Key Implications of the EU Listing Act for Debt Capital Markets (DCM)

1. Overview

On 14 November 2024, a package of reforms known as the EU Listing Act (the “EU Listing Act”) was published in the EU Official Journal and became effective on 4 December 2024. The EU Listing Act is a package of reforms as part of the Capital Markets Union 2020 Action Plan and aims to improve access to capital markets, making them more attractive for EU companies by simplifying the listing rules for companies that want to list on public stock exchanges, while also preserving transparency, investor protection and market integrity.

The package comprises a Regulation (Regulation (EU) 2024/2809) amending the Prospectus Regulation (Regulation (EU) 2017/1129), the Market Abuse Regulation and EU MiFIR and a Directive (Directive (EU) 2024/2811) amending EU Directive 2014/65 (“MiFID II”) and repealing the EU Listing Directive. It also introduces a new Directive (Directive (EU) 2024/2810) on multiple vote share structures.

Overall, the DCM related changes under the EU Listing Act represent targeted refinements to the Prospectus Regulation and Market Abuse Regulation with some useful new provisions for debt issuers. The changes will be implemented on a staggered basis with some changes applying when the Act entered into force on 4 December 2024, and others applying from 5 March 2026 or 5 June 2026 only. If not stated otherwise below, the changes apply as of 4 December 2024.

2. Key changes to the Prospectus Regulation

2.1 Incorporation of future financials

Issuers will not be required to publish a supplement to a base prospectus (but may still do so voluntarily) in order to update annual or interim financial information if it is within the 12-month validity period for base prospectus (Art. 19(1b) amended Prospectus Regulation). We expect this new flexibility to be swiftly used by market participants because it may in some cases enable issuers to access the markets more quickly without the need to publish a supplement before and they will save the costs for the publication of such supplement. On the other hand, issuers may prefer to continue to supplement their prospectuses for due diligence reasons or because a supplement is anyhow necessary to amend certain prospectus statements like the material adverse change statement and the no significant change statement which could result in being no longer accurate in light of the latest financial information.¹

2.2 Incorporation by reference

The list of documents that can be incorporated by reference has been widened to include, amongst other things, sustainability reports included in management reports and the short form summary document required for some of the fungible exemptions referred to below.

2.3 Prospectus Disclosure Requirements for ESG Bonds

There will be prospectus disclosure requirements for bonds advertised as considering ESG factors or pursuing ESG objectives (“ESG Bonds²”) with the Commission empowered to adopt delegated acts setting out further detail within 18 months.

2.4 Standardising Prospectuses

The format and sequence of information in a prospectus³ is to be standardised with the Commission empowered to adopt delegated acts setting out further detail by 5 June 2026.

The European Securities and Markets Authority (“ESMA”) is also empowered to develop draft implementing technical standards to specify the template and layout of prospectuses and guidelines on comprehensibility and on the use of plain language to ensure that the information provided is concise, clear and user friendly.

2.5 Supplements cannot be used to introduce a new type of security

Some regulators have previously issued guidance to the effect that supplements should not be used to introduce new types of securities. The EU Listing Act now clarifies this. A supplement to a base prospectus will not be permitted to introduce “a new type of security” for which the relevant information has not already been included in the originally approved base prospectus. ESMA is expected to develop guidelines to specify the circumstances in which a supplement is to be considered to introduce a new type of security by 5 June 2026.

2.6 Expansion of existing exemptions from the requirement to publish a prospectus

A number of exemptions from the requirement to publish a prospectus have been expanded although it may be that these changes have little practical impact on existing DCM practice since those exemptions weren’t widely used previously. For example, MTN programme base prospectuses already allow for fungible issuances to be conducted so that there may be little need for the new fungible securities exemption.

Fungible securities: The 20% threshold for fungible issues (to be admitted to trading on the same regulated market) without a new prospectus has been raised to 30%. This has also been extended to public offers (subject to certain conditions and requiring issuers to file and publish a summary document with the home National Competent Authority (“NCA”) with a maximum length of 11 pages following new Annex IX to the Prospectus Regulation).

New fungible securities: There is also a new exemption for both public offers and admissions to trading which would apply to companies issuing securities fungible with securities already admitted to trading on a regulated market or SME growth market if the original issue has been admitted to trading for at least 18 months. Again, this requires publication of a summary document following Annex IX. There is no percentage cap for this exemption.

Shares resulting from conversion or exchange: The 20% threshold in the exemption from the obligation to publish a prospectus for the admission to trading of shares resulting from the conversion or exchange of other securities is increased to 30%.

Credit Institution exemption: A prospectus exemption applies to a credit institution issuing in a continuous or repeated manner if the total aggregated consideration in the EU for the securities offered is less than EUR 150 million (previously, EUR 75 million) (over a period of 12 months) per credit institution.

From 5 June 2026: The EUR 1 million threshold for offers to the public below which no prospectus is required has been removed. Offerings of securities with a total aggregated consideration of less than EUR 12 million (previously EUR 8 million) (over a period of 12 months) will be exempt from the requirement to publish a prospectus. Member States may opt to reduce the threshold to EUR 5 million.

However, market practice may still require the preparation of an offering document even if it would not be required under the new Prospectus Regulation.

2.7 New simplified disclosure documents and other changes

EU Follow-on and EU Growth issuance prospectuses: The EU Listing Act simplifies disclosure with the introduction of a new EU Follow-on prospectus and EU Growth issuance prospectus (new Article 14a and Article 15a Prospectus Regulation).

Third country equivalence: NCAs will no longer have to assess non-EU approved prospectuses for equivalence with EU disclosure standards. Instead, the Commission will adopt delegated acts granting equivalence in accordance with general criteria.

Extension of withdrawal rights: The amendments introduced as part of the Capital Markets Recovery Package have been made permanent. In particular for DCM, this means that the deadline for investors to withdraw their acceptances during book-building in case of a prospectus supplement due to significant new factors, material mistakes, or material inaccuracies is now extended to three (previously, two) working days.

Risk factors: The requirement to “rank the most material risk factors” has been replaced with a requirement that in each category, the most material risk factors shall be listed in a manner that is consistent with the assessment of the materiality of the risk factor based on the probability of occurrence and the expected magnitude of negative impact.

This shall work as a relaxation of the rules relating to the ordering of risk factors. If it will “ease the burden for issuers” in real life needs to be seen.

In addition, the EU Listing Act makes clear that a prospectus may not include risk factors that are generic, only serve as disclaimers, or that do not give a sufficiently clear picture of the specific risks. These requirements are broadly consistent with the guidance and practice already adopted in many European jurisdictions. Therefore, this may not have much practical effect as debt issuers are already familiar with those requirements under related ESMA Guidelines on Risk Factors.

Prospectuses in electronic form: There is no longer a requirement to provide paper copies of prospectuses to investors upon request. Instead, prospectuses are only required to be provided in electronic form.

Universal Registration Documents (“URDs”): The rules relating to filing URDs have been relaxed so that an issuer only has to have a URD approved by an NCA for one year (previously two) before subsequent URDs can simply be filed instead. URDs will also be excluded from the new rules relating to standardising prospectuses discussed above. In our view, the URD regime seems not to be widely used in Germany. Therefore, these new rules will likely remain of limited impact on DCM in Germany.

3. ESMA Consultation on Prospectus Regime

Several provisions in the EU Listing Act require the Commission to adopt delegated acts. Therefore, the Commission requested technical advice from ESMA and in October 2024, ESMA published a consultation paper on draft technical advice concerning the Prospectus Regulation (the “Consultation Paper”), which includes proposed changes to Commission Delegated Regulation (EU) 2019/980 (the “Delegated Regulation”). The deadline for feedback on the Consultation Paper was 31 December 2024. ESMA’s final advice to the Commission is due in the second half of 2025. The recommendations are meant to facilitate European capital market activity by streamlining and reducing regulatory burden.

Points to note in the Consultation Paper are:

3.1 Disclosure requirements for ESG Bonds:

ESMA proposes to include a definition for use of proceeds bonds and sustainability-linked bonds in the Delegated Regulation as well as a new disclosure Annex 21 (the “ESG Annex”) setting out detailed disclosure requirements for ESG Bonds. These proposals are of relevance to all ESG Bonds subject to the Prospectus Regulation, including those aligned with voluntary market-based standards (such as the ICMA Principles), green bonds meeting the requirements of the EU’s official label (“EuGB”) and ESG Bonds using the voluntary templates under the European Green Bond Regulation (“EuGB Regulation”). Annex 21 is based on ESMA’s existing guidance Statement on sustainability disclosure in prospectuses, but in some cases goes further than the ESMA statement.⁴ In relation to ESG Bond issuances using the base prospectus format, Annex 21 specifies what disclosure must be set out in the base prospectus and what can be included in the final terms. The aim of the new ESG Annex is to prevent greenwashing and ensure investors receive the necessary information to allow them to make an informed investment decision.

In relation to the EU Green Bond Standard (“EU GBS”), ESMA wishes to minimise overlapping disclosure requirements in the EU GBS and in the Prospectus Regulation. Therefore, ESMA proposes that the requirement for relevant information from the EU GBS factsheet to be incorporated by reference into the prospectus, and the optional disclosures from the voluntary templates set out in the EU GBS to be included in the prospectus can satisfy the requirements under Annex 21. To allow flexibility, ESMA also proposes to allow EU GB factsheet information as well as information to be disclosed under the EU GBS optional disclosure regime to be incorporated by reference into final terms.

3.2 Other proposals with relevance for debt securities

ESMA proposes a single disclosure framework for debt securities (merging the existing disclosure annexes for retail and wholesale debt securities). However, certain disclosure requirements such as the requirement to produce a summary will continue to apply to retail securities only. In addition, the disclosure annexes are to be reorganised to align with the EU growth prospectuses annexes.

ESMA also proposes that the requirement for audited financial information for standard debt prospectuses should be reduced from two financial years to one financial year.

ESMA proposes to give NCAs the power to require additional disclosure in relation to a new type of product (for example crypto-assets), transaction or issuer that is insufficiently covered by existing disclosure requirements under the Prospectus Regulation. ESMA also proposes to harmonise certain timeframes relating to the scrutiny and approval of prospectuses by NCAs.

4. Key changes to the Market Abuse Regulation

The EU Listing Act makes several changes to the Market Abuse Regulation including providing further clarity on disclosure of inside information. In particular, immediate disclosure of inside information will no longer apply to intermediate steps in a protracted processes (i.e. issuer will not need to announce the information until the final step in the process is taken). In addition, the circumstances in which an issuer can delay disclosure of inside information will become more specific. However, these changes will apply only from 5 June 2026.

Another key point to note is that the market soundings regime is clarified to be a safe harbour from the offence of unlawful disclosure of inside information (and not a mandatory procedural requirement), reflecting market consensus. This change applies as of 4 December 2024.

5. Timing

The EU Listing Act contains transitional provisions which allow for issuers with MTN programmes, that prospectuses approved until 4 June 2026 shall continue to be governed by the version of the Prospectus Regulation that is in force at the time of approval until the end of their validity.

^{1 To use this new flexibility, an issuer will need to make amendments to the Documents Incorporated by Reference section of its base prospectus and ensure that the new annual or interim financial information is published electronically. We assume that competent authorities will permit such amendments via a prospectus supplement. Alternatively, issuers may choose to make such changes at the time of the next full update of the base prospectus. Since the Prospectus Regulation does not define “financial information” and issuers often list exactly which parts of the financial information shall be incorporated by reference, any new drafting of the description in the base prospectus must ensure that only the relevant parts will become incorporated automatically.}

^{2 For some further information, please see also below under 3. ESMA Consultation on Prospectus Regime.}

^{3 For some further information, please see also below under 3. ESMA Consultation on Prospectus Regime.}

^{4 For example, ESMA is including a requirement to disclose whether post-issuance information will be published (rather than a recommendation) because they argue that this is critical for investors to know. Further, where an ESG Bond is advertised as complying with a taxonomy or market standard, the prospectus must unequivocally state how the criteria in the taxonomy or market standard are met and that they are significant in relation to the ESG features or objective of the bonds.}