Банкеръ Weekly

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PUBLIC OFFERING OF SECURITIES TO BE MADE EASIER

Companies won't be obliged to draft prospects if they offer their shares and bonds to less than 100 people or to qualified investors only, amendments to the Public Offering of Securities Act, approved by the Financial Supervision Commission (FSC) on first reading in the beginning of May, stipulate. Qualified investors, by virtue of the law, will be juristic persons, licensed to operate on financial markets or liable to regulation. This category will include banks, investment intermediaries, collective investment schemes, pension funds, and pension insurance companies. Qualified investors will also include national and local governments, central banks, the International Monetary Fund, the European Investment Bank, and other international organisations. Small and medium-sized enterprises, however, will be excluded from this definition.
No prospect shall be needed when closing trade deals connected with mergers and acquisitions of companies, when replacing shares with new stocks without a capital increase, or when using securities for payment of remuneration to executives. The document won't be required either if the stocks have been offered for more than 18 months on the regulated market or if the issue has been admitted for trade on another regulated market. No prospect will be demanded also when the minimum amount against which the securities could be acquired is worth at least EUR50,000 per investor or the price of a single security is worth that amount. Companies will be relieved of that obligation as well if the issue itself is worth less than EUR100,000, the threshold being calculated for the last year. Each sale of securities that follows will be considered a separate offering also if any of the above-mentioned terms are not present. A prospect should be drafted is such a case. By the drafted amendments initial and secondary offering of securities will be made equal by virtue of the law and will represent offering, addressed to more than 100 people.
Collective investment schemes including investment companies and mutual funds shall be also relieved of the obligation to draft prospects. Another novelty is that EU-registered non-for-profit organisations, which issue securities, shall not be obliged to present prospects if the issue is not connected with the collection of money for the fulfilment of their purposes. This practically means that foreign humanitarian or environmental organisations will be able to offer securities in Bulgaria.
The new requirements expressly stipulate that the prospects should contain the entire information necessary for the public offering or admittance to a regulated market of securities. Moreover, it should contain an accurate evaluation of the company's economic state, its assets and liabilities, financial results, and perspectives for the issuer's development. If the papers are guaranteed by a third company the prospect should contain the information about the guarantor of the issue as well. The person who wants to admit the stocks for trade, the members of managerial bodies, the curator, and the guarantor shall be solidarily responsible for the damages inflicted to investors, caused by untrue contents in the prospect. Responsibility for the document's undersigners may also arise even from the prospect's resume if it contains untrue information.
Companies will be able to draft prospects, fulfilling the role of basic ones. However, they can be used only when the securities are shares or if they are issued periodically by banks. If the basic prospect contains no information about the final terms of the stocks' offering, then the issuer shall be obliged to present that information for each separate offering in the shortest possible term. The FSC may allow exclusion of information from the prospect if it runs counter to the public interest or could harm the issuer. The commission could also do that for any non-essential information which is not important for the issuer and could not influence the investors' evaluation.
The FSC will extend its stance within 10 working days after the issuer, demanding to be admitted for trade on a regulated market, has sent an application for that. However, the term for the commission to extend its stance is 20 days if the issuer has not securities, admitted for trade on a regulated market. As now, the FSC might demand additional information within a legislatively set 10-day term. If the commission does not notify the issuer within the stipulated term, that will be considered a silent refusal to approve the prospect.
Because of Bulgaria's future EU-membership the FSC may transfer the approval of a certain prospect to a supervising body from another country. In that case the commission has to notify the issuer within three working days after the date of the decision for the transfer. The term for approval or refusal is counted from the date of the decision for the transfer. After being approved, the prospect should be published not later than the initial term for the public offering, which is not longer than twelve months. The Bulgarian commission can also allow to offer the securities in other countries, but should warn the regulatory bodies in these countries. In such a case, however, the prospects should be translated into the respective languages or into a language that is usual for the financial markets sector.
The amendments to the Public Offering of Securities Act are aimed at facilitating the issuers of stocks and bonds. Banks, for instance, shall not have to issue a prospect each time they issue bonds. The elimination of that obligation for qualified investors who offer securities will help the operation of funds when they realize their projects by purchase of shares in a certain company. The amendments to the Public Offering of Securities Act are still at an early stage and are expected to be voted by Parliament after its summer recess.

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