation for offers/sales to institutional or wholesale investors and are included in a confirmation letter or subscription agreement as well as referred to, or incorporated by reference in, any Bloomberg message for the offering.

‘If You (or any person for whom You are acquiring or procuring the Securities) are in New Zealand, You (and any such person):

(a) are a person who (i) is an investment business within the meaning of clause 37 of Schedule 1 of [the FMC Act], (ii) meets the investment activity criteria specified in clause 38 of Schedule 1 of the FMC Act, (iii) is large within the meaning of clause 39 of Schedule 1 of the FMC Act, (iv) is a government agency within the meaning of clause 40 of Schedule 1 of the FMC Act [or (v) is an eligible investor within the meaning of clause 41 of Schedule 1 of the FMC Act (and, if an eligible investor, have provided the necessary certification)];
(b) acknowledge that: (i) Part 3 of the FMC Act shall not apply in respect of the offer of Securities to You, (ii) no product disclosure statement, register entry or other disclosure document under the FMC Act may be prepared in respect of the Offer and (iii) any information provided to You in respect of the Offer is not required to, and may not, contain all of the information that a product disclosure statement, register entry or other disclosure document under New Zealand law is required to contain;
(c) warrant that if in the future You elect to directly or indirectly offer or sell any of the Securities allotted to You, You undertake not to do so in a manner that could result in (i) such offer or sale being viewed as requiring a product disclosure statement or other similar disclosure document or any registration or filing in New Zealand, (ii) any contravention of the FMC Act or (iii) the Offeror or its directors incurring any liability; and
(d) warrant that (i) any person for whom You are acquiring or procuring Securities meets one or more of the criteria specified in subclause (a) above [and (ii) You have delivered, where applicable, a safe harbour certificate in accordance with clause 44 of Schedule 1 of the FMC Act].’

The prospectus for a public offering of securities must comply with the requirements of the Companies Act 2017, the Securities Act 2015 and the Public Offering Regulations 2017 in order for the SECP to grant its approval.

Restrictions for sales to sophisticated or high-net-worth individuals

The offer to sophisticated or high-net-worth individuals comes under either the ‘investment activity’ category referred to above, which generally involves having a portfolio of securities valued in excess of NZD$1m; or an ‘eligible investor’, who is an investor who certifies in a prescribed form that they are sufficiently experienced in investing that they do not require a product disclosure statement (or ‘PDS’ – the New Zealand equivalent of a prospectus); the grounds for this certification; and a financial adviser, a qualified statutory accountant, or a lawyer signs a written confirmation of the certification. Given the technical requirements associated with eligible investor certification, this is often not included as a category for a wholesale offering. The bracketed text above can be deleted if a decision is made to exclude them.

Additional selling restrictions for sales by investment companies or closed-end funds

N/A. The selling restrictions are essentially the same for investment companies and closed-end funds as they are for operating companies, assuming no financial advice is provided either.

Transfer restrictions

Securities that have not been offered under a PDS or cleansing notice should not be on-sold in New Zealand by the initial purchaser unless they are only sold under an exemption (eg, to another wholesale investor), 12 months has expired or it is clear that the securities were not allotted with a view to the original holder dealing with them. The warranty in (c) is typically included to cover these matters.

Roadshows

There are no specific restrictions but any materials should make it clear that any offering will only be extended to ‘wholesale investors’ unless an exemption applies.

Legends

No specific legend is required for an offering document, but the following is customary:

‘The Offer in New Zealand is made to "wholesale investors only". The information provided in respect of the Offer is not required to, and may not, contain all of the information that a product disclosure statement, register entry or other disclosure document under New Zealand law is required to contain.’

Name, law firm and contact details for submitter

David Raudkivi
Russell McVeagh, Auckland

David.Raudkivi@russellmcveagh.com

Notes

(1) Broadly, the Financial Markets Conduct (Incidental Offers) Exemption Notice 2021 allows foreign entities that are listed on one of the main stock exchanges (which are specified in the notice) to offer their securities to any existing New Zealand security holders, provided that the offering complies with the law of the relevant foreign jurisdiction where the entity is listed.

Norway

The offering of securities in Norway is governed by the Norwegian Securities Trading Act (the ‘STA’) and the European Prospectus Regulation (Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (as amended) (the ‘Prospectus Regulation’), which is implemented in Norway pursuant to the STA because Norway is a European Economic Area (EEA) member country.

The STA sets out some general principles that must be applied in all offerings, irrespective of whether a prospectus has been prepared and irrespective of who the targeted investors are (ie, these principles also apply in a private placement context): inter alia, offerings must be made in accordance with good practice and ensure equal treatment of shareholders.¹

The obligation to publish a prospectus, the exemptions therefrom and the contents of the prospectus are stated in the STA and the following EU regulations:

• the Prospectus Regulation;
• Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (as amended); and
• Commission Delegated Regulation (EU) 2019/979 of 14 March 2019, supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council with regard to regulatory technical standards on key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus and the notification portal (as amended).

Whether an issuer is required to publish a prospectus, as approved by the Norwegian Financial Supervisory Authority (NFSA) or by another competent EEA regulatory authority and notified to Norway, depends, inter alia, on the size of the offering, and the number and type of investors targeted in the offering.

The following types of offerings do not require a prospectus to be published in Norway under the Prospectus Regulation:

• an offer of securities addressed solely to ‘qualified investors’;
•an offer of securities addressed to fewer than 150 natural or legal persons in Norway, save for ‘qualified investors’;
• an offer of securities whose denomination per unit amounts to at least €100,000; and
• an offer of securities addressed to investors who acquire securities for a total consideration of at least €100,000 per investor.²

Further, according to the STA, there is no obligation to publish a prospectus in accordance with the Prospectus Regulation for offerings where the aggregate consideration is below €8m (calculated as the aggregate amount of all non-prospectus offerings during the previous 12-month period within the EEA). However, for offerings with an aggregate consideration of between €1m and €8m, the offeror must prepare a national prospectus (Nasjonalt prospekt) pursuant to the STA. A national prospectus does not constitute an EEA-prospectus and is not subject to any form of review, control or approval by the NFSA or any other public authority, but there is a requirement for the national prospectus to be filed with the Norwegian Register of Business Enterprises. The content requirements of the national prospectus are fairly simple, and are set forth in the STA and Norwegian Securities Trading Regulation (the ‘STR’). For offerings below €1m, no prospectus or information document is required pursuant to the STA.

Restrictions for sales to institutions

The sale of shares only directed towards institutions is typically exempt from the requirement to publish a prospectus, provided the institutions qualify as ‘qualified investors’ or if another prospectus exemption described above is applicable.

Restrictions for sales to sophisticated or high-net-worth individuals

Offers to sophisticated or high-net-worth individuals may fall within the exceptions to the obligation to publish a prospectus. For example, an individual can fall under the category of a qualified investor, to which a prospectus exemption applies, if the individual requests to be treated as a professional client and fulfils the required criteria.

Additional selling restrictions for sales by investment companies or closed-end funds

The Prospectus Regulation applies to offerings by investment companies or closed-end funds. There are specific requirements for the contents of a prospectus to be prepared for the offerings of closed-end investment undertakings.

Where an investment company or closed-end fund meets the criteria of an ‘alternative investment fund’ (within the meaning of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (as amended) (the ‘AIFMD’)), the selling restrictions regarding such funds also apply.

As a general rule, foreign alternative investment funds can be marketed only to professional clients (within the meaning of Directive 2014/65/ EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments, amending Directive 2002/92/EC and Directive 2011/61/EU (‘MiFID II’), as implemented into Norwegian law), subject to certain disclosure requirements.

Additionally, depending on the regulatory status and home jurisdiction of the alternative investment fund manager, and subject to certain additional requirements and conditions, an alternative investment fund can also be marketed to non-professional clients. Such conditions include a requirement regarding certain legal forms of the fund, a requirement that the fund must be domiciled in the EEA, a requirement on the suitability assessment and an obligation to prepare a key information document (in Norwegian).

A process with the NFSA must be completed before marketing in Norway can commence. Depending on the regulatory status and home jurisdiction of the alternative investment fund manager, the process entails either marketing passporting under the AIFMD (which only covers professional clients) or a marketing notification sent directly to the NFSA followed by approval from the NFSA. If marketing is directed to any non-professional investors, a marketing notification and approval thereof is always required, regardless of whether the alternative investment fund manager has relied on the marketing passport.

Transfer restrictions

Once the shares have been issued to the first investor in an initial offering, the shares are fully fungible and exchangeable.

If the shares issued in an initial public offering are offered at a later point in time to the public, the offering is subject to the same rules as the initial offering (ie, the same general principles in the STA apply and an obligation to publish a prospectus applies to the offering, unless any of the exemptions under the Prospectus Regulation apply).

Roadshows

It is common practice in Norway to arrange roadshows for institutions in connection with an initial public offering.

The obligation to keep information equally and consistently available to investors implies that essential information that has been provided to only some of the prospective investors should be provided equally to all investors to whom the offering is directed. If new essential information is to be provided at, for example, roadshows or events for analysts or investors, the relevant information should be made available to all investors at the same time. New essential information that has inadvertently been provided on such occasions or at such events shall also be made available to all investors without delay.

Legends

It is not mandatory to include a legend or disclaimer in the offering documentation, but it is market practice. The content of a possible legend or disclaimer should be specifically assessed and formulated for each transaction. If a foreign offering is directed to Norwegian investors under an applicable exemption under the Prospectus Regulation, the following disclaimer could be considered for use with respect to an offering in Norway:

‘This [offering circular] [presentation] does not constitute a prospectus and has not been reviewed, controlled or approved by the Financial Supervisory Authority of Norway (Finanstilsynet) or any other public authority.
The securities may not be offered or sold in Norway, directly or indirectly, other than where at least one of the exemptions to prepare a prospectus under the Regulation (EU) 2017/1129 is applicable.
This [offering circular] [presentation] or any other information in connection with the offering may not be distributed or otherwise made available, in Norway in any such circumstances that would require a prospectus to be prepared or in which the delivery of the document would be subject to any other restrictions or obligations imposed by law.’

Name, law firm and contact details for submitter

Anne Lise Ellingsen Gryte
Advokatfirmaet Wiersholm AS, Oslo
aleg@wiersholm.no

Notes

^{(1) Pursuant to s 3-7 of the STA, the conduct of business rules must be observed in approaches addressed to the general public, or to individuals that contain an offer or encouragement to make an offer to purchase, sell or subscribe to financial instruments or that are otherwise intended to promote the trade in financial instruments.}

^{(2 )Qualified investors means:}

Pakistan

Introduction

A company incorporated outside Pakistan is not allowed to offer securities for sale or subscription to the public (defined below) in Pakistan. Neither is such company allowed to issue, circulate or distribute any prospectus offering securities of a non-Pakistani company for subscription or sale. However, the company may do so if it receives consent from the Securities and Exchange Commission of Pakistan (SECP) and if it complies with the prospectus requirements. Furthermore, if allowed to make such a public offering of securities in Pakistan, the non-Pakistani company offering its own shares for subscription will be treated as having established a place of business in Pakistan and will have to comply with the ensuing notification and registration requirements with the SECP under the Companies Act 2017.

Where the SECP allows a person to make an offering for subscription or sale of any securities of a non-Pakistani company, it shall require such a person to prepare a prospectus that must be approved by the SECP. The Securities Act 2015 broadly describes ‘securities’ as including: shares, instruments acknowledging or creating any indebtedness issued by a company such as bonds, debentures, loan notes, sukuks or other debt securities, units in a collective investment scheme and warrants and options to acquire securities.

A public offering is any offering of securities (either by way of offer for sale or subscription) to more than 50 persons in Pakistan, unless those persons are: qualified institutional buyers (mainly banks and certain financial institutions); and/or employees of the offerer under an employee stock option scheme.

The prospectus and the SECP approval requirement mentioned above do not apply to a public offering (without the issue or circulation of a prospectus or offering document in this regard) of the following:

• shares of a subsidiary to the members of its listed holding company by way of in specie dividend;
• rights shares or bonus shares to existing members of the issuer; and/or
• shares under an employee stock option scheme.

Private placement of securities

There is no law restricting or regulating non-Pakistani companies from making a private placement of securities to Pakistani residents, which does not fall within the definition of a public offering of securities and that is not contained in a prospectus or public offering document in respect of the foreign company. However, any acquisition of such securities by Pakistani residents and payment in relation thereto must comply with the foreign exchange regulations of Pakistan. Pakistani residents may need special permission from the State Bank of Pakistan to lawfully remit foreign exchange to enable them to acquire such securities of non-Pakistani companies outside Pakistan.

Competition Commission of Pakistan restrictions

Pursuant to a widely drafted Competition Act 2010 and the Competition (Merger Control) Regulations (2016), every acquisition of shares worth more than PKR100m (approximately US$0.9m), where the acquirer and/or the target company meet certain, relatively low assets and/or turnover thresholds, requires a pre-merger approval from the Competition Commission of Pakistan (CCP). In sizeable international offerings, this requirement, although procedural in nature, becomes cumbersome and has, on occasion, dissuaded offerers from making a public offering in Pakistan. The requirement to seek a pre-merger approval applies equally to domestic and international offerings of shares in Pakistani companies. The only exemption from this requirement applies to a narrow sub-set of banks and investment companies. However, in light of the representations made by leading Pakistani law firms and financial institutions, the CCP has now provided for a simplified and flexible merger approval process, which allows the relevant merger parties to seek the CCP’s approval before or after the relevant acquisition of shares on the capital markets.

Foreign exchange restrictions

Pakistan has a strict foreign exchange control regime, which has been in place since its independence in 1947. Where a company incorporated outside Pakistan wishes to make a public offering of its securities in Pakistan, and even after it has received the approval of the SECP for its prospectus, the company will need to ensure that the State Bank of Pakistan’s (SBP) permission is received to enable domestic acquirers of securities to acquire such securities and to remit the subscription/acquisition proceeds offshore. Very strong macro-economic justifications will be required to convince the SBP to grant such a permission, which is usually difficult to obtain.

Appointment of consultants

The issuer/offerer of the securities is required to appoint a consultant, a book runner, an underwriter, a balloter and a share registrar and banker to the issue/offering, where required. This should be done through separate agreements in writing.

Research

The consultant to the issue, the book runner and the underwriter and their associates are prohibited from publishing any research report in respect of the issuer/offerer or the issue/offering, from the date of their appointment until the date of allotment of securities to the general public.

Name, law firm and contact details for submitter

Rabel Akhund
Akhund Forbes Hadi, Karac

Notes

^{The above report should not be relied upon as legal advice. For any questions relating to this}

Spain

Introduction

Securities offerings in Spain are subject to Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the ‘Prospectus Regulation’). Also relevant in Spain are:

• Law 6/2023, of 17 March, on the Spanish Securities Market and Investment Services (the ‘Securities Markets and Investment Services Act’); and
• Royal Decree 1310/2005 of 4 November (RD 1310/2005).

Article 2 of the Prospectus Regulation defines ‘offer of securities to the public’ as ‘a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities’. This definition also applies to the placing of securities through financial intermediaries.

In principle, but subject to certain exceptions (some of which are described below), a public offering will require the registration and publication of a prospectus. The competent authority responsible for the supervision and inspection of securities markets in Spain is the Comisión Nacional del Mercado de Valores (CNMV; the ‘Spanish Securities Market Commission’) which, according to Article 39 of the Securities Markets and Investment Services Act in Spain, is entrusted with the approval of prospectuses.

Restrictions for sales to institutions

According to the Prospectus Regulation and the Securities Markets and Investment Services Act, the obligation to publish a prospectus does not apply to, among others, any of the following types of offerings of securities to the public:

• an offer of securities addressed solely to qualified investors;
• an offer of securities addressed to fewer than 150 natural or legal persons in Spain, other than qualified investors;
• an offer of securities whose denomination per unit amounts to at least €100,000;
• an offer of securities addressed to investors who acquire securities for a total consideration of at least €100,000 per investor, for each separate offer;¹ and
• an offer not subject to notification in accordance with Article 25 of the Prospectus Regulation (cross-border offers) when the total consideration of such offer in the European Union is less than a monetary amount calculated over a period of 12 months which does not exceed €8m (€5m in case of credit institutions).

The concept of ‘qualified investor’ is defined in the Prospectus Regulation by reference to Annex II to Directive 2014/65/EU. Additionally, the concept of ‘professional clients’ is also defined in Spain in Article 58 of Royal Decree 217/2008, of 15 February (RD 217/2008), which regulates investment companies. Qualified investors include, among others:

• credit institutions;
• investment companies;
• insurance companies;
• pension funds; and
• other institutional investors whose main activity is to invest in financial instruments.

Therefore, sales to such institutions falling within one of the exemptions above are generally unrestricted and do not require the publication and registration of a prospectus.

Restrictions for sales to sophisticated or high net worth individuals

Sales to sophisticated or high net worth individuals would also generally be unrestricted, and would not require the publication and registration of a prospectus, if such individuals qualify as qualified investors under the Prospectus Regulation and one of the exemptions above apply.

As mentioned above, the Prospectus Regulation defines a qualified investor by reference to Annex II to Directive 2014/65/EU, which includes persons or entities who are, on request, treated as professional clients in accordance with Section II of that Annex. Articles 59 and 60 of RD 217/2008 sets forth criteria for individuals to be treated as professional clients.

Individuals must apply in writing to the relevant investment company to be classified as a qualified investor (in general, for a particular service or transaction or for a specific type of product or transaction). Investment companies must clearly inform about the rights and protections that the individual would be waiving, and must assess the expertise, experience and knowledge of the client to determine whether the client is capable of making investment decisions and understanding the risks involved. The client must satisfy at least two of the three following criteria:

• the client has carried out transactions, in significant size, on the relevant market at an average frequency of ten per quarter over the previous four quarters;
• the size of the client’s financial instrument portfolio, including cash deposits and financial instruments, exceeds €500,000; and
• the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.

Additional selling restrictions for sales by investment companies or closed-ended funds

Article 1.2(a) of the Prospectus Regulation excludes from its application ‘units issued by collective investment undertakings, with the exception of those of the closed-end type’. Therefore, offerings of securities to the public of closed-ended funds would be subject to the Prospectus Regulation and a prospectus would be required, unless an exception applies (as indicated above).

On the other hand, listing and prospectus requirements for shares and units of open-ended funds are regulated by Law 35/2003, of 4 November, on collective investment undertakings. Furthermore, Law 22/2014 transposes Directive 2011/61/EU on Alternative Investment Fund Management (AIFMD) and includes additional marketing obligations applicable to closed-ended funds. Such requirements depend on the addressees of the offer, the type of closed-ended fund, the location of the fund and the management company; these obligations are stricter when marketing a closed-ended fund to retail investors.

Article 4 of Law 22/2014 defines closed-ended funds as ‘collective investment undertakings that, without a commercial or industrial purpose, raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors’.

Roadshows

Roadshows normally are limited to qualified investors in Spain. Material information that is disclosed during roadshow meetings to the specific number of investors must be passed on to the different investors to whom the offer is addressed to ensure equal treatment of all potential investors.

Transfer restrictions

Article 5 of the Prospectus Regulation provides that the subsequent resale of securities that have previously been the subject of one or more of the types of offer that were exempted from the obligation to publish and register a prospectus (described above) must be considered as a separate offer. The definition of public offer must be applied to decide whether such resale can be qualified as a public offer of securities. A qualified investor that purchases securities in an initial public offering (IPO) can resell them subject to the publication of a prospectus, unless one of the exemptions referred to in Section 2 above applies in relation to the final placement (eg, a qualified investor can freely transfer the securities to another qualified investor in Spain without the publication of a prospectus).

Placement of securities is an investment service subject to prior authorisation under the Spanish Securities Market and Investment Services Act.

Legend

Although it is not legally required, it is advisable to include a disclaimer in the offering memorandum and other marketing materials.

None of the securities, the offering or this offering memorandum has been approved or registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) (CNMV) and, therefore, this offering memorandum is not intended to be used for any public offer of the Securities in Spain. The securities may not be offered or sold or distributed in Spain, nor may any subsequent resale of the Securities be carried out or publicity or marketing of any kind be made in Spain in relation to the Securities, except (i) in circumstances that do not qualify as a public offer of securities in Spain in accordance with the Prospectus Regulation and (ii) in compliance with the consolidated text of the Spanish Securities Market and Investment Services Act (Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión.) as amended and restated (the Spanish Securities and Investment Services Market Act), Royal Decree 1310/2005, of November 4, partially implementing the former Spanish Securities Market Act in matters affecting securities listings on official secondary markets, public offers for sale or subscription of securities, and the required prospectus for those purposes (Real Decreto 1310/2005, de 4 de noviembre por el que se desarrolla parcialmente la Ley 24/1988, de 28 de julio, del Mercado de Valores, en materia de admisión a negociación de valores en mercados secundarios oficiales, de ofertas públicas de venta o suscripción y del folleto exigible a tales efectos) (RD 1310/2005), and additional rules enacted under or in substitution of these regulations from time to time and the European Securities and Markets Authority (ESMA) or the CNMV guidance developing them that may be in force and required therefore from time to time.

Name, law firm and contact details for submitter

Ferran Foix
Gomez-Acebo & Pombo, London
ffoix@ga-p.com

Jose Francisco Canalejas
Gomez-Acebo & Pombo, London
jfcanalejas@ga-p.com

Notes

^{¹ The ESMA has issued a Q&A clarifying that, in a warrants issue, only the subscription price of the warrants should be considered for purposes of the €100,000 threshold, not the strike price.}

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