Threshold raised for the exemption from the obligatory publication of prospectus for lower-value securities issues

Published: 23 July 2020

Following amendments to the Capital Market Act in 2020, the Croatian Financial Services Supervisory Agency (Hanfa) adopted the Ordinance on the minimum format and content of the information document in case of exception from the obligation to publish a prospectus, in order to provide administrative and cost-related disburdening to issuers and/or providers who intend to make public offers of securities in Croatia, with a total amount of less than EUR 8 million in HRK equivalent over a period of 12 months.

This year's amendments to the Capital Market Act abolished the obligation to draw up and publish a prospectus for such issues of smaller value, but at the same time, for issues worth between EUR 4 million and 8 million in HRK equivalent they guaranteed that, by way of a special Information Document on the Offer of such new issue, investors would not be deprived of essential information on the basis of which they could make an investment decision.

The goal of these amendments to the Capital Market Act was to comply with the new Prospectus Regulation (Regulation 2017/1129), in which the legislator decided to exercise national discretion that could facilitate access to finance on the capital market for small enterprises in the Republic of Croatia.

The use of this simple document, instead of the so far obligatory prospectus, relieves the companies raising capital through offers of small value from various additional costs that are common when drawing up a prospectus, such as the costs of legal advice and consultants and costs for Hanfa's approval of the prospectus.

The Ordinance lays down, among other things, the contents of the Information document with the intention of providing uniform, structured, complete and clear information to help understand the key investment risks associated with such offers.

The information document will not be subject to prior approval by the regulator, and the persons listed in the information document as responsible persons will be accountable for the data in it. In addition to the main characteristics of the issue or offer procedure, information on securities and risk factors, the document will clearly identify, among other things, investor rights as well as any fees and redress associated with investing in new securities.

When drafting this Ordinance, Hanfa consulted the best practices of other regulators so that issuers in the Republic of Croatia are not disadvantaged compared to European issuers allowed to use this exception.

The new rules for lower-value offers are a step forward by the Croatian legislator in line with the European Commission's long-term plan to establish a Capital Markets Union, which should increase the number of issuers and investors in all European Union markets in additional areas, facilitate the possibility of financing small enterprises through the non-banking financial sector and enable smaller stock exchanges to survive and further grow through networking on a regional and EU basis.