No C 310/50 Official Journal of the European Communities 30. 11. 81 
Opinion on the proposal for a Council Directive coordinating the requirements for the 
drawing-up, scrutiny and distribution of the prospectus to be published when securities are 
offered for subscription or sale to the public 
The text referred to the Committee has been published in Official Journal of the European 
Communities No C 355 of 31 December 1980, page 39. 
A. LEGAL BASIS FOR THE OPINION 
On 27 January 1981 the Council referred the abovementioned proposal to the Economic and 
Social Committee in accordance with Articles 54 (3) (g), 100 and 198 of the Treaty establishing 
the European Economic Community. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
190th plenary session held in Brussels on 23 and 24 September 1981. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Articles 54 (3) 
(g), 100 and 198 thereof, 
Having regard to the request from the Council of the 
European Communities on 21 January 1981 for an 
opinion on the proposal for a Council Directive 
coordinating the requirements for the drawing-up, 
scrutiny and distribution of the prospectus to be 
published when securities are offered for subscription or 
sale to the public ('), 
Having regard to its opinion of 17 July 1974 on the 
proposal for a Directive and the draft Council 
Recommendation concerning the prospectus to be issued 
in connection with admission to stock exchange 
quotation (2), 
Having regard to the decision of its Bureau on 27 January 
1981 instructing the Section for Economic and Financial 
Questions to prepare an opinion on the matter, 
Having regard to the oral report of the Rapporteur, 
Mr Hemmer, 
Having regard to the opinion adopted by the Section for 
Economic and Financial Questions at its 66th meeting, 
held on 15 September 1981. Having regard to the discussions at its meeting on 
24 September 1981 (190th plenary session of 23 and 
24 September 1981), 
HAS ADOPTED THE FOLLOWING OPINION 
with 2 votes against and 11 abstentions: 
1. The proposed Directive which is the subject of this 
opinion is a complement to the Directive of 17 March 
1980 (3) on the prospectus to be published when securities 
are first given a quotation on a stock exchange. It lays 
down what information is to be published in the form of a 
prospectus when securities which are not to be given a 
stock market quotation are issued or offered to the public. 
The information required is, for the most part, the same 
in both cases. 
2. General comments 
2.1. The Committee has asked itself if the proposed 
Directive is necessary or, at the very least, if it answers a 
need. It has noted that there is still a need for information, 
whether a security is quoted or not. The absence of an 
obligation to publish a prospectus for unlisted securities 
could discourage requests for a stock exchange 
quotation. Now, in the interest of market transparency it 
is desirable to have as many security transactions as 
possible take place on the stock markets. By making 
provisions for the prospectus required for unlisted 
securities to be used for the purpose of a stock market 
quotation, the proposed Directive encourages requests 
for such a quotation and thus a concentration of security 
(') OJNoC355, 31. 12. 1980. 
(2) OJ NoC 125, 16. 10. 1974. (3) OJ No L 100, 17. 4. 1980. 
30. 11. 81 Official Journal of the European Communities No C 310/51 
dealings on the floor of a stock exchange. The Committee 
therefore approves the present proposal, subject to the 
comments set out below: 
2.2. On the whole, capital markets have continued to 
be national markets. One fundamental reason for this is 
exchange controls which, in some cases, prevent capital 
transfers across national frontiers. It is restrictions such as 
these, rather than the absence of harmonized national 
regulations governing the issue of securities by unlisted 
companies, which stand in the way of the creation of a 
European capital market. 
2.3. Nevertheless, the Committee recognizes that 
harmonization of the relevant provisions in the different 
Member States may, to a certain extent, help towards the 
setting-up of a European capital market. On the other 
hand, it wonders whether the facility granted to Member 
States of settling the important details themselves may not 
tend to undermine the standardization at which the 
proposal is aiming. Among the rules left to the discretion 
of the Member States are: 
— the definition of a 'restricted circle of persons' in 
Article 1 (2); 
— the wide-ranging possibilities of exemption allowed in 
Article 7, especially as regards the paper issued by 
companies enjoying a monopoly, 
— the rules governing the publication of the prospectus 
(Article 19)-, 
— the submission of the prospectus for verification prior 
to publication; 
— the laying-down of a maximum percentage holding 
above which the name of the shareholder concerned 
must be published in the prospectus (paragraph 3.2.7 
in Schedule A). 
2.4. These provisions for exemption correspond, 
however, to each Member State's own issuing practice. In 
the interests of harmonization these exemptions should 
gradually be restricted as far as possible, although it is 
apparent that they have not prevented the basic aim of the 
Directive from being achieved. 
2.5. The Committee cannot, however, ignore the 
situation in the Member States where an appropriate 
public supervisory authority already exists. These 
authorities vet each individual case beforehand, 
determine the actual information requirements, and 
require the relevant issuer to supply the data needed. 3. Specific comments 
3.1. Title 
In the interests of clarity and following a suggestion made 
by professional interests, the Committee proposes that 
the words 'when securities are offered for subscription or 
sale to the public' be replaced by 'when securities not 
quoted on a stock exchange are offered for subscription 
or transfer to the public'. This change also applies to the 
rest of the text. 
3.2. Article 1 
3.2.1. To define clearly exactly what securities are to 
be covered by the proposed Directive, the following 
passage should be added after Article 1 (1): 
'The term "securities" shall be taken to mean paper 
which may be given a stock exchange listing. Such 
paper shall grant the bearer the rights of: 
— a shareholder; or 
— a debenture holder. 
Such rights may be exercised either directly, 
indirectly, or collectively.' 
3.2.2. This comment applies to certificates of 
representation (as rights are exercised indirectly) and to 
shares in investment trusts (where rights are exercised 
collectively). 
3.2.3. The Committee feels that the definition of an 
offer to the public in Article 1 (2) is not sufficiently clear 
and that leaving it up to the Member States to decide what 
is meant by a 'restricted circle of persons' runs counter to 
the proposed Directive's avowed aim of standardization. 
It proposed the following definition, based on the studies 
conducted by the Banking Federation: 
'Public offer means an offer of securities made directly 
or indirectly by the issuer made according to 
conditions established in advance through a public 
statement. An offer is not a public offer if it is 
addressed to a limited number of persons or bodies 
known to the offerer and falling within a certain 
category, who are personally informed by the issuer 
or his appointed agent.' 
3.2.4. This definition should be supplemented by the 
following additional statements: 
'An offer made indirectly by the issuer shall mean an 
issue originally subscribed by a bank or banking 
syndicate on condition that the securities so acquired 
are offered for sale to the public, so that the bank or 
the syndicate concerned can be considered to be an 
agent of the issuer.' 
No C 310/52 Official Journal of the European Communities 30. 11. 81 
'The expression "by public statement" covers the use 
of advertising instruments such as publication in the 
press, which contain a specific offer for invitation or 
subscription, announcements on the radio, the 
circulation of letters to an unlimited number of 
persons or documents available to the public at bank 
branches.' 
3.2.5. In any case, the Directive itself must contain a 
definition of 'restricted circle of persons'. This definition 
should include investors, even where there are a great 
many of them, who have personal connections with the 
financial institution and are approached individually by 
it. 
3.3. Article 2 
The Committee considers that the excemption granted to 
securities in paragraphs (a), (b) and (c) of Article 2, is not 
justified, and that this could result in discrimination to the 
detriment of shares. 
3.4. Article 7 
3.4.1. Shares resulting from the conversion of 
convertible bonds or the exercise of the rights conferred 
by a warrant are covered by the prospectus put out when 
the original instrument was issued, so, instead of allowing 
the possibility of exemption by the competent authority, 
it would be preferable simply to exempt such shares 
through an appropriate clause. 
3.4.2. The sum of 25 000 EUA quoted in paragraph 3 
(a) is insignificant and should be replaced by a figure 
several times as high. 
3.4.3. The Committee considers that there is no 
justification for allowing a wide exemption for securities 
(paragraphs 3 (b) and 3 (c)) solely because their issuers 
have more or less close links with the public 
authorities. 
It is advisable, in this case too, to avoid any form of 
discrimination against shares. 
3.5. Article 12 
To take account of the special situation of those 
constantly issuing securities secured by mortgage, the 
Directive should make provision for the Member States 
to empower the competent authorities to grant dispensations for issues secured by mortgage on condition 
that the mortgage guarantee is covered by official 
regulations and supervised by the public authorities. The 
same provision should be made for savings certificates 
and, as a general rule, all instruments representing a claim 
against a financial institution subject to constant 
supervision by the State. 
3.6. Article IS 
3.6.1. In paragraph 2, second indent, penultimate 
line, 'or' should be replaced by 'and'. 
3.6.2. The first line of the second indent should read 'a 
subsidiary 95% or more of which is owned by one or 
more credit institutions . . .'. This would make it easier to 
pool issues without making the subscriber's position less 
favourable. If this amendment is adopted, 'that credit 
institution' should be replaced by 'these credit 
institutions' towards the end of the passage. 
3.7. Article 17 
3.7.1. The ban on publishing a prospectus before it 
has been approved by the competent authorities puts the 
issuer at the latter's mercy. Some sort of deadline 
(maximum one month) should be laid down, after which 
approval shall be deemed to have been tacitly given 
providing that the competent authorities have not raised 
any objections. Approval must be understood in the sense 
of nihil obstat. 
3.7.2. In order not to hamper international issues by 
having the prospectus examined by several national 
authorities, the following addition to Article 17 of the 
prospectus Directive is suggested: 
The prospectus need only be approved by the appropriate 
authority in the Member State of the issuer or the leading 
bank in the consortium responsible for the issue. It shall 
be considered as approved if the appropriate authority 
has not said anything within eight days of application for 
approval. 
3.8. Article 22 
According to Article 22, every significant new factor 
which arises before a public offer is closed must be 
published. But it is not clear when a public offer is closed. 
This point in time shduld be laid down quite 
unambiguously (e.g. end of the subscription period, or 
selling period). 
30. 11. 81 Official Journal of the European Communities No C 310/53 
3.9. Article 25 
3.9.1. The Committee is pleased to note that the 
Contact Committee referred to here is the same as that 
provided for in the Directive on the prospectus for 
securities admitted for official stock exchange listing. 
3.9.2. In view of the comments made in its opinion of 
17 July 1974 on the admission prospectus, the 
Committee thinks that this Contact Committee should include representatives of the issuers, the banks and the 
public, so as to ensure it has the benefit of the experience 
of those groups with a particular interest in the operations 
in question. 
3.10. Schedule B 
Under 5.1.4 it should be made clear what is meant by a 
'material' amount. The Committee considers that a sum 
exceeding 10% of the capital should be regarded as 
'material'. 
Done at Brussels, 24 September 1981. 
The Chairman 
of the 
Economic and Social Committee 
Tomas ROSEINGRAVE