Ireland as a Home Member State under EU securities legislation
The Prospectus Directive and Transparency Directive
The EU Prospectus Directive 2003/71/EC is of importance to issuers of securities from non-EU countries (described as 'third countries' in the Directive), especially US issuers. In effect there is a federal securities law in Europe, but no federal securities regulator - the EU Member State whose regulatory authority is to regulate an issuer from 'third countries' is the issuer's 'home Member State'.
The home Member State of a third country issuer is triggered by that issuer doing one of two things:
- making a public offer of securities into an EU Member State (on or after 31 December, 2003);
or
- making an application to list securities for the first time on a regulated market in an EU Member
State.
The home Member State is decided by which of these two things is first done, and is the Member State where the offer was made or securities admitted to trading as the case may be.
Where an offer of securities was made between 31 December, 2003 and 30 June, 2005, for it to have the effect of choosing a home Member State, the offer had to be one which was considered to be a public offer under local law at that time also.
For a listing to have the effect of choosing a home Member State, the listing had to be live as of 1 July, 2005.
US issuers have generally come across the Prospectus Directive in the context of employee share offers.
An employee stock purchase plan offer will generally be considered an offer to the public. However, an offer of non-transferable employee stock options or restricted stock will generally not be.
There are two distinct kinds of home Member State:
- the home Member State in connection with the issue of equity securities (i.e. shares) and retail
debt securities (debt with a unit price of less than €1,000) - this is chosen once only; and
- the home Member State in connection with the issue of wholesale debt - debt with a unit price
of €1,000 or more. This is chosen by the issuer on a case by case basis from the EU Member
States where the debt is to be listed or offered.
The key points are:
- where the securities offered on or after 31 December, 2003 or applied to be listed are equity
securities (i.e. shares or debt convertible into issuer shares) or debt securities with a unit value of
less than €1,000, then the choice of home Member State is permanent and irrevocable;
- where the securities offered on or after 31 December, 2003 or applied to be listed are (non
convertible) debt securities with a unit value of €1,000 or more, then the choice of home Member
State applies only with respect to those offered or listed securities.
What have US companies been doing?
In order to forestall permanent entrapment in the wrong EU Member State, some companies have sought explicitly to opt into jurisdictions where English is the working language and in which they feel that the regulatory authorities will be more accustomed to the process.
Ireland has been perceived as particularly advantageous as a home Member State on account of a listing procedure that is quicker and less expensive than in other EU member states.
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