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The Prospectus Directive is the EU framework for the preparation of prospectuses in public offers of securities and where securities are admitted to trading on a regulated market. The purpose of the Directive is to harmonise requirements for the drawing up, approval and distribution of the prospectuses that are published when securities are offered to the public or admitted to trading on a regulated market. It came into force on 1 July 2005, and allows a prospectus approved in one Member State to be valid across the EU - giving issuers a ‘passport’ across the EU capital markets.
On 23 September 2009, the European Commission published a proposal to amend the Prospectus Directive, to simplify and improve its application for business without compromising standards of investor protection. On 17 June 2010, the European Parliament adopted a common approach, which was endorsed by the Council on 11 October 2010. The UK must implement the Directive by 1 July 2012.
In November 2010, as part of Financing business growth: the Government’s response to ‘Financing a private sector recovery’, the Government indicated that it intended to implement two of the measures early - ahead of the July 2012 deadline - because this would benefit companies and SMEs in particular. Both the threshold for an offer of securities, and the minimum number of investors for which a Prospectus is required, will be raised. These measures will be particularly helpful for smaller companies by allowing more efficient access to capital on public markets, as fewer offers will necessitate the production of a prospectus.