For Small and Medium-Sized Enterprises – Additional Ability to Raise Capital

Date

2019 05 23

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On Wednesday, the Government approved draft amendments to the Law on Securities and related laws aimed to develop the national capital market, to offer better opportunities for small and medium-sized enterprises to raise funds for the implementation of projects and to enhance Lithuania’s competitiveness in the European Union.

The amendments to the laws are designated to implement the Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market.

By this Regulation the EU Member States should be free to set out in their national law a threshold between EUR 1 000 000 and EUR 8 000 000, expressed as the total consideration of the offer in the Union over a period of 12 months, below which the exemption should apply to publish a prospectus – a document presenting the information on the issuer to the investors and the public and his offered securities.

The draft amendment to the Law on Securities proposes to set out a maximum threshold of EUR

8 000 000 in Lithuania (current threshold in Lithuania is EUR 5 000 000). In order to ensure the protection of the investors’ interests at national level, for public offer of securities of the value of between EUR 1 000 000 and EUR 8 000 000 over a period of 12 months, the Law on Securities proposes to set out the access to drawing up and publication of the information document.

“By selecting a maximum threshold, we would enjoy a competitive advantage over other EU countries in attracting foreign investment. The proposed amendments would offer an opportunity for small and medium-sized enterprises to raise funds by issuing securities. This would be an additional alternative for companies and would have a positive effect on the Lithuanian capital market, business environment and thereby would not weaken the protection of small investors”, says Minister of Finance Vilius Šapoka.

The experience shows that current requirements for larger companies or larger security issues are inappropriate for small and medium-sized enterprises and smaller security issues. The drawing up costs of the prospectus usually become a disproportionate burden for small and medium-sized enterprises.

The Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 aims to reduce the administrative burden to companies and thereby to ensure the disclosure of sufficient information for investors.

Also, the Regulation introduces a possibility for small and medium-sized enterprises and small mid-cap companies to publish a simplified prospectus – EU Growth prospectus which focuses on information that is material and relevant to such size companies.