CELEX: 51972PC0835
Language: en
Date: 1972-09-26
Title: PROPOSAL FOR A COUNCIL DIRECTIVE concerning the content, checking and. distribution of the prospectus to be published when securities issued by companies within the meaning of Article 58 paragraph 2 of the Treaty are admitted to official stock exchange quotation#DRAFT COUNCIL RECOMMENDATION concerning the contents of the prospectus to be published when securities issued by the States or their local authorities are admitted to official stock exchange quotation (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (72) 835
Vol. 1972/0095
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983
concernant l'ouverture au public des archives historiques de la Communauté économique
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983,
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit
règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243,
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this
file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5
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 ---pagebreak--- COMMISSION               OP      THE     EOHOPEAI          • COHHUIITIES
                                                         COM(72)835 final
                                                   •  .  Brussels , 26 September 1972
                        PROPOSAL FOR  A  COUNCIL DIRECTIVE
   concerning the content , checking and. distribution of the prospectus to be
   published when securities issued by companies within the meaning of Article
 58 paragraph 2 of the Treaty are admitted to official stock exchange quotation
                           DRAFT COUNCIL RECOMMENDATION
 f
   concerning the contents of the prospectus to be published when securities
   issued by the States or their local authorities are admitted to official
                             stock exchange quotation
                   ( submitted to the Council by the Commission )
   CCtl(72 ) 835 final
 ---pagebreak---                                     Contents
                                                                Page
   I.   Proposal for a Council Directive   . .  . .   ....         5
 II.    Schedule A                                               20
III. ' Schedule B       . ..    .   ...      .  . .   .    . .   33
IV.     Schedule C      .  . ~ .    .    . . k  . .   .  . . .   45
 V.    Explanatory Memorandum            . . .  . .   ...  . .   47
VI.     Draft Recommendation of the Council . '                '67
S. 8/72                                           - •              3
 ---pagebreak--- PROPOSAL FOR A COUNCIL DIRECTIVE ---pagebreak---  The Council of the European Communities
 Having regard to the Treaty establishing the European Economic Community
 and , in particular, Article 54.3 g. thereof,
 Having regard to the proposal from the Commission,
 Having regard to the Opinion of the European Parliament,
 Having regard to the Opinion of the Economic and Social Committee,
 Whereas the enlargement of the size of the market in which enterprises operate
 to the dimensions . of the Community involves a parallel widening of their
 financial requirements and of the capital markets on which they must call to
 satisfy these, and whereas admission to the stock exchanges of several Member
 States of transferable securities issued by companies and other legal persons in
 public and private law constitutes an important method of access to these
 capital markets, and whereas furthermore exchange restrictions on the
purchase of transferable securities negotiated on the stock exchanges of another
 Member State have been eliminated as part of the liberalization of capital
 movements,
"Whereas safeguards for the protection of the interests of company members
and third parties investing whose savings are sought are required in most of
the Member States of enterprises which make public call on savings, sometimes
immediately the securities are issued and in any case at the time of their
admission to official stock exchange quotation, and whereas these safeguards
rest on the requirement that information which is adequate and as objective as
possible must be furnished concerning in particular the financial situation of
the issuing enterprise and the features of the securities for which quotation is
requested and whereas the form under' which this information is required
usually consists of the publication of a prospectus,
"Whereas at the same time the safeguards thus required diverge from one
member country to another, both as regards the contents and the layout of the
prospectus and the efficacity, methods and timing of the check on the
adequacy and sufficiency of the information given, and whereas the effect of
these divergencies is not only to make it more difficult for enterprises to obtain
admission to the stock exchanges of several Member States but also to hinder
the acquisition by savers residing in a Member State of securities quoted on
the stock exchanges of the other Member States and thus to inhibit the
financing of the enterprises and investment by savers throughout the
Community,
"Whereas these divergencies should be eliminated by coordinating the rules and
regulations without necessarily making them completely uniform, in order to
achieve an adequate degree of equivalence in the safeguards offered in each
Member State to ensure sufficient and objective information for company
members and third parties who are present or potential security holders, and
S. 8/72                                                                          7
 ---pagebreak---  whereas at the same time, taking into account on the one hand the present
 degree of liberalization of capital movements in the Community and on the
 other the fact that a mechanism for checking at the time the securities are
 issued does not yet exist in all the Member States, it would appear sufficient at
present to limit the necessary coordination to the conditions for admission of
 such securities to official stock exchange quotation, ■
Whereas' the enterprises in the Member States which request the quotation of
securities that they issue are all companies or other legal persons in public or
private law within the meaning of Article 58(2) of the Treaty so that the
coordination of the safeguards which are made compulsory for them in the
field of this Directive comes under Article 54.3 g.; and whereas these
safeguards, because of their objective character and their nature as rules for
the protection of savings and for the proper functioning of the stock
exchanges, must necessarily also apply to applications for admission to
quotation on a stock exchange in the Community of the securities issued by
enterprises of third countries, and whereas the provisions of this Directive must
consequently also concern the information required of these undertakings in
the form of prospectuses and the checking of this information,
Has adopted this Directive:
Section I: General rules and field of application
Article 1 : Requirement of issuing a prospectus                       •
1.     Member States shall ensure that, before securities are admitted to or
introduced for official quotation on a stock exchange situated within their
territory, a prospectus checked by an authority appointed for this purpose is
published or made available to the public.
2.     Notwithstanding the foregoing, securities issued by open-end investment
companies and unit trusts, i.e. organisations whose securities are issued in a
continuous fashion or in closely spaced tranches and / or are bought back or
redeemed directly or indirectly at the request of the holder out of their assets,
shall be excluded from the field of application of this Directive.
3 . ' The obligations of this Directive shall not apply either to securities
issued by the States or their local authorities.
Article 2: Contents of the prospectus
The prospectus mentioned in Article 1 above must contain all information
which, according to the particular nature of the issuer and the securities in
8                                                                           S. 8/72
 ---pagebreak---   question, are necessary to enable investors and their investment advisers to
  form a well-founded opinion on the net worth, financial situation, results and
  prospects of the issuer and also on the rights pertaining to the securities for
  which application for admission is being made.
 Article 3 : Obligation to follow the schemes of presentation set out in the
 Schedules
  1.    In order to achieve the result envisaged in Article 2, Member States shall
 ensure that the admission prospectus contains,, in as easily analysable and
 comprehensible a form as possible, at least those items of information that are
 listed in Schedules A, B or C annexed to the present Directive, depending on
 whether shares, debentures1 or certificates representing shares are involved.
 The schemes of presentation in question are applicable in conjunction with the
 exception options provided for in Articles 4 and 5 .
 2.     In the specific cases mentioned in Articles 6-12 the prospectus shall be
 drawn up in accordance with the indications laid down therein.
 3.     In cases where certain headings of the Schedules are inappropriate to the
 issuers' sphere of activity, a prospectus giving equivalent information shall be
 drawn up by adapting the headings in question.
 Article 4: Right to waive publication of a prospectus or certain of its headings
 1.     Member States may, under conditions determined by them , waive
publication of a prospectus drawn up in accordance with the annexed schemes
of presentation, or may even provide for complete exemption from the
requirement of issuing a prospectus when the application for admission is in
respect of the securities detailed below:
 (a) securities for which, within a maximum of six months prior to the
application for admission, an issue prospectus was published in the same
member country in connection with a public issue, provided that the
prospectus was drawn up in conformity with the provisions of the present
Directive and can be held to be equivalent to the European admission
prospectus; in such a case, the up-datirig of that prospectus may if necessary be
called for;
 (b) securities already admitted to official quotation on another stock
exchange in the same member country, provided that a prospectus has already
been published which complies with the present Directive;
1 "Debenture" includes debenture stock, loan stock, bonds and any similar securities of a
company whether constituting a charge on the assets of the company or not (Translater 's
note).
S. 8/72                                                                                 9
 ---pagebreak---  (c) shares (including shares having no capital value) allotted, consequent
 upon the capitalisation of reserves, issue premiums, revaluation surpluses or
 profits, to holders of shares of the same category already quoted on the same
stock exchange;
 (d) shares resulting from the conversion of convertible debentures when these
convertible debentures and shares of the same category as those offered by way
of conversion are already quoted on the same stock exchange;
 (e)   shares issued in connection with the exercise of warrants, when the
debentures to which they were attached, as well as shares of the same category
as those offered to holders of the warrants, are already quoted on the same
stock exchange;
(f) supplementary certificates representing shares issued in exchange for
original securities, where there is no increase of capital, when the certificates
are already quoted on the same stock exchange.
(g) a number of securities amounting to less than 5% of the number of
securities of the same category already admitted to quotation on the same
stock exchange, provided that the aggregate market value of the additional
securities does not exceed 500 000 units of account over a period of two years.
2.     Where Member States intend to avail themselves of this exemption
option, they must notify the Commission, at the latest by the expiry of the
time-limit fixed in Article 20(1 ), of the cases in which they intend to keep this
option available and, where appropriate, of the particular provisions they are
establishing for the scheme of presentation. - When, in these same cases,
circumstances relating to the creation of extra securities call for special
information the Member States must nevertheless prescribe the publication of
the necessary information.           ,     ■                               .
Article 5: Dispensation from the provisions of certain headings in the annexed
Schedules
The authorities of Member . States may dispense the issuer from publishing
certain information laid down in the Schedules when, in the particular
circumstances . of the issuer concerned :
1 . . this information has no more than minimal importance and is not likely
to influence assessment of the net worth, financial position, results and
prospects of the issuer;
2.     the disclosure of this information would be contrary to the public
interest or would be seriously detrimental to the issuer, provided that
non-publication is not likely to mislead the public with regard to the facts and
circumstances essential for assessment of the securities in question.
10                                                                           S. 8/72
 ---pagebreak---   Section II: Content of the prospectus in special cases
 Article 6: Financial institutions
                                                                               i
 1.      Upon admission to quotation for securities issued by financial
 institutions, the prospectus must contain at least the items of information
 specified in Chapters 1 , 2, 3, 5 and 6 of Schedules A or B, according as shares
 or debentures are involved .
 2.     In addition, it must contain information adapted to the characteristics of
 the issuers in question and equivalent to that specified in Chapters 4 and 7 of
 Schedules A or B in accordance with the rules laid down for this purpose by
 the competent national authorities.                    '
3 . 'It shall be incumbent on Member States to define the financial
institutions for which modified schemes for the presentation of prospectuses
will be laid down .-
The system provided for by this Article for financial institutions may be
extended to investment companies and collective investment funds other than
those covered in Article 1 , to "pure" finance companies (i.e. those engaging in
no other activities than assembling capital to make it available to a parent
company or a company directly or indirectly affiliated with the parent
company) and to "pure" holding companies (i.e. those that do not engage in
any other activity than managing a portfolio of transferable securities, licences
or patents).                                                                 ♦
Article 7: Continuous or repeated loan issues by financial institutions
1.      In the case of banks, savings banks, credit institutions and mortgage
companies which publish their accounts regularly, which within the
Community are corporations of public-law status or are subject to public
supervision designed to protect savings, and which make continuous or
repeated issues, not less than an average of twice a year, of debentures for
which admission to quotation is sought, the complete prospectus drawn up in
accordance with the method laid down for financial institutions in Article 6
need only be published every three years.       This system may be extended to
cover Dutch mortgage companies. '
2.      Nevertheless, on the occasion of each admission, . the publication is
required of information concerning, at' the least, the signatories of the
prospectus, the terms of the loan and conditions of the transaction (Chapters 1
and 2 of the annexed debentures Schedule), together with information
concerning any events of importance for assessing the security which have
occurred since the date of the latest annual statement of accounts.          With
S. 8/72                                                                          11
 ---pagebreak---    regard to the latter, it may be made available to the public at the banks which
   are acting as paying agents.
  In the case of debentures issued by the Italian banks' "special sections" with
  separate legal personality (cartelle fondiarie and other like securities), the
  annual accounts of the special sections must be published, and not those of the
  banks from which they stem.
  Article 8: Guaranteed loans                                              1
  1.     In the case of loans covered by a third company's guarantee other than
  in the form of material security, the prospectus must carry information as
  specified in the debentures Schedule - concerning both companies when the
  issuing company and the guarantor company are specifically engaged in
  industry and commerce.
- When one of the two companies is a financial institution , that part of the full
  prospectus which relates to that company shall be drawn up in accordance
  with the provisions of Article 6.
  2.     In the case of loans issued by a " pure" finance company having no other
  business than that of the issuing of loans and the placing of such funds at the
  disposal of the parent company or other companies affiliated to it, the
  prospectus must include, for the guarantor companies, the information
  specified in the debentures Schedule except for Chapter 2 and, for the issuing
  company, that is to say the "pure" finance company, the information specified
  in Chapters 1 , 2 and 3 and under items 51 and 61 of the debentures Schedule.
  When there is more than one guarantor, the information specified in the
  Schedule is required from each, but the prospectus may be abridged for the
  sake of making it easier to read, pursuant to instructions given by the
  authorities .                                          •  .
  3.     For group -loans, information concerning all the guarantor companies is
  required in the prospectus. When these are too numerous, however, the
  authorities shall have discretionary power to allow 1 abridgement of the
  information required of each.
  4.     In all cases of guaranteed loans, the guarantee contract must be annexed
  to the prospectus unless it is too voluminous or difficult for the public to
  understand. In such a case, a resume of the contract must be published which
  will allow an assessment to be made of the nature and scope of the guarantee,
  whilst the contract itself must be made available to the public at the premises
  of the financial intermediaries through whom the request for admission is
  made.
  12                                                                         S. 8/72
 ---pagebreak--- Article 9: Convertible loans or loans with warrants attached
 1.     When the request for admission relates to convertible debentures or to
debentures carrying warrants, the prospectus must contain the information
specified in the shares Schedule and in Chapter 2 of the debentures Schedule,
1.e. information relating to the operation, as well as the subscription or
conversion terms.                                                    .
2.      When the issuer of the debentures is a different Company from that
which issues the shares, the prospectus must contain the information specified
in the debentures Schedule for the first company and that specified in the
shares Schedule for the second company.
However, in the event of the issuer of the debentures being a "pure" finance
company, the prospectus need contain, in addition to the subscription or
conversion terms, only the information specified in the debentures Schedule in
the abridged form for the "pure" finance company, i.e. the information
specified in Chapters 1 , 2 and 3 and under items 51 and 61 of the debentures
Schedule.
3.      When the currency of the convertible debenture is different from that of
the shares, the effects of any changes in currency parities upon the terms of
conversion or upon the terms of subscription must be indicated.
Article 10: Admission to stock exchange quotation of securities issued in
connection with the merging or splitting of companies, the transfer of assets or
a public exchange offer            -
1.     When the application for admission relates to securities issued in
connection with an operation involving the merging or splitting of companies,
the transfer of assets or a public exchange offer, and when the operation took
place within the last three years, the prospectus shall include, in addition to
the information specified in the shares Schedule or in the debentures Schedule
as appropriate, the following material which may be inserted or simply
annexed :
(i)    the documents presented to the general meeting, including the report of
        the merger, the valuation criteria and the justification for the exchange
        ratio ;
(ii)    the opening balance sheet showing the effects of the operation in
        question;
(iii) information relating to the financial background of each of the
        companies involved ; this information may be brief for companies which
        are already quoted.
S. 8/72                                                                        13
 ---pagebreak---   2. . When less than six months before admission to stock exchange quotation
  equivalent and checked information has been published prior to an operation
  of the kind teferred to in paragraph . 1, the authorities of Member States may
  waive publication of a prospectus for admission to quotation, provided that
  this information is made available to the public.
 Article 11 : Certificates representing shares
 1.      When the application for admission relates to certificates representing
 shares, the prospectus must contain the information specified in the shares
 Schedule as regards the shares represented, and the information specified in the
 certificates Schedule.
 2.     Nevertheless, the authorities may allow the issuer of the certificates to
 dispense with the publication of details of its financial position provided for in
 the annexed Schedule, when the issuer is :
 (i)    a bank, savings bank, credit institution or mortgage company which is
        quoted on a stock exchange, which publishes its accounts regularly and
        which within the Community is a corporation of public-law status or
        subject to public supervision aimed at safeguarding savings;
 (ii)   or an interprofessional organisation for the transfer of securities;
 (iii) or a trustee institution subject to special regulations for the sa'fe custody
        of original shares.
Article 12: Issuers in the public sector       .
1.      In connection with the admission to stock exchange quotation                of
securities issued by corporate bodies under public law which are engaged            in
industrial, commercial or financial activities, the general rules laid down         in
this Directive shall apply with only such adaptations as the particularities        of
these enterprises may require.
2.      When these issuers, or the debentures issued by them, are covered, both
as to the redemption of the loan and interest payment, by the unconditional
and irrevocable guarantee of a Member State, the competent authorities may
simplify that part of the prospectus which refers to the issuer and the issuer's
financial position, while, at the same time, endeavouring to insist upon the
publication of this information in accordance with sound practice as adopted
on the international market.
14                                                                            S. 8 /72
 ---pagebreak--- Section III: Arrangements for enforcing the prospectus requirements and for
miking it publicly available
Article 13: Enforcement of the prospectus requirements
1.      Member States shall instruct one or more national authorities, public or
private, to supervise the enforcement of the rules in the present Directive and
shall notify die Commission of these authorities, giving details of any division
of responsibilities among them.
2.      The prospectus may not be published, nor may it be made available to
the public, before it has been passed by the competent authority as referred to
in paragraph 1.
3.      The competent audiority shall give authorisation for the prospectus to be
published or made available to the public only if it is of the opinion that the
prospectus satisfies all the requirements of the present Directive, and if it has
good reason to believe that it contains no particulars or omissions likely to
mislead the public.
4.      In order to carry out their task, the authorities appointed shall be
endowed with all the necessary competence and powers of supervision. In
particular, they must have the power to require the issuer of the securities for
which admission to quotation is sought to furnish all the information and to
produce all die documents necessary for them to judge whether or not the
draft prospectuses submitted to them conform to the requirements laid down
in the Directive, as well as powers to require the prospectus to be presented in
the manner best suited to the characteristics of die issuer and of the securities.
They must also be provided with power to check whether an issuer complies
with the conditions laid down in die Directive for a partial or total
dispensation from some of its requirements.
Article 14: Methods of publishing the prospectus
1.      The prospectus for admission to quotation must be published:
(i)     either by insertion in an official gazette and in one or more other -
        journals,
(ii)    or by making available to the public, free of charge, copies in pamphlet
        form at the headquarters of the stock exchange or stock exchanges on
        which the securities are being admitted to quotation and at the offices of
        the issuer as well as over the counters of the banks and other
        intermediaries involved in the application for admission or in the
        placing of the securities.
S. 8/72                                                                          15
 ---pagebreak---  2. ' These two methods may be combined. In countries where publication
 of a prospectus in the press is prescribed not all the information specified in
 the Schedules annexed to the Directive need be published in the press,, subject
 to the following conditions :
 (i)   the information prescribed in the annexed Schedules but not published in
        the press must be made available to the public in pamphlet form;
 (ii)  this pamphlet must always be accompanied by a reprint of the document
       published in the press;
 (iii) the document published in the press must mention the pamphlet and
       must state where members of the public may obtain the information
       document in full.
Finally, the apportionment of the information between the two methods must
be carried out in accordance with the standards fixed by law or by the
competent authorities and under their control.
3.     It must be made compulsory for the prospectuses to be lodged in places
and according to procedures laid down by the Member States.
Article IS: Deadlines for publishing the prospectus
1.     When shares are admitted to quotation the prospectus must ba published
or made available to the public as early as possible and at least- eight days
before the date on which the securities admitted to quotation can be the
subject of dealings recorded in the official list. This same eight-day minimum
requirement must be respected in the case of issues of convertible debentures or
debentures with warrants attached carrying preferential subscription rights for
current shareholders . Three days at least must be allovved in the case of issues
of debentures, convertible debentures or debentures with warrants which do
not carry preferential subscription rights for existing shareholders.
2.     Moreover, where there is to be a market in subscription rights giving rise
to dealings recorded in the official list, the prospectus must be published or
made available to the public at least three days before this market opens.
3.     In the event of the admission of debentures to quotation coinciding with
the public issue, and when certain terms of the issue such as the issue price or
the interest rate are only finalised at the last moment, the authorities may
confine themselves to insisting upon the publication, at least three days
before admission, of a provisional prospectus omitting this information but
indicating how it will be made known. This information must be made
known to the public not later than the day before dealings commence, by
16                                                                         S. 8/72
 ---pagebreak---   putting out either a complete prospectus or an addendum sheet to the
  above-mentioned provisional prospectus, or alternatively by a notice in the
  press referring to the complete prospectus and indicating where it may be
  procured.                                                •
  Article 16: Publication of documents other than the prospectus
  1.      As soon as a checked prospectus is published for securities in connection
 with their admission to quotation, the bills, posters and documents confined to
 the announcement of these operations and to an indication of the essential
 characteristics of the securities must refer to the prospectus and must state
 where and how the public may procure it.
 2.      Documents containing more detailed information that are published by
 or on behalf of the issuer, and in particular the partial or abbreviated
 prospectus in countries where its issue is allowed by the authorities, must, in
 the same manner as the complete prospectus, be submitted for checking by the
 competent authorities, in order that they may verify that these informatory
 documents, though abbreviated or incomplete, would not be liable to distort
 the public's assessment of the securities and in order that they may call for
 amendments to be made, if necessary.
Furthermore, these" documents must refer to the complete prospectus and must
indicate where and how it may be obtained by the public.
                                                                              »
3.       It is recommended that Member States should encourage the publication
of abbreviated prospectuses which are clearly presented and easy for the public
to understand and which, whilst including only the essential elements of the
annexed Schedules, convey an objective impression of the issuer and of the
rights attaching to the securities.
4.       The company 'or the financial intermediaries concerned in the placing of
the securities or their admission to quotation may not, in this connection, give
any information that might affect assessment of the securities if it does not
appear in the prospectus or is not common knowledge.
Article 17: New factors
Every important new factor arising between the time when the prospectus is
finalised and when dealings commence in the stock market must be notified in
a supplement to the prospectus, checked in the same way as' the latter and
made available by kindred procedures which will be decided by the competent
authorities .
S. 8 /72                                                                         17
 ---pagebreak---  Section IV: Procedures for cooperation between Member States in the
application of the Directive
 Article 1 S: Operations affecting several Member States
 1.    In the case of simultaneous admission to quotation on the stock
 exchanges of several member countries of the Community, the authorities of
 the Member States concerned shall establish between themselves all the
 contacts necessary to coordinate to the maximum the requirements concerning
prospectuses in order to avoid a multiplicity of formalities and to accept a
single text for the greater part of the prospectus which would then only need a
possible translation and supplement corresponding to the individual
requirements of each Member State concerned .
2.     In the event of admission to quotation being sought on a stock exchange
in one or more Member States for securities which have been admitted to
quotation in another Member State for less than six months, the authorities of
the countries in which admission is being sought shall make contact with .the
authority which has already admitted the securities and shall, as far as is
possible, exempt the issuer from drawing up a new prospectus subject to any
need for updating, translation or the issue of a supplement in accordance with
the individual requirements of each member country concerned.
3.     In the case of a security which is quoted on the stock exchanges of
several Member States, the authorities of the countries concerned must
endeavour to get the issuer to arrange that information made available in one
of these countries which might influence assessment of the merits of the
security is also made available at the same time, or soon after, in the other
countries in which the security is quoted. -
Article 19: Contact Group
1.     A Contact 'Group shall be set up in the Commission.      Its function shall
be :                                                                               '
(a ) to facilitate, without prejudice to the provisions of Articles 169 and 170
of the Treaty, harmonised application of the Directive through regular
contacts designed to concert approaches to the practical problems connected
with its application, and, in particular, with the annexed Schedules, about
which exchanges of views might he deemed useful;
(b) to facilitate a concerted approach as regards supplements and
improvements to the prospectus which it is permissible for the authorities of
Member States to require or recommend at purely national level ;
18                                                                          S. 8/72
 ---pagebreak---    (c) to aid the Commission, if necessary, in drawing up new proposals to the
   Council with a view to supplementing or amending the Directive.
   2.    The Contact Group shall be composed of representatives of the Member
   States and o£ the Commission. The Commission's services shall provide the
' Secretariat.
  Section V: Final provisions
  Article 20
  1.     Member States shall put into effect, within twelve months of notification
  to them of the present Directive, all measures necessary for complying with its
  provisions and shall inform the Commission immediately of such measures.
  2.     The Member States shall communicate to the Commission the texts of
  the essential provisions of national law which they adopt in the areas covered
  by the present Directive.
  Article 21                                    -
  The present Directive is addressed to the Member States.
 S. 8/72                                                                         19
 ---pagebreak---                                       SCHEDULE A
                         Scheme of presentation for prospectuses
               for the admission of shares to stock exchange quotation
   Chapter 1 . Persons or bodies assuming responsibility for the prospectus ■
   11 . Name arid function of the natural persons, name and registered office of
  the bodies corporate assuming responsibility for the prospectus or, as the case
  may be, for certain parts of it. Should they assume responsibility for certain
  parts of the prospectus only, mention these parts.
   12. Declaration by the signatories of the prospectus that, to the best of their
  knowledge, the data appearing in that part of the prospectus for which they
  assume responsibility are in accordance with the facts and that there are no
  omissions likely to affect the bearing of the information.
   13 . Statement specifying whether or not the accounts have been checked by
  internal or outside auditing/ accounting experts (e.g. accountants, sindaci,
  Wirtschaftspriifer, etc.). The capacity (organ established under the " Statutes "1
  or external body) in which the verifications were carried out should be
  specified, as well as possible reservations. The same rule shall apply to the
  consolidated accounts contained in the prospectus. >
  Chapter 2. Information concerning admission to quotation and the securities
  for which application is being made                                 . •
  21 . Nature of the operation (e.g., admission to quotation of securities
  already marketed ; admission to quotation with a view to stock exchange
  marketing).
  22.     Information concerning the securities to be admitted to quotation.
         221 . Indication of the resolutions, authorizations and approvals by
         virtue of which the securities were created : type of operation and
          amount thereof. Number of securities created, if predetermined.
i                                           .1                                     ,
       • 222. Concise description of the rights attaching to the securities, inter
         alia extent of the voting rights, entitlement to share in the profits and to
         the liquidation surplus, any privileges. Time-limit after which dividends
         lapse and indication of the party in whose favour this provision
         operates .
     In the case of a U.K. company this term corresponds to the Memorandum and Articles
  of Association (Translater's note).
  20                                                                            S. 8/72
 ---pagebreak---         223. Arrangements for transfer of the securities and any restrictions on
         their free negotiability (e.g., clause establishing approval requirement).
        224. Date from which dividends become payable. '
     - 225. The stock exchange or exchanges to which admission is or may be
        applied for.
        226. The institutions which, at the time of admission, are the paying
        agents of the company in the country where the admission occurs.
23 .    Information concerning issue and placing of securities: should an issue
prospectus not have been published and when the issue and the admission to
quotation occur at the same time, or when the issue preceded admission to
quotation by less than three months, the following items of information shall
appear in the' admission prospectus.                The information provided for in
point 23, so far as applicable, shall also be supplied for privately issued
securities at the time of their admission to stock exchange quotation.
        230. For the securities referred to in point 22, indication of any
        preferential rights or exclusion of preferential rights for existing
        shareholders . In the latter case, the reasons for the exclusion and, in the
        case of an issue for cash, for the choice of the issue price of the
        securities, with indication of the beneficiaries of the exclusion.
        231 . The total amount on offer to the public and the number of
        securities offered , where applicable by category. .
        232. If the public offer is being or has been made simultaneously on
        several markets and if a tranche is-being or has been reserved for certain
        of these, indicate the tranches.
        233 . The issue or subscription price, distinguishing the par value or the
        amount placed to capital , the issue premium and the amount of any
        expenses explicitly charged to the purchaser or subscriber; the methods
        of payment of the price, inter alia as regards the paying-up of securities
        which are not fully paid-up.
        234. The procedure' for exercise of the preferential rights, the
        negotiability of subscription rights ; what happens to unexercised rights.
        235. Period during which the issue is or was open and indication of the
        financial institutions responsible for receiving the public's subscriptions.
        236. Methods and time-limits for delivery of the securities, possible
        creation of scrip.                        v
        237. Indication of the persons underwriting or guaranteeing the issue
        for the issuing company. If the issue is being guaranteed privately by
        natural persons, this fact is to be indicated without mentioning them by
        name. Where not all of the issue is underwritten or guaranteed, the
        portion not covered is to be mentioned.
S. 8/72                                                                              21
 ---pagebreak---     238 . Estimate of the overall amount and / or amount per security of the
    charges relating to the issue operation, making a distinction at least
    between the legal and administrative expenses on the one hand, and the
    overall    remuneration    of the financial    intermediaries   on  the   other
     (including the underwriting commission              or    margin,   guarantee
    commission, placing commission).
    239. Net proceeds accruing to the company from the issue and planned
    appropriation of these proceeds (e.g., financing of the investment
    programme or reinforcement of the company's financial situation).
24. Information concerning admission to quotation.
    241 . Description of the securities the admission of which is applied for
    and, inter alia, number or overall par value, exact designation or
    category, serial numbers, coupons attached, etc.
    242. If the securities are to be placed by introduction on the stock
    exchange, the number of securities made available to the market and /or
    the overall par value and, where applicable, the minimum sale price.
    243 . If known, the date on which the new securities will be listed.
    244. If securities of the same category are already listed on one or more
    stock exchanges, mention is to be made of this or these stock exchanges
    and, in so far as the data mentioned below are available, for the last
    five financial years and for the current financial year as regards the
    principal stock exchange or stock exchanges :
           2441 . The number of securities listed or their overall par value.
           2442. The volume of transactions by number of the securities
           and / or their market value.
           2443 . The adjusted highest and lowest prices, i.e., rendered
           comparable so as to take account of operations that have occurred
           in respect of the capital (increase, decrease, splitting,
           rearrangement).      The adjustment formulae utilised are to be
           indicated.
           2444. The adjusted profit per share and the adjusted dividend per
           share, i.e., rendered comparable so as to take account of
           operations that have occurred in respect of the capital (increase,
           decrease, splitting, rearrangement).        The adjustment formulae
           utilised are to be indicated.
    245. If securities of the same category are not yet admitted to quotation
    but are dealt in on markets other than that of official quotation, the
    most recent prices on those markets in so far as such publicity is
    permitted ; the market on which these prices were recorded and the
    source from which they were taken . The data referred to above are
    given only if the market for the securities is sufficiently wide.
22                                                                          S. 8 /72
 ---pagebreak---            246. Public take-over bids or exchange offers involving the company's
           shares and public exchange offers which have been made by the
           company -during the last financial year and the current financial year,
           mentioning the conditions of the offer and its result.
 25 . If, simultaneously or almost simultaneously with the creation of securities
 for which admission to quotation is being sought, securities of the same nature
 are - subscribed or placed privately or if securities of other categories are
 created with a view to their public or private placing, details are to be given
 of the nature of these operations and of the number and characteristics of the
 securities to which they relate.
 Chapter 3 . Information of a general character about the company
 31 .     Status of the company.
          311 . Name or style, registered office and , where appropriate, principal
          administrative establishment, if the latter is different from the registered
          office .
          312. Date of incorporation and, if the life of the company is limited,
          the date of its expiration .           ■
          313. Legislation under which the company operates and legal form
          which it has adopted in the framework of this legislation.
          314. Indication of the company's objects and reference to the Article of
          the " Statutes " in which they are described.
          315 . Indications of the places where it is possible to consult the
          coordinated "Statutes ", balance sheets and reports, decisions concerning
          the appointment and dismissal of members of the company's organs, as
          well as any other document quoted in the prospectus and accessible to
          the public, and of the place where the dispatch of the latest company
          report may be applied for. • Places where the prospectuses relating to the
          operations in respect of issue or admission to quotation performed by
          the company in the course of the past five years may be consulted by the
          public.
          316. Time-limits for and ways of calling general meetings.        Date and
          place of the next General Meeting, if these are known .
32.       Capital.                                            •
          321 . The amount of the capital subscribed and its composition ; the part
          of the subscribed capital still to be paid up, with indication of the
          number (or the overall par value) and nature of the securities not yet-
          fully paid-up, broken down, where applicable, according to the degree
          to which they have been paid up.
S. 8 / 72                                                                           23
 ---pagebreak---         322. When there is an authorised capital or authority for a contingent
        capital increase, inter alia in connection with convertible bonds issued or
        subscription options granted, indicate :
        (i) the amount of this authorised or " contingent" capital and, where
              appropriate, the duration of the authorisation;
        (ii) the categories having a preferential right of subscription for these
              additional portions of capital ;
        (iii) the terms and arrangements for the share issue corresponding to
              these portions .
       323 . If there exist several categories of securities, whether representing
       the capital or not, mention their principal characteristics and the number
       of shares or "parts " 1 issued.
       324. Conditions governing changes in the capital and in the respective
       rights of the various categories of securities, in so far as they depart
       from the general law.
       325. Outline table of changes in the capital coverning, in principle, at
       least the last five years, as well as the most important events prior to
       that period. Date and concise description of the successive operations
       changing the capital or its composition (mentioning premiums on issues
       or assets brought in).
       326. Indication of any person who directly or indirectly, alone or
       jointly with other shareholders, controls the company, mentioning the
       amount of his participation and in any case, in so far as it is known to
       the company, any holding of 25% or more of the subscribed capital.
       Mention must also be made of the portions of 10% or more held
       directly or indirectly in the company by other natural persons or bodies
       corporate, whenever this holding is common knowledge.
       By joint control must be understood the control exercised by several
       companies or several persons when they have concluded among
       themselves an agreement which may lead them to adopt a common
       policy vis-a-vis the company in question.
       327. If the prospectus-publishing company belongs to a group of
       enterprises, a description of the group and of the place it occupies
       therein .
       328 . Book value and par value (or accounting par value) of its own
       securities repurchased or held by the company if these securities are not
       isolated in the balance sheet; origin and object of this repurchase.
   "Parts" give profit-sharing rights but do not represent any capital value (Translater's
note).
24                                                                                S. 8/72
 ---pagebreak---  Chapter 4. Information concerning the company's activity
 41 .    Principal activities of the company.
 In the sections where the description of the company's activity is required only
 for the current financial year and the last financial year and if it is considered
 that this period is too short to reflect meaningfully the company's
 development, it is advisable to add indications about the previous financial
years . In so far as the company's development within the reference period has
 been influenced by exceptional events, e.g., an important merger, these events
 are to be indicated . If possible, the data should be presented in such a way as
 to enable a comparison to be made of the trend from one financial year to
 another.                                                          .
         411 . Description of the company 's principal activities, mentioning the
         main categories of products manufactured and sold and / or services
         performed. Indicate important new products and, as far as possible, the
         proportion of the turnover attributable to new products developed
         within the last five years .
         412. The above description may contain indications concerning the
         development of the company's relative position in its principal branches
         of activities, if these indications can be based, as to their significance and
         comparability, on figures emanating from qualified institutions, and the
         source given.
         413 . Breakdown , by principal branches of activities, of the net amount
         of the turnover in the course of the past five financial years and, if these
         figures are significant, the production volumes "of the principal products.
      . Any relatively homogeneous activity which contributes more than 15%
         to the turnover is considered a branch of activity.
         414. Information on the structure of markets and supplies for the last
         financial year, and for the current financial year and their trend (with, if
         possible, breakdown of the net amount of the turnover by principal
         geographical or economic zones, in so far as this information may
         influence assessment of the net worth, financial position or results).
         415. Location and importance of the company 's principal establishments
       ; and, if necessary, their development in the course of recent financial
         years and the current financial year, and information about the real
         estate owned. Any establishment which accounts for more than 10% of
         turnover or production is considered to be a principal establishment.
         416. For mining, - extraction of hydrocarbons, quarrying, etc.,
         description of the deposits, estimate of the economically exploitable
         reserves and expected period for which they will be exploited, indication
         of the period and principal conditions of the concessions and the
         economic conditions of their exploitation, indicating the state of progress
         of the actual exploitation.
S. 8/72                                                                               25
 ---pagebreak---  42. Show clearly, if applicable, the company's dependence with respect to the
 grant, use or expiration of patents and licences, to the conclusion, maintenance
 or expiration of industrial , commercial and financial contracts, and to new
 manufacturing processes when these factors have great importance for the
 activity or profitability of the company.
 If this is the case, all that will be required is to give indications about the
 degree of dependence, to describe concisely, and without divulging industrial
secrets, the factors in question which have a particular importance, and to .
indicate, if they are significant in this respect, the dates of conclusion,
obtaining or expiration of contracts, licences and patents.
43 . ; Amount of the expenditure effected in the course of the past five
financial years for research and development of new products.
44. Indications of lawsuits and factors interrupting activities (e.g. : strikes,
accidents ) which have had or might have a significant impact on the net
worth, financial position or results of the company.
45. Average numbers employed and their trend in the course of the past five
financial years (if this trend is significant) with, if possible, a breakdown of
persons employed by principal branches.
46.     Investments .
                                                                          «
                                      /
        461 . Description, with figures, of the principal investments, including
        trade investments acquired, in the course of the past five financial years.
     ■ 462. General indications concerning the investment programme in
        course of implementation, including its overall cost, its methods of
        financing, the nature of the investments, in so far- as these indications are
        necessary for assessing the use of the funds collected in relation to the
        programme as a whole.           By investment programme in course of
        implementation is meant not only the projects whose execution has
        already started but, more widely, the whole body of investment projects
        which are inter-linked to an extent such that the commissioning or
        profitability of the investments already effected or in course of execution
        depends on the implementation of all the investment projects constituting
        the programme.
        463 . A table showing the sources and utilisation of funds must be
      • supplied , relating to the past five financial years and the current
        financial year.
26                                                                             S. 8/72
 ---pagebreak---  Chapter 5 . Information concerning the net worth, financial situation and
 results of the company
 51 .     General rules.                          \ -
         511 . Comparative table summarising the annual accounts relating to the
         past five financial years so as to bring out the essential factors, ensuring
         however that the rearrangement of the published accounts does not
         affect their informative value.             "
         512. The annual accounts relating to the last two completed financial
         years as approved by the general meeting pf shareholders must be
         appended.
         If more than nine months have elapsed since the date on which the last
         financial year was closed, a recent provisional financial statement
         (which may be submitted without having been checked by chartered
         accountants) must be inserted in the prospectus, or appended to it. .
         513 . Should the annual accounts not be drawn up in conformity with
         the provisions of Council Directive No. . . . of . . .,* and should they not
         give a sufficiently detailed and precise view of the net worth, financial
         situation and results of the company, they must be accompanied by
         explanatory notes ;^ad comments; more detailed disclosure in the
         prospectus may be called for and explicit mention must be made of
         corrections and amendments in relation to the published accounts.
         514. If the company draws up consolidated accounts, the information
         provided for in items 511 , 512 and 513 shall, if possible, be given on the
         basis of the consolidated accounts as well .
52. Individual details relating to the enterprises in                    which    the
 prospectus-publishing company holds at least 10% of the capital :
         521 . Name, registered office.
         522. Proportion of capital held.
         523 . Capital subscribed.
         524.   Reserves .
         525 . Result of the last financial year.
         These details shall be presented, if possible in the form of a synoptic
         table in the prospectus, unless they already appear in the annual
         accounts appended to it.                  ■
53 . Individual details relating to the companies in which the
prospectus-publishing company has a substantial holding likely to influence
 assessment of its net worth, financial situation or results.
1 OJ C 7 of 28.1.1972.
S. 8 /72                                                                           27
 ---pagebreak---  Those Ji'tnils must be given, inter alia, for the companies in which the
 prospectus-publishing company directly or indirectly holds at least 25% of the
 capital, or when the value of this holding represent* at lcnBt 10% of the
paid-up capital of the prospectus-publishing company, or when this holding
 accounts for at least 10% of the latter company's earnings.
However, for holdings in companies belonging to third countries, the details
provided for in items 531 to 535 need not be given in an individual manner
 but may be amalgamated with the details provided for in item 54.
In addition to the details mentioned in items 521 to 525, the following
indications must be given :
       531 .  Field of activity.
       532.  Book value of the shares or "parts " held.
       533.   Amount still to be paid up on these shares or "parts" held.
       534.  Net turnover in the course of the last financial year.
       535 . Amount of dividends received in the course of the last financial
       year in respect of shares or "parts " held.
       536. Amount of the prospectus-publishing company's claims on the
   (   company in which it has a substantial holding.
       537. Amount of the prospectus-publishing company's debts to the
       company in which it has a substantial holding.
       538 . Amount for which the prospectus-publishing company guarantees,
       endorses or secures the commitments of the company in which it has a
       substantial holding.
54. Overall information relating to all the enterprises taken together in
which the prospectus-publishing company holds at least 10% of the capital
and which are not referred to in item 53 :                    '
Same details as those provided for in items 532 to 538 but presented in overall
form and broken down as between companies of the country, companies of
other member countries and companies of third countries.
55.    When the prospectus comprises consolidated accounts, there shall be
indicated in an annex :
       551 . The consolidation principles applied and, if applicable, any
       exceptions to and deviations from these principles.
       The following details are to be indicated, inter alia:
       (i)   the selection criteria for the companies included            in    the
             consolidation;            :
28                                                                          S. 8/72
 ---pagebreak---             (ii )    the method (s) of consolidation utilised : overall or proportional
                     integration, placing on an equivalent footing;
            ( iii )  the rates of exchange used for the consolidation of the foreign
                     companies ;
            (iv)    the methods of eliminating profits resulting from transactions
                     among the companies of the group ;
            (v)     the way in which the stocks were integrated ; in particular,
                     explanations must be provided in the event of the non-elimination
                     of the intra-group profit;
            (vi)    if appropriate, the details relating to the underlying fiscal situation
                     of the group , taking account of timing differences in the payment
                     of corporation tax ;
           (vii ) the definition of the consolidated turnover;
           (viii) the scope of the consolidation of the results (total, partial or
                    simplified consolidation);"
           (ix)     the changes which have occurred , in relation to the accounts
                    published for the previous financial year, in the principles set forth
                    above.
           552. List of companies included in the consolidation , name and
           registered office. It may be sufficient to distinguish them by a sign in
           the list of companies for which details are provided for in item 52.
           553 . For each of the companies included in the consolidation, other
           than the prospectus-publishing company :
           (i)      the proportion of third-party interests, if the accounts of this
                    company are consolidated globally;
           (ii)     the proportion of the consolidation calculated on the basis of the
                    interests, if consolidation has been effected on a pro rata basis .
  56. When the company performs a significant proportion of its activities
  through the intermediary of companies controlled by it and managed as a
  single unit, the details concerning the activity of the company ( Chapter 4), its
  recent development and its prospects ( Chapter 7) must be provided for the
  whole unit in addition to concise details for the prospectus-publishing
  company individually.
■ Chapter 6. Administration, Management, Supervision
  61 . Name, first name, place of residence and function in the company of the
  following persons, mentioning the principal activities performed by them
  outside the company when they are significant in relation to the
  S. 8 /72                                                                               29
 ---pagebreak---    prospectus-publishing company (inter alia, the most significant directorships
   and important functions in other companies). . The activities of significance
  for the company performed by these same persons in the course of the past
  five years if they joined the company less than five years ago .                  -
          611 . Members of the administrative, directing or supervisory organs, as
          well as the other persons who assume the management of the company
          at the highest level .
          612. General partners in the case of a partnership limited by shares.
          613 . Founders, if the company has been established for less than five
          years . ,
  62.     Interests of the directors, etc., in the company. .
          621 . Remuneration paid for the last completed financial year under any
          heading whatsoever, as a charge to overheads or the profit
       • appropriation account, to the administrative, directing or supervisory
          organs. Overall amount for each category of organ. In addition, the
          total remuneration paid to the members of these organs of the
          prospectus-publishing company by all the companies controlled by it and
          managed as a single unit must be indicated.
          622. Options granted to the members of the administrative, directing or
          supervisory organs and to the other persons referred to in point 611 ,
          with respect to securities of the company: terms and conditions of these
          options.
          623 . Information about the nature and extent of the direct or indirect
          interests of the directors and managers or of the persons they represent
          in transactions which are unusual by their character or their conditions,
          effected by the company (such as purchases outside the normal activity,
          acquisition or disposal of fixed asset items, lease contracts with
          subsidiaries or persons mentioned above) in the course of the last
          financial year and during the current financial year. When such
          unusual transactions were concluded in the course of previous financial
          years and their effects are still being felt, information on these
          transactions must also be given. . :
          624. Overall indication of all the loans granted by the company to the
          persons referred to in point 611 , as well as of the guarantees constituted
          by the company in their favour. : ,
• 63 .  - Staff beneirits .
          631 . Brief description of the policy followed with regard to staff
          benefits and more particularly with regard to profit-sharing contracts or
          supplementary retirement pension contracts ; as regards the latter point,
          steps taken to ensure provision for them.
  30                                                                            S. 8/72
 ---pagebreak---          Description of the special benefits of a contractual character when the
      . probable trend of the charge they represent is likely to exert a marked
          influence on this category of expenditure.
         632. Options granted to the staff on shares in the company.
         633 . Overall indication of all the loans granted by the company to the
         staff and of the guarantees constituted in their favour.
 64. Name, address , capacity and occupation of the persons responsible for
checking the accounts (e.g. : commissaires aux comptes, reviseurs d'entreprises,
 Wirtschaftspriifer, sindaci, etc.).
Chapter 7. . Recent development and prospects of the company                   '
71 . General indications concerning the trend in the company's business since
the end of the last financial year and comparison with the corresponding
period of the previous financial year. When this information is already
available in interim reports, it will suffice to append the said reports to the
prospectus made available to the public. The following data are to be
supplied, inter alia:
       ■ 711 . The net turnover since the beginning of the financial year.
         712. A description of the most significant recent trends in production
         and stocks .
         713 . A description of recent trends in costs and selling prices.
         714 . The state of the order book.
72.-     Company prospects. '
The prospectus must clearly bring out the fact that this part consists of
estimates or intentions which might not materialise.
         721 . Brief indications on the projected investment programme in so far
         as the company has already made firm decisions on this or has prepared
         the ground by recent financial operations and where the programme is
         likely to exert an important influence on the company 's future financial .
         policy, particularly its self-financing policy.
         722. An estimate concerning the company's commercial and financial
         prospects may be inserted in the prospectus, provided that it is backed
         by figures (concerning, for example, the trend of business conditions, of
         the markets and of the order book, the influence of capital spending by
         the company and its competitors) and by pointers that are highly likely
         to prove accurate.
S. 8/72                                                                          31
 ---pagebreak--- 723 . If possible, general indications concerning the profit distribution
and retention policies which the company contemplates following or
proposing to die meeting of shareholders and particularly, if applicable,
concerning the policy on the issue of securities in connection with
capitalisation of all or part of the reserves or increases in value, and
concerning the operation of any dividend equalisation reserve.
                                                                   S. 8/72
 ---pagebreak---                                       SCHEDULE B
              Scheme of presentation for prospectuses for the admission
                   to stock exchange quotation of debentures issued
                       by industrial or commercial undertakings
   Chapter 1 . Persons or bodies assuming responsibility for the prospectus
  11 . Name and function of the natural persons, name and registered office of
  the bodies corporate assuming responsibility for the prospectus or, as the case
  may be, for certain parts of it. Should they assume responsibility for certain
  parts of the prospectus only, mention these parts.
• 12. Declaration by the signatories of the prospectus that, to the best of their
  knowledge, the data appearing in that part of the prospectus for which they
  assume responsibility are in accordance with the facts and that there are no
  omissions likely to affect the bearing of the information.
  13 . Statement specifying whether or not the accounts have been checked by
 internal or outside auditing / accounting experts (e.g. accountants, sindaci,
 Wirtschaftspriifer, etc.). The capacity (organ established under the "Statutes" 1
 or external body) in which the verifications were carried out should be
 specified, as well as possible reservations. The same rule shall apply to the
 consolidated accounts contained in the prospectus.
                                                                                    «
 Chapter 2. Information concerning the operation
 21 .    Conditions of the loan.
         211 . The nominal amount of the loan; the nature and the amount of
         the denominations available and, where appropriate, their number and
         numbering.
         212. The issue and redemption prices and the nominal interest rate; if
         several interest rates are provided for, an indication of the conditions for
         changes in the rate.        In the event of the securities being issued
       . continuously at a variable price following the trend of the markets,
         information is to be given concerning the limit issue prices applied.
         213 . The procedures for allocation of any other financial advantages of
         which account cannot be taken in the yield, for example prizes, share in
         profits, indexing, etc. and, where applicable, the basis of calculation of
         the variable factors and the publicity given to these; the probable
         incidence on yield of a variation of the parameter.
1 In the case of a U.K. company this term corresponds to the Memorandum and Articles
or Association (Translater's note).
S. 8/72                                                                            33
 ---pagebreak---      214. Tax withheld at source on the income from securities in the
     country of origin and / or the country of quotation. Indication as to
     whethe? the issuittg e&mpany asaumes jespongibility for the withholding
     of tax at source.
     215 . Amortization .
           2151 . The amortization plan for the loan with any possibilities of
           early redemption at the option of the issuer and / or subscriber and
           the way in which early redemptions or stock exchange or
           over-the-counter buying-in will affect the * amortization plan ;
           method of operation of any sinking fund .
           2152. Amortization procedure : technique of drawing by lot and
           publicity therefor, repurchase on the stock exchange, repurchase by
           mutual agreement.
    216. The financial institutions which, at the time of admission, are the
    paying agents of the company in the country where the admission takes
    place.
    217. Currency of the loan. If the loan is denominated in units of
    account, the contractual status of these; currency option.
    218 . Time limits .
           2181 . Period of the loan and any interim due dates.
           2182. The date from which interest becomes payable and the due
           dates for interest.
                                                                      *
           2183 . The time limit on the validity of claims to interest and
           repayment of principal.
           2184. The procedures and time limits for the delivery of the
           securities and the creation of scrip, where applicable.
    219 . Any other factor necessary for the calculation of the yield or for
    the assessment of the value of the securities. The method of calculating
    the yield is to be specified.
22. Légal information.
    221 . Reference to the resolutions, authorizations and approvals by
    virtue of which the securities were created or which constitute a prior,
    condition for issue or. admission to quotation.
    222. Nature and scope of the guarantees, sureties and commitments
    intended to ensure that the loan will be duly serviced as regards both
    interest and capital repayment. The texts of the contracts relating to
    such guarantees, sureties and commitments should be accessible to the
    public. When there are no such sureties, guarantees or commitments
    this fact must be mentioned .
34                                                                       S. 8/72
 ---pagebreak---          223 . Organization of representation for the body of debenture holders
         or trusteeships; name or denomination and head office of the
         representative of the debenture holders, the main conditions of such
         representation and particularly the conditions under which the
         representative may be replaced. The texts of the contracts relating to
         these forms of representation must be accessible to the public.
         224. Mention of clauses subordinating the loan to other debts of the
         company already contracted or to be contracted in the future.
         225. The legislation applicable to the securities and the courts
         competent in the event of litigation.
         226. Arrangements for transfer of the securities, registered or bearer,
         and any restrictions on their negotiability.
 23 .    Information concerning admission of the debentures to quotation.
        231 . The stock exchange or exchanges on which quotation is or will be
        applied for.
        232. Indication of the persons underwriting or guaranteeing the issue
        for the issuing company and the extent of their commitments. If the
        issue is being guaranteed privately by natural persons this fact is to be
        indicated without mentioning who they are. Where not all of the issue
        is underwritten or guaranteed, the portion not covered is to be
        mentioned.                                      ■_                      ••
        233. The number or global nominal 1 value of the securities for which
        quotation is sought.
        234. If the public offer, issue or admission to quotation takes place
        simultaneously on the markets of several countries and a tranche is
        reserved for certain of these markets, an indication of these tranches.
        235 . If, simultaneously or almost simultaneously with the creation of
        the securities which are the subject of the public issue or of the
        admission to quotation, securities of the same nature are subscribed or
        placed privately or securities of other categories are created with a view
        to their public or private placing, mention is to be made of the nature of
        these operations and of the number and characteristics of the securities
        concerned.
        236. If the same debentures are already quoted on one or several stock
        exchanges, the following must be mentioned:
               2361 . The stock exchange or exchanges on which they are quoted.
               2362. The latest price known.
S. 8/72                                                                            35
 ---pagebreak---           237. If the securities are not yet admitted to quotation, but are dealt in
          on markets other than that of official quotation, the most recent prices
          on those markets insofar as these prices are meaningful; the market on
          which these prices were recorded and the source from which they have
       , become known .
 24. Information concerning the issue, in the case of a prospectus published at
 the time of issue, or if the issue is concomitant with admission to quotation or
 if it has taken place within the three months preceding such admission :
          241 . Any preferential rights and the procedure for exercising them : the
          negotiability of the rights and what happens to rights not taken up.
          242. The amount of the subscription charges which are added to the
          purchase or subscription price and borne by the subscriber.
          243 . The procedure for payment of the purchase or subscription price.
          244. The period during which the issue is or was open and an
          indication of any possibilities of early closure.
          245 . An indication of the financial establishments instructed to receive
          subscriptions from the public and of the persons responsible for
          allotment, where applicable, of the loan.
          246. Indication of the net amount of the issue proceeds.
          247. Purpose of the issue and allocation of its proceeds.
                                                                          »
 Chapter 3 . Information of a general character about the company '
31 .     Status of the company.
         311 . Name or style, registered office and, where appropriate, principal
         administrative establishment, if the latter is different from the registered
         office.
         312. Date (jf incorporation and, if , the life of the company is limited,
         the date of its expiration.
         313 . Legislation under which the company operates and legal form
         which it has adopted in the framework of this legislation.
         314. Indication of the company's objects and reference to the Article of
         the "Statutes " in which they are described.
         315 . Indications of the places where it is possible to consult the
         coordinated "Statutes ", balance sheets and reports, decisions concerning
         the appointment and dismissal of members of the company's organs, as
         well as any other document quoted in the prospectus and accessible to
     ■ the public, and of the place where the dispatch of the latest company
36                                                                            S. 8/72
 ---pagebreak---           report may be applied for. Places where the prospectuses relating to the
          operations in respect of issue or admission to quotation performed by
          the company in the course of the past five years may be consulted by the
          public.
 32.      Capital.
          321 . The amount of the capital subscribed and its composition; the part
          of the subscribed capital still to be paid-up, with indication of the
          number (or the overall par value) and nature of the securities not yet
          fully paid-up, broken down, where applicable, according to the degree
          to which they have been paid-up.
         322. In the case of a convertible loan or a loan with warrants attached
         and when there is an authorised capital or authority for a contingent
         capital increase, indicate:
          (i)   the amount of this authorised or "contingent" capital and, where
                appropriate, the duration of the authorisation;
          (ii)  the categories having a preferential right of subscription for these
                additional portions of capital ;
         (iii)  the terms and arrangements for the share issue corresponding to
                these portions.
         323 . Indication of any person who directly or indirectly, alone or
         jointly with other shareholders, controls the company, mentioning the
         amount of his participation and in any case, in so far as it is known to
         the company, any holding of 25% or more of the subscribed capital.
         Mention must also be made of the portions of 10% or more held
         directly or indirectly in the company by other natural persons or bodies
         corporate, whenever this holding is common knowledge.
         By joint control must be understood the control exercised by several
         companies or several persons when they have concluded among
         themselves an agreement which may lead them to adopt a common
         policy vis-a-vis the company in question.
         324. If the prospectus-publishing company belongs to a group of
         enterprises, a description of the group and of the place it occupies
         therein .
         325. Book value and par value (or accounting par value) of its own
         securities repurchased or held by the company if these securities are not
         isolated in the balance sheet; origin and object of this repurchase.
5 . 8/72                                                                          37
 ---pagebreak---  Chapter 4. Information concerning the company's activity
 41 .    Principal activities of the company.
 In the sections where the description of the company's activity is- required only
 for the current financial year and the last financial year and if it is considered
 that this period is too short to reflect meaningfully the company's
 development, it is advisable to add indications about the previous financial
 years. In so far as the company 's development within the reference period has
 been influenced by exceptional events, e.g., an important merger, these events
 are to be indicated. If possible, the data should be presented in such a way as
 to enable a . comparison to be made of the trend from one financial year to
 another.
        411 . Description of the company's principal activities, mentioning the
        main categories of products manufactured and sojd and / or services
        performed. Indicate important new products and, as far as possible, the
        proportion of the turnover attributable to new products developed
        within the last five years.
     - 412. The above description may contain indications concerning the
        development of the company's relative position in its principal branches
        of activities, if these indications' can be based, as to their significance and
        comparability, on figures emanating from qualified institutions, and the
        source given.
        413 . Breakdown, by principal branches of activities, of the net amount
        of the turnover in the course of the past five financial years and, if these
        figures are significant, the production volumes of the principal products.
        Any relatively homogeneous activity which contributes more than 15%
        to the turnover is considered a branch of activity.
        414. Information on the structure of markets and supplies for the last
        financial year and for the current financial year and their trend (with, if
        possible, breakdown of the net amount of the turnover by principal
        geographical or economic zones, in so far a£ this information may
        influence assessment of the net worth, financial position or results).
        415 ; Location and importance of the company's principal establishments
        and, if necessary, their development in the .course of recent financial
        years and the current financial year, and information about the real
        estate owned . Any establishment which accounts for more than 10% of
        turnover or production is considered to be a principal establishment.
        416. For mining, extraction of hydrocarbons, quarrying, etc.,
      ' description of the deposits, estimate of the economically exploitable
        reserves and expected period for which .they will be exploited, indication
        of the period and principal conditions of the concessions and the
        economic conditions of their exploitation, indicating the state of progress
        of the actual exploitation.
38                                                                                S. 8/72
 ---pagebreak--- 42. Show clearly, if applicable, the company's dependence with respect to the
grant, vise or expiration of patents and licences, to the conclusion, maintenance
or expiration of industrial, commercial and financial contracts, and to new
manufacturing processes when these factors have great importance for the
activity or profitability of the company.
If this is the case, all that will be required is to give indications about the
degree of dependence, to describe concisely, and without divulging industrial
secrets, the factors in question which have a particular importance, and to
indicate, if they are significant in this respect, the dates of conclusion,
obtaining or expiration of contracts, licences and patents.
43 . Amount of the expenditure effected in the course of the past five
financial years for research and development of new products.
44. Indications of lawsuits and factors interrupting activities (e.g. : strikes,
accidents) which have had or might have a significant impact on the net
worth, financial position or results of the company.
45. Average numbers employed and their trend in the course of the past five
financial years (if this trend is significant) with, if possible, a breakdown of
persons employed by principal branches.
46 .     Investments.
         461 . Description, with figures, of the principal investments, including
         trade investments acquired , in the course of the past five financial years.
                                                                                  *
         462. General indications concerning the investment programme ' in
         course of implementation, including . its overall cost, its methods of
         financing, the nature of the investments, in so far as these indications are
         necessary for assessing the use of the funds collected in relation to the
         programme as a whole.           By investment programme in course of
         implementation is meant not only the projects whose execution has
         already started but, more widely, the whole body of investment projects
         which are inter-linked to an extent such that the commissioning or
         profitability of the investments already effected or in course of execution
         depends on the implementation of all the investment projects constituting
         the programme.
         463 . A table showing the sources and utilisation of funds must be
         supplied, relating to the past five financial years and the current
         financial year.
Chapter 5 . Information concerning the net worth, financial situation and,
results of the company
51 .     General rules .
S. 8 /72                                                                              39
 ---pagebreak---        511 . Comparative table summarising the annual accounts relating to the
        past five financial years so as to bring out the essential factors, ensuring
       however that the rearrangement of the published accounts does not
        affect their informative value.                         (
       512. The annual accounts relating to the last completed financial year
       as approved by the general meeting of shareholders must be appended.
       If more than nine months have elapsed since the date on which the last
       financial year was closed, a recent provisional financial statement
        (which may be submitted without having been checked by chartered
        accountants) must be inserted in the prospectus, or appended to it.
       513 . Should the annual accounts not be drawn up in conformity with
       the provisions of Council Directive No . . . . of . . -,1 and should they not
       give a sufficiently detailed and precise view of the net worth, financial
       situation and results of the company, they must be accompanied by
       explanatory notes and comments ; more detailed disclosure in the
       prospectus may be called for and explicit mention must be made of
       corrections and amendments in relation to the published accounts.
       514. If the company draws up consolidated accounts, the information
       provided for in items 511 , 512 and 513 shall, if possible, be given on the
       basis of the consolidated accounts as well.
 52. Individual details relating to the enterprises in which the
 prospectus-publishing company has a substantial holding likely to influence
 assessment of its net worth, financial situation or results. )
 These details must be given, . inter alia, for enterprises in ' which the
 prospectus-publishing company directly or indirectly holds at least 25% of the
 capital, or when the value of this holding represents at least 10% of the
 paid-up capital of the prospectus-publishing company, or when this holding
 accounts for at least 10% of the latter company's earnings.
 These details must be submitted if possible in the form of a synoptic table in
 the prospectus unless they already appear in the annual accounts annexed to it.
     . 521 . Name, registered office.
       522. Portion of capital held.
       523 . Capital subscribed.
       524. Reserves.
       525. Resuit of the last financial year.
1 OJ C 7 of 28.1.1972.
40                                                                            S. 8/72
 ---pagebreak---  53 . Additional individual details regarding subsidiaries and indirect
 subsidiaries.       By subsidiary is meant an enterprise in which the
 prospectus-publishing company holds shares or "parts" which represent over
 half that enterprise 's subscribed capital or to which is attached a voting power
 of over 50% . By indirect subsidiary is meant an enterprise in which the
 prospectus-publishing company holds directly or through one or more
subsidiaries or indirect subsidiaries shares or "parts " which represent over half
 that enterprise's subscribed capital or to which is attached a voting power of
over 50% . However, for subsidiaries and indirect subsidiaries located in third
countries the details provided for in items 531 to 538 need not be given in an
individual manner but may be amalgamated with the details provided for in
item 54 .
In addition to the details mentioned in items 521 to 525, the following
indications are to be given :
         531 . Field of activity.
         532. Book value of the shares or "parts " held.
         533 . Amount still to be paid-up on these shares or "parts " held.
         534. Net turnover in the course of the last financial year.
         535 . Amount of dividends received in the course 'of the last financial
         year in respect of shares or "parts " held.
         536. Amount of the prospectus-publishing company's claims on the
         subsidiary or indirect subsidiary. ■
         537. Amount of the prospectus-publishing company's debts to the
         subsidiary or indirect subsidiary.       ,           «
         538 . Amount for which the prospectus-publishing company guarantees ,
       . endorses or secures the commitments of the subsidiary or indirect
         subsidiary.
54.      Overall information relating to all enterprises referred to in item 52 and
not referred to in item 53 :
Same details as those provided for in items 532 to 538 but presented in overall
form and broken down as between companies of the country, companies of ' •
other member countries and companies of third countries.
55 .     When the prospectus comprises consolidated accounts, there shall be
indicated in an annex :
         551 . The consolidation principles applied and, if applicable, any
         exceptions to and deviations from these principles .
S. 8 /72                                                                          41
 ---pagebreak---         The following details are to be indicated, inter alia:
        (i ) the selection criteria for the companies included in the
               consolidation;
        (ii ) the method(s) of consolidation utilised : overall or proportional
               integration, placing on an equivalent footing;
        (iii) the rates of exchange used for the consolidation of the foreign
               companies;
        (iv) the methods of eliminating profits resulting from transactions
               among the companies of the group ;
        (v) the way in which the stocks were integrated ; in particular,
              explanations must be provided in the event of the non-elimination
              of the intra-group profit;
       (vi) if appropriate, the details relating to the underlying fiscal situation
              of the group, taking account of timing differences in the payment
              of corporation tax;
       (vii) the definition of the consolidated turnover;
       (viii) the scope of the consolidation of the results (total, partial or
              simplified consolidation);              '
       (ix) the changes which have occurred, in relation to the accounts
              published for the previous financial year, in the principles set forth
              above.
       552. List of companies included in the consolidation, name and
     ■ registered office. It may be sufficient to distinguish them by a sign in
       the list of companies for which details are provided for in item 52!
       553 . For each of the companies included in the consolidation, other
       than the prospectus-publishing company:
       (i ) the proportion of third party interests, if the accounts of this
              company are consolidated globally;
       (ii) the proportion of the consolidation calculated on the basis of the
              interests, if consolidation has been effected on a pro rata basis .
56. When the company performs a significant proportion of its activities
through the intermediary of companies controlled by it and managed as a
single unit, the details concerning the activity of the company ( Chapter 4), its
recent development and its prospects (Chapter 7) must be provided for the
whole unit in addition to concise details for the prospectus-publishing
company individually. .                ' '
Chapter 6. Administration, Management, Supervision
61 . Name, first name, place of residence and function in the company of the
following persons, mentioning the principal activities performed by them
42                                                                                S. 8/72
 ---pagebreak---  outside the company when they are significant in relation to the
 prospectus-publishing company (inter alia, the most significant directorships
 find important functions in other companies). The activities of significance
for the company performed by these same persons in the course of the past
five years if they joined the company less than five years ago.
          6sll . Members of the administrative, directing or supervisory organs, as
         well as the other persons who assume the management of the company
         at the highest level.
          612. General partners in the case of a partnership limited by shares.
         613 . Founders, if the company has been established for less than five
         years .
62.      Interests of the directors, etc., in the company. .
         621 . Remuneration paid for the last completed financial year under any
         heading whatsoever, as a charge to overheads or the profit
         appropriation account, to the administrative, directing or supervisory
         organs. Overall amount for each category of organ. In addition, the
         total remuneration paid to the members of these organs of the
         prospectus-publishing company by all the companies controlled by it and
         managed as a single unit must be indicated.
       ' 622. Information about the nature and extent of the direct or indirect
         interests of the directors and managers or of the persons they represent
         in transactions which are unusual by their character or their conditions,
         effected by the company (such as purchases outside the normal ictivity,
         acquisition or disposal of fixed asset items, lease contracts with
         subsidiaries or persons mentioned ; above) in the course of the last
         financial year and during the current financial year.           When such .
         unusual transactions were concluded in the course of previous financial
         years and their effects are still being felt, information on these
         transactions must also be given.                       .
    -    623 . Overall indication of all the loans granted by the company to the
         persons referred to in point 611, as well as of the guarantees constituted
         by the company in their favour.
63 .     Staff benefits .
         631 . Brief description of the policy followed with regard to . staff
         benefits and more particularly with regard to profit-sharing contracts or
         supplementary retirement pension contracts ; as regards the latter point,
         steps taken to ensure provision for them.
         Description of the special benefits of a contractual character when "the
         probable trend of the charge they represent is likely to exert a marked
         influence on this category of expenditure.
S. 8 /72                                                                          43
 ---pagebreak---         632. Overall indication of all the loans granted by the company to the
        staff and of the guarantees constituted in their favour.
 64. Naine, address, capacity and occupation of the pcrsons responsible for
 checking the accounts (e.g.: commissaires aux comptes, réviseurs d'entreprises,
 Wirtschaftspriifer, sindaci, etc. ).
 Chapter 7. Recent development and prospects of the company
71 . General indications concerning the trend in the company 's business since
the end of the last financial year and comparison with the corresponding
period of the previous financial year. When this information is already
available in interim reports, it will suffice to append the said reports to the
prospectus made available to the public. The following data are to be
supplied, inter alia:
       711 . The net turnover since the beginning of the financial year.
       712. A description of the most significant recent trends in production
       and stocks.
       713 . A description of recent trends in costs and selling prices .
       714. The state of the order book .
72.    Company prospects.
The prospectus must clearly bring out the fact - that this part consists of
estimates or intentions which might not materialise.
       721 . Brief indications on the projected investment programme in so far
       as the company has already made firm decisions on this or has prepared
       the ground by recent financial operations and where the programme is
       likely to exert an important influence on the company's future financial
       policy, particularly its self-financing policy.
       722. An estimate concerning the company's commercial and financial
       prospects may be inserted in the prospectus, provided that it is backed
       by figures (concerning, for example, the trend of business conditions, of
       the markets and of the order book, the influence of capital spending by
     ■ the company and its competitors) and by pointers that are highly likely
       to prove accurate.
       723 . If possible, general indications concerning the profit distribution
       and retention policies which the company contemplates following or
       proposing to the meeting of shareholders and particularly, if applicable,
       concerning the policy on the issue of securities in connection with
       capitalisation of all or part of the reserves or increases in value, and
       concerning the operation of any dividend equalisation reserve.
44                                                                        S. 8/72
 ---pagebreak---                                       SCHEDULE C
             Scheme of presentation for prospectuses for the admission
           to stock exchange quotation .of certificates representing shares
  Chapter. 1 . Information on the issuer of the certificates
  11 . Name or style, registered office and, where appropriate, principal
  establishment if this is different from the registered office.
  12.    Date of incorporation and, if the life of the company is limited, date of
 its expiration.
  13. Legislation under which the company operates and legal form which it
 has adopted in the framework of this legislation.
 14. The amount of the authorized capital, if appropriate, and the amount of
 the capital subscribed and its composition ; the part of the subscribed capital
 still to be paid-up with an indication of the number (or the overall par value)
 and nature of the securities not yet fully paid-up, broken down, where
 applicable, according to the degree to which they have been paid-up.
 15 .    Indication of the chief holders of the capital.
                                                                                 «
 16. Name, first name, place of residence and function in the company of the
members of the administrative, directing or supervisory organs as well as of
 the other persons who assume the management of the company at the highest
level and of the persons entrusted with checking the accounts.
 17. Objects of the company. If the issue of certificates representing shares is
not the only object of the company, the features of its other activities must be
set out, those having a purely trustee character being dealt with separately.
 18 . Annual accounts for the last completed financial year. Commitment by
the issuer to publish any information required by law, in particular any
amendments to the "Statutes", the annual accounts and publications for the
information of security holders, and the places where such publication will be
made.
Chapter 2. Information on the certificates themselves
                                                                 t
21 . Legal status. The issue terms must be- inserted in the prospectus, with
mention of the date and place of their publication.
S. 8/72                                                                         45
 ---pagebreak---          211 . Exercise and benefit of the rights attaching to the original
         securities, particularly as regards voting rights–conditions on which the
         company issuing the certificates may exercise these rights , and measures
         envisaged to obtain the instructions of the certificate holders–and the
         right to share in the profit and liquidation surplus.
         212. Bank or other guarantees attached to the certificates and intended'
         to underwrite the issuer's obligations, possibility of obtaining the
         conversion of the certificates into original securities and procedure for
         such conversion.
22.      The amount of the commission and costs to be borne by the holder of
the securities in connection with :
         221 . the issue of the certificates or "parts",1
         222. the payment of the coupons,
         223 . the creation of additional certificates,
       [ 224. the exchange of the certificates for original securities.
23 .     Negotiability of the securities :
         231 . Stock exchanges on which quotation is or will be applied for. If
         it is indicated that other markets will be organized, specify on whose
         initiative and responsibility.
         232. Any restrictions on the free negotiability of the securities.
24.      Supplementary information for admission to quotation :
         241 . If the securities are to be placed by introduction on a stock
         exchange : the number of securities made available to the market and / or
         the overall par value; the minimum sale price, if such a price is fixed.
         242. Date on which the new securities will be quoted if this is known.
25 . Indications &f the tax arrangements with regard to any imposts and
taxes to be borne by the holders and levied in the countries where the
certificates are issued.       : •      ^                                    v'
26.      Competent courts in the event of litigation. .                              - .
1 "Parts" give profit-sharing rights but do not represent any capital value (Translater's
note).
46                                                                                S. 8 /72
 ---pagebreak---                        EXPLANATORY MEMORANDUM
 Introduction
 1.     At present .the requirements to provide information when securities are
 admitted to stock exchange quotation sometimes differ considerably in content
 and in legal basis from one Member State to another. Consequently, issuers
 provide information which varies markedly both in quality and quantity and
 the protection afforded to the investor in this respect is not everywhere the
 same .                                                                   -
The degree of freedom of movement for capital already achieved as a result of
the first two Directives issued pursuant to Article 67 of the Treaty, which
allows the acquisition of securities of all kinds quoted in another Member
State, makes it necessary to re-examine forthwith, from a Community
standpoint, the problems of informing and protecting the holders of securities.
It appears to be necessary to establish minimum requirements for the
information to be provided at the time of a grant of quotation in order to
avoid undermining the confidence of holders of various European securities by
differing information and to provide effective protection for holders
irrespective of where the security is quoted.
2. ' The incomplete and differing nature of the information which the public
receives concerning securities constitutes a "second barrier" to the movement
of capital between Member States and prevents full advantage being taken, in
the operation of the capital markets, of the abolition of exchange restrictions
which has alresdy taken place.
( a ) Improvement of the information available to the public concerning
securities quoted on the stock exchanges of the Community could make them
more attractive to the public and consequently affect both the supply of
savings in these markets and the way in which they function . Indeed , the
opacity of the markets is often seen as a basic reason for their narrowness and
instability.
For lack of sufficient information on the operations and prospects of
companies, investors, who are making increasing use of financial analysis, are
cautious in their attitude to the markets of the Community, preferring to direct
their investments towards leading international securities for which ample
information is available.
For the same reasons th'ey attach disproportionate importance to political and
fiscal factors, which helps to explain the exaggerated nature of certain
reactions on the markets and the unjustified price levels for certain securities.
(b) Improvement of the information available should also lead to an increase
in the transactions in securities effected by non-residents in each of the Member
States. It is certain that the difficulties in gathering the necessary information
S. 8/72                                                                           47
 ---pagebreak---    to make investments in securities are considerably greater on foreign markets
  and especially within the Community. This situation helps to explain why
  investments by member countries in each other's market are less developed
  than their investments in the markets of certain non-member countries where
  information on securities is more extensive.
  3.     The fact that the requirements which face issuers applying for a grant of
  quotation are different in character and in their degree of stringency in the
  various Member States can :
   (i)   distort their choice of stock exchanges to which they apply for a
         quotation of their securities,
  (ii)   discourage them from applying for a grant of quotation on the stock
         exchanges of other Member States.
  The requirement to publish the same minimum information will clearly not
  lead to complete harmonization of the rules governing information in the
  various markets but it will go some way towards bringing them more into line
  with one another, and in this way willreduce the difficulties mentioned above.
  As a result of the Directive, European issuers will probably in some cases have
  to publish certain information which previously they were not obliged to
  disclose. However, on the whole, decidedly stricter information requirements
  apply to applications for admission to quotation on the stock exchanges in
  London or New York. Experience in these countries has shown that these
  issuers have suffered no ill effects from the need to publish extensive
, information but that, on the contrary, they have benefited from it as regards
  both sources of finance and their relations with the general public.
  4.     The draft Directive has its legal basis in Article 54 paragraph 3 (g) of the
  EEC Treaty, which establishes the obligation to coordinate the safeguards
  which, for the protection of the interests of members and outsiders, are required
  by Member States of companies or firms within the meaning of Article 58
  with a view to making such safeguards equivalent throughout the Community.
  The aim of the Directive is to coordinate the information published in the
  Member States by companies applying for the admission or introduction of
  securities for stock exchange quotation and to improve the general quality of
  this information in order that present or potential holders of securities, i.e. the
  company members and third parties who are invited to subscribe, may enjoy,
  equivalent safeguards in all the Member States. The rules thus provided for,
  taking into account their nature as a code of market conduct of territorial
  application, will necessarily have to extend to enterprises in third countries .
  The Directive will also help to facilitate the simultaneous or consecutive
  admission of their securities to the stock exchanges of the Member States, to
  strengthen the capital markets of the Community and to reduce the obstacles
  in the way of interpenetration.           ■:
  48                                                                           S. 8/72
 ---pagebreak--- _ Section I : General rules and field of application
  Article 1 : Requirement of issuing a prospectus
   1.      A prospectus checked by an authority appointed for this purpose must be
  published before securities are admitted to or introduced for official quotation
  on a stock exchange.
   (a) The linking of this rule to an official listing on a stock exchange, rather
  than to the issue of securities , is based on the following considerations :
  In order to ensure that satisfactory information and protection are afforded to
  subscribers and to improve the quality and attractiveness of the securities
  market, it would doubtless be desirable to impose requirements on issuers of
  securities to provide information at the time of issue, since in most of the
  Member States the issue and the offer to the public occur before admission to
  quotation . It would also be desirable not to impose stricter requirements on
  companies at the time of admission to quotation, since this could deter them
  from applying.
 Nevertheless, the requirement to provide information at the time of issue exists
  at present only in Belgium, in France and in Luxembourg. In other Member
 States such information is not as yet obligatory, although in practice it is quite
 frequently provided . Thus :
  (i)     in the Netherlands a public issue is nearly always accompanied by a
          grant of quotation, so that in practive the distinction is of no interest;
  (ii)    in Germany the Committee of experts on stock exchange reform
          attached to the federal Ministry for the Economy and Finance has
          recommended to banks which are members of new issue syndicates that,
          at least where foreign debentures or an increase of capital are involved,
          they publish the admission prospectus at the time of issue and before
          offer to the public.                                     .        ' ■
 On the other hand , it is already obligatory in these five Member States to
 publish a prospectus at the time of admission to stock exchange quotation.
 Initially at least it therefore seems preferable to harmonize the requirements in
 the Member States where they already exist rather than impose new ones in
 several States at one and the same time.
 Furthermore, these five Member States already possess authorities which check
 the prospectuses drawn up in accordance with national rules and these
 authorities could, without major difficulties, do likewise for those drawn up in
 accordance with the rules laid down in the present Directive. Hence, it has
 seemed preferable to rely on the existing infrastructure in order to improve
 and harmonize the quality of the information in a shorter space of time than
 S. 8 /72                                                                            49
 ---pagebreak---  would have been required to establish supervision at the time of issue in those
 countries where it does not yet exist.
 ( b) The requirements arising from the Directive ore limited to admission to
 official quotation. Although it is realized that such limitation can cause
problems, it was felt to be difficult at the present time to establish Community
rules for admission to markets other than the official market, bearing in mind
especialy the very different circumstances in the various Member States.
Nevertheless, it would be possible for Member States to impose similar
regulations in the case of admission to these other markets.
The regulations governing information apply to every issuer of securities
applying for a stock market quotation irrespective of the issuer's domicile and
legal status and the nature of the securities, except, on the one hand, securities
issued by open-end investment companies and unit trusts, and, on the other
hand, securities issued by the States and local authorities.
2.      It was felt preferable, in spite of the importance and urgent need for
progress in this field , that the Directive should not apply to securities issued by
open-end companies and unit trusts, i.e. organisations whose securities are
issued continuously or in closely spaced tranches and / or are bought back or
redeemed directly or indirectly at the request of the holder out of their assets.
Indeed , because of the continuous process of issuing and repurchasing the
securities of these concerns and the frequent practice of placing by canvassing
techniques, regulations governing the provision of information applicable only
at the time of introducing such securities to the stock market wduld be
unsuitable as a means of giving subscribers satisfactory information and
protection . Moreover, information rules specifically for these concerns are at
present under preparation.
On the other hand , securities issued by investment companies and collective
investment funds other than of the open-end type are subject, at the time of
their market introduction , to the same rules as securities issued by the financial
institutions referred to in Article 6 of the present Directive.
3.      Securities issued by the States or their local authorities are excluded from
the field of application of this Directive. They are, however, being covered in
a proposed Council Recommendation, taking account of the special
characteristics of these securities and issuers .
Article 2 : Contents of the prospectus
The general principles to which the prospectus must conform in order to
achieve the objectives of the present Directive are stated in Article 2.
50                                                                             S. 8/72
 ---pagebreak--- This establishes rhe standards to which the authorities of Member States must
refer in judging the acceptability of a prospectus and the admissibility of
certain exceptions .
In considering the information they require to be supplied, the authorities must
take into account the special characteristics of the issuer. The prospectus must
contain all the information likely to affect an evaluation of the security. The-
prospectus must not be limited to brief particulars designed solely to be
understood by the general public. It must also provide such details as to allow
professionals to have full knowledge of the facts when advising the public or
taking investment decisions on its behalf.                                 '
Article 3: Obligation to follow the schemes of presentation set out in the
Schedules
1.       It was felt necessary not only to establish the general requirement to
achieve the objectives' as set out in the preceding Article but also to specify the
means of achieving them by indicating in the appended Schedules the
information which should be contained in the prospectus . Without such
Schedules it is doubtful whether the requirements set by the various authorities
could be harmonized to a satisfactory degree, let alone made equivalent. Such
equivalence is essential if the public is to have equal confidence in prospectuses
published in the various Member States .
However, certain Member States already require information which, in certain
respects, goes beyond that specified in the Schedules. It was not felt desirable
at this juncture to align the Community requirements immediately with the
most stringent of the regulations obtaining in one or other of the Member
States. Nor did it appear justifiable to restrict, for the sake of harmonization, '
the range of information required by the strictest of the rules obtaining in
certain Member States .
2.       The annexed Schedules set out the minimum information which it is
required to publish . All the particulars mentioned in the Schedules must be
published except in cases 'coming under Articles 4 and 5 of the present
Directive.
3.       On the other hand , the authorities of the Member States can, if
necessary, supplement the requirements of the Schedules, since it was clearly
impossible to make exhaustive and precise provision in these Schedules for the
coverage of every factor which could affect evaluation of the securities .
4.       The Schedules do not lay down one particular form of presentation for
prospectuses . If the authorities consider it desirable, the presentation may be
adapted in order to make prospectuses easier to read. In this respect, it is
indeed the duty of the authorities to ensure that the presentation of
prospectuses makes them easy to understand .
S. 8 /72                                                                          51
 ---pagebreak--- 5.     Articles 6 to 12 indicate the ways of adapting the schemes of
presentation and their terms of application in order to take account of the
characteristics of certain issuers (public bodies, financial institutions), of' certain
kinds of issue (continuous or repeated), of . certain securities (guaranteed,
convertible or with warrants, certificates representing shares) or the particular
circumstances which occasioned the issue ( mergers, transfers of assets, the
splitting up of companies or public offers of exchange).
In all these cases the annexed schemes of presentation are to be applied in part
or in combination one with another and must be followed within the limits
stated in the corresponding Articles.               -
6.     Since the schemes of presentation were drawn up for the most general
case of a joint stock company operating in the industrial or commercial fields,
the requirement to publish certain particulars may prove inappropriate to the
particular . legal status or economic activity of certain issuers. In order
nevertheless to keep the public sufficiently well informed in these cases and to
subject all issuers to equivalent requirements, it was felt necessary to allow the
competent national authorities freedom to adapt the scheme in question on this
limited number of points so as to bring out^the particular characteristics of the
issuers in the most suitable way. It need not be stressed here that the use of
this right must not lead to a widening of the narrow range of exceptions to
the Schedules-set out in Articles 4 and 5-but that its sole purpose is to
enable the competent national authorities to give a better definition of the
information to be given to the public and that it applies only in those cases
where some items of the annexed Schedules would be inappropriate. .
Article 4: Right to waive publication of a prospectus or certain of its headings
It was considered unnecessary in the cases set out in Article 4 to require
publication of a prospectus conforming with the Schedules.
1.     In several of these cases the information is already available to the public
at large or to the'limited circle of operators involved in the transaction . In
other cases admission to quotation involves a very small amount of securities,
so that it can be considered that the transaction is of interest only to a limited
circle of operators , that it makes no major change in the basis for evaluation
of the securities or that it does not justify the formalities and costs involved in
the publication of a new prospectus. Lastly, in some of the cases specifield, it is
impossible to meet the public's needs for continuous information in a
satisfactory way by means of a prospectus. "
2.     Rather than provide for the blanket exclusion of all the cases mentioned
from the scope of the Directive it was thought preferable to empower the
Member Stares to establish the appropriate conditions for exemption.
52                                                                               S. 8/72
 ---pagebreak---  The intention 011 the part of any Member State to make use of this facility must,
however, be notified to the Commission at the latest by the expiry of the
 time-limit set in Article 20(1 ), so that the Commission can know precisely the
present Directive's field of application. Moreover, the rule set out in Article 2
would remain applicable where the certain Member States nevertheless
 required a prospectus. Hence, where the circumstances of the case make it
necessary to give the public certain facts, the issuer cannot be exempted from
publishing a prospectus comprising at least these facts.
Article 5: Dispensation from the provisions of certain sections of the annexed
Schedules                                      ;
Whereas the previous Article sets out certain circumstances in which, in the
last analysis, the authorities can grant the issuer a blanket dispensation from
publishing a prospectus, Article 5 . defines the conditions under which these
authorities can, in individual cases, dispense the issuer only from publishing
certain information specified in the annexed Schedules.
1.      Exemption is possible in the first instance for information which, in the
case of individual issuers, is of negligible importance and unlikely to* affect
assessment of the securities .                >■
Although, in principle, the information specified in the annexed Schedules is
necessary and must, therefore, be published, it was felt advisable to give the
authorities the possibility of allowing the omission or abbreviation of certain
particulars which, in certain defined cases, would give the public no additional
aid to assessment but which, on the contrary, would detract from the clarity of
the prospectus .
These provisions would not allow the authorities to give all issuers blanket or
systematic exemption from the obligation to publish certain information.
2.      Provision has also been made for exemption from the obligation to
publish information required by the Schedules in certain cases where
publication could be contrary to " the public interest" or could be " seriously
detrimental to the issuer".
The exemption clauses could only be used in exceptional cases. Thus, the
authorities could not grant blanket dispensation or dispensation in the majority
of cases in such fashion as would, in . pratice, restrict the scope of the
obligations arising from the Directive. The use of the exceptions is limited by
the fact that exemption from publishing this kind of information must not be
liable to mislead the public. Hence, for instance, an issuing company must not
be exempted from publishing details of its financial situation when this is
unsatisfactory, even if publication could have grave consequences .
S. 8/72                                                                        53
 ---pagebreak--- The concept of " serious detriment to the issuer" must not be restricted to that
of detriment to the interests of certain company members.
The concept of "the public interest" could be invoked, for instance, in cases
where publication of the information would endanger national defence or the
country's commercial policy.
Section ^1: Content of the prospectus in special cases
Article 6: Financial institutions               '  _
1.     The annexed Schedules were drawn up for application to the great
majority of companies, that is, those engaged in industrial or commercial
activities .
Nevertheless, Chapters 1 , 2, 3 , 5, and 6 could be applied without much change
to all concerns irrespective of their business and their legal, status.
2.     On the other hand, Chapters 4 and 7, relating to the business of the
company and its prospects, are unsuitable in their present form for concerns of
a financial nature .
On the one hand , certain concepts such as turnover or the order book have no
meaning for such concerns and, vice versa, the most significant details for these
concerns , such as minimum reserves or the liquidity ratio , are not covered in
the Schedules. It follows that special schemes of presentation covering these
chapters would be necessary for enterprises in the financial sector.
On the other hand rules governing the information to be supplied by entreprises
in this sector, such as banks, savings banks, insurance companies, pension funds,
are aimed not only at providing information and protection for shareholders
but also , and even more, for customers and affiliated members of the
institutions . These institutions are of great complexity and diversity, making it
difficult to establish Community schemes of presentation immediately.
It therefore seems necessary at this stage to entrust the authorities in the
Member States with the task of adapting Chapters 4 and 7 to suit the
characteristics of entreprises in the financial sector in such a way that
equivalence is achieved in the information supplied .
3.     The Member States are free to define financial institutions and thus to
specify the cases in which Chapters 4 and 7 of the annexed Schedules will not
be applicable in their present from.                             1
Since such definition could be difficult in the case of holding companies, it is
necessary when laying down rules them to take into account not their style
and legal status but their business activities. The definition and legal status of
54                                                                          S. 8 /72
 ---pagebreak--- " holding companies " varies considerably from one country to another. In
practice, this style can cover different functions exercised by the following
compagnies;
(i)       investment companies and collective investment funds of the open or
          closed-end type;
( ii)     " pure" finance companies, i.e. those engaging in no other activities than
          assembling capital to make it available to the parent company or to a
          company directly or indirectly affiliated to it;
(iii )    "pure " holding companies, i.e. those that do not engage, in any . other
          activity than managing a portfolio of transferable securities, trade
          investments, licences or patents ;
( iv)     " mixed " companies , i.e. carrying on industrial or commercial activities in
          addition to one of the activities outlined above.        .
The system applicable to investment companies and collective investments
funds is set out in Article 1 , paragraph 2. That for "pure" finance companies
is set out in Article 8 , so far as guaranteed loans are concerned , and in
Article 9 for convertible loans and loans with warrants attached which they
issue .                                                 •
With regard to the shares that they issue, "pure" finance companies and
"pure", holding companies can be placed on the same footing as financial
institutions and made subject to the same set of rules.
" Mixed " holding companies will be subject to the general system laid down
for industrial and commercial compagnies .                                       *
Article 7: Continents of repeated loan issues by financial institutions
1.        It has not seemed necessary to require publication of a complete
prospectus at each admission to quotation for securities issued continuously or
for repeated loans ( issued on average at least twice yearly) in the case of
banks, savings banks, credit institutions and mortage companies which publish
their accounts regularly and which within the Community are corporations of
public-law status or subject to public supervision designed to protect savings.
In fact, the institutions described in the Directive that make such issues are
sufficiently well known and the fact that within the Community they are
corporations of public-law statuts or subject to public supervision designed to
protect savings provides sufficient safeguards for subscribers._
Furthermore, to require a prospectus to be published several' times a year
would be expensive as well as unnecessary, since on most occasions little new
information would emerge. Hence, it is sufficient to require the publication of
a complete prospectus only every three years.
S. 8 / 72                                                                            55
 ---pagebreak---     2.    This being the case, it seemed preferable to limit the requirement to
    publish at the time of each admission to the variable factors : the terms of the
    loan and conditions of the transaction, the latest annual accounts if these have
    not been published during the year, particulars of events of significance for
    assessment of the securities that have occurred since publication of the latest
    annual accounts.
    Article 8 : Guaranteed loans
    1.    Where a guarantee other than in the form of material security is granted
    by one company for a loan issued by another, the full prospectus must contain,
    for the two companies, the information laid down in the Schedule for
    debentures, since the meeting of the borrower 's obligations depends on the
   profitability and solvency of the issuing company and of the compagny acting
    as guarantor.
 ( 2.     Where loans are issued by a finance company on behalf of its parent
   company and are guaranteed by the latter, it can be considered that the
   servicing of the loan depends above all on the company acting as guarantor,
   since the issuing company does not operate on its own account and is not
   economically independent. The information required concerning the issuing
   company should, therefore, be simplified and detailed particulars given for the
, company acting as guarantor.
   Where there is more than one guarantor, the authorities can allow less
   information to be given to make the prospectus easier to read.          ♦
   3.     For group loans, a reduction in the information required for each
   company may prove necessary in order to keep the prospectus readable. Such
   reductions shall be made according to instructions issued by the authorities in
   keeping with the principles outlined in Article 2 and taking into account the
   share of the various companies in the guarantee.
   4.     As a source of information, the guarantee contract is generally an
   important document and must be annexed to the prospectus. However, it is
   often very bulky and drawn up in a legal form difficult for die public to
   understand. If such be the case, it is necessary to require publication of
   abridged particulars of the contract in; the prospectus but not publication of
   the full text, which should simply be made available to any interested persons
   at the premises of the banks .
   Article 9: Convertible loans or loans with warrants attached
   1.     When application for admission is for debentures convertible into shares
   of the issuing company or for debentures carrying warrants giving the right to
   subscribe for a specific number of shares of the company at a specific price,
   56                                                                          S. 8/72
 ---pagebreak---    the issuing company must publish all the particulars set out in the shares
   Schedule as well as those in Chapter 2 of the debentures Schedule concerning
   the terms of the loan .
  The public must have all the information concerning the terms of the loan
   and, in addition, information about the securities it will eventually be able to
   acquire as a result of exercising its rights. The public must be able to
  determine whether the conversion terms are advantageous, bearing in mind the
  company's prospects and the lower rates of interest generally applied to such
  securities .
  2.      Where the right attaching to the debentures applies to shares of a company
  other than the company issuing the debentures, the public must, for the same
  reasons, have complete information in both companies, i.e. the particulars set
  out in the shares Schedule for the one and those in the debentures Schedule for
  the other.
 However, for reasons explained above in connection with Article 8 , it has
 seemed necessary to relax the requirements of the debentures Schedules when
 the company issuing the debenture is a "pure" finance company i.e. a company
 engaging in no other activity than assembling capital to make it available to
 the parent company or to a company directly or indirectly affiliated to it.
 3.      Cases   in  which    the  convertible   debentures   and   the   shares   are
 denominated in different currencies are rare at present but could be more
 common in the future. The consequences that any changes in the exchange
 rate relationship between the currencies would have on the conversion terms of
 the securities must be stated .                                                 '
 Article 10: Admission to stock exchange quotation of securities issued in
 connection with the merging or splitting of companies, the transfer of assets or
 a public exchange offer                       • i'
 1.      In the case of the admission to stock exchange quotation of securities
 issued at the time of mergers between companies, the splitting up of
 companies, the transfer of assets or a public exchange offer, the shareholders,
 who must give their , prior consent either individually or at a general meeting,
 shall receive information about the various companies involved in the
 operation so they can evaluate the proposed conversion terms for the
 securities. The same information is required if securities resulting from such
 an operation are admitted to quotation within three years of its occurrence
since in general the operation continues to affect the profitability and prospects
of the company over this period of time.            "
The information is no longer addressed to the previous shareholders, since the
operation is completed on introduction of the securities to stock exchange
dealing, but is intended for potential buyers of the securities who have the
right to the same particulars .
S. 8/72                                                                             57
 ---pagebreak---  However, to avoid making the prospectus too bulky, the information can be
 abridged if it refers to companies already quoted and for which an admission
 prospectus has been published.
 2.    Moreover, the information requirements can be relaxed by the competent
authorities if the operation has occurred less than six months before admission
 to stock exchange quotation and if at that time verified information equivalent
 to that which should appear in a prospectus was published. In diese
 circumstances, it is sufficient for this information to be made available to the
public without the publication of a special prospectus being required.
Article 1 1 : Certificates representing shares
 1.    The information- specified in the Schedule for certificates representing
shares must be published in addition to that specified in the shares Schedule
when certificates representing shares are admitted to quotation.
2.     This is often the case with admission to quotation of foreign securities
not conforming to the requirements or practices of the place of quotation, and
especially:
(i) when the foreign securities are registered and, by law or by practice,
       only bearer securities can be quoted, so that bearer certificates have to
       be issued;
(ii)   when the foreign securities are bearer and only registered sec.urities can
       be quoted or delivered, so that registered certificates have to be issued;
(iii)  when the delivery time for . the; original securities is too long or the
       delivery costs are too high and certificates representing them are in fact ,
       circulating;
(iv)   when the denominations of the original securities are in too small or too
       large units and certificates representing multiples or fractions of these
       units are quoted.
Hence, it frequently occurs that a bank or other financial institution in the
country of the stock market acts as an intermediary, retaining the original
securities and issuing certificates to represent them.
3. '   The same is true of domestic securities in the Netherlands. These are
often deposited with trustees who in return issue certificates in respect of
which a quotation is applied for and which circulate in place of or alongside
the original securities.
4.     In these cases, it is necessary to inform the public not only about the
original securities by means of a prospectus containing the particulars specified
in the shares Schedule but also about the issuer of the certificates and the
58                                                                            S. 8/72
 ---pagebreak---    terms of issue in accordance with the annexed certificates Schedule.         The
   concern issuing the certificates can be held legally liable for any loss to the
  holders caused by its dishonesty or by serious negligence. Holders must,
   therefore, be afforded the opportunity to satisfy themselves as to the solvency
   and the financial standing of the issuer of the certificates.
  5. •    However, when the issue of certificates is undertaken by banks, savings
  banks, credit institutions or mortgage companies which are quoted on the
  stock exchange, publish their accounts regularly and which within the
  Community are corporations of public-law status or subject to public
  supervision designed to protect savings, or by inter-professional associations for
  the transfer of securities (Kassenverein, SICOVAM etc.) or by trustee offices
  (administratiekantoren) subject to the strict rules imposed by the Dutch stock
  exchange authorities in respect of the deposit of the original securities, the
  competent authorities may exempt the issuers of certificates from publishing
  their financial situation.
 Article 12: Issuers in the public sector
 1.      The requirement to subject corporate bodies under public-law whose
 business is of an industrial, commercial or financial nature to the same rules
 governing information as apply to private companies with comparable business
 activities is justified primarily by the need to avoid distorting competition
 between these bodies and private companies with the same business activities
 within the Community, and by the advisability of submitting these bodies, to
 the discipline of good management usually linked with the requirement to
 inform the public.                                                         .
2.       However, as far as protection of the saver is concerned, such information
is no longer essential when these organizations or their debentures are
 unconditionally and irrevocably guaranteed by a Member State.
In such case, it seems that the competent authorities should be empowered to
simplify the prospectus. However, it is to be hoped that, for the reasons
explained above, these authorities will endeavour to limit the use of this
concession.
Section III: Arrangements for enforcing the prospectus requirements and for
making it publicly available
Article 13 : Enforcement of the prospectus requirements
1.       In order that the same confidence can be felt everywhere in the quality
of information published on securities quoted on the stock exchanges of the
various Member States, it seems necessary that prospectuses should contain not
S. 8 /72                                                                         59
 ---pagebreak--- only similar information but that they should be scrutinized with the same
efficacity.
To this end the Member States shall entrust implementation of the Directive to
national authorities already existing or created for this purpose. The task can
be assigned to one or several authorities and their responsibilities must be
clearly defined.
It is left to the Member States to determine the characteristics of these
audiorities, be they public or private, and their relations with government
departments on condition, nevertheless, that - they be endowed with the
competence and powers of supervision necessary for the 'accomplishment of
their task .
2.     It was felt necessary to prohibit prospectuses from being published or
made available to the public before authorization by the competent authority.
However, the Member States are free to determine the most appropriate
method of authorization, be this in the form of positive approval- or that of a
" nihil obstat" which may or may not be recorded by means of an official
stamp. Consequently, the mere publication of the prospectus allows the public
in all cases to be aware of the absence of objection on the part of the
competent authotity.
3.     The task of the competent authorities implies that they will refer both to
the general principles expounded in Articles 1 , 2 and 3 and to the annexed
Schedules applicable to the issuers and securities in question. The competent
authority is, therefore, obliged to check that the prospectus contains all the •
particulars required by the relative Schedules or necessary for observance of
the general principles;- that the particulars are consistent, that they are _
comparable with information released or published previously, and that they
contain all the necessary explanations for any contradictions with the latter or
with other information in the possession of the authorities.
In making checks, especially on the net worth and financial position of the
issuer, the competent authority will be able to draw on audits indertaken by
professional accountants, financial institutions or other reliable experts and
may confine itself to requiring evidence of such audits.
Hence, the authority is not obliged to verify that the information published is
materially accurate and complete. However, it has the right and even the duty
to request the communication and publication of further details, as well as
possible specific checks, when it has doubts about certain items of information. .
4.     The area of competence and supervisory powers of the competent
authority can be determined by the Member States either in a general or in a
precise fashion according to their constitutional rules and common practice.
60                                                                         S. 8/72
 ---pagebreak--- They must be sufficient in all cases to allow the authority to require
publication, not only of the particulars provided for . in the annexed Schedules,
but also other information considered necessary to ensure observance of the
general principles and to allow it to make the checks necessary for the
accomplishment of its task.
Article 14: Methods of publishbig the prospectus
 1.     There are only two methods of publishing a prospectus which satisfy the
publication requirement, namely insertion in the press or a pamphlet made
available to the public.
These two methods can be considered sufficient if the press medium chosen
does in fact reach a sufficiently wide public in the area of the stock exchange
in question, and if the pamphlets are in fact made available to the public at
the premises of all intermediaries likely to receive subscriptions or orders for
buying on the stock exchange.
Member States must, therefore, enforce the use of one or other of these
methods; the optional use of other methods cannot be held to be sufficient.
2.      However, because of the expense and problems of legibility of the
document when published in the press, a combination of the two methods is
permitted.                                                                 *
Prospectuses drawn up in accordance with the rules laid down in the Directive 1
will contain more information than at present and hence will be more bulky
than a current prospectus. Since publication in papers with a wide circulation
is already everywhere more expensive than the publication of pamphlets , a
requirement for full - publication in the press of prospectuses drawn up in
accordance with the Directive would cause a significant . increase * in costs
creating an additional obstacle to stock exchange listing.
Moreover, members of the general public are generally neither sufficiently
knowledgable nor interested to analyse all the information to be contained in
the prospectus, this information being of rather more use to their financial
advisers. Hence it does not seem essential to make publication of the
complete document in the press obligatory if it is made available to, all
interested parties. Observance of the various conditions set out above will
ensure this .                                ;
Furthermore, the decision as to which particulars to publish in the press must
be taken in accordance with the rules laid down by the competent authority,
and under its supervision , to ensure that this incomplete document does not
mislead the public.                          i
S. S /72                                                                       61
 ---pagebreak---   3 . • It seemed necessary to make it compulsory to . lodge admission
  prospectuses in places where they would be permanently accessible to any
  member of the public interested so that they can be consulted, even after a
  lapse of time, when they are no longer available over the counters of the
  financial intermediaries. These locations will be freely chosen by Member
  States . They could well be, for example, at the stock exchange granting
  quotation , at the offices of the controlling authority, or at the offices of the
  financial establishments assisting the undertaking in making the issue or
  introducing it to a stock exchange.
  Article 15: Deadlines for publishing the prospectus
  1 . . Two sometimes contradictory requirements must be met when setting the
  deadline for publishing prospectuses.
  The period of time between publication of the prospectus and the opening of
 dealings recorded in the official list must be:
  (i)     long enough for the public to take in the information contained in the
        - prospectus ;
  (ii )   short enough to remove the temptation for professionals to create an
          unofficial market meanwhile.
 The deadlines chosen–a minimum of eight days beforehand for shares and
 three days for debentures–reflect the most general current practice and take
 account of the nature of the securities in question, the factors to be considered
 being more complex for shares than for debentures . As regards fconvertible
 debentures or debentures with warrants it was considered suitable to choose a
 minimum requirement of eight days when the issue of this type of security
 carries subscription rights to current shareholders, and of three days only when
 this is not t;he case.
 2.       Three days' clearance has also been prescribed for the publication of the
 prospectus before the opening of official dealings in subscription rights . This
 emerged as the best compromise between the contradictory requirements
 mentioned above ; it also takes account of the different deadlines at present
obtaining in various markets.
3.        When the admission of debentures to quotation is simultaneous with
their public issue, the need to finalize precisely certain terms of the issue, such
as the issue price or the rate of interest, sometimes means that these terms are
not finally settled until the day before issue takes place. In such cases it
seemed advisable to aliow the Member States to authorise use of the
prospectus-publishing technique adopted on the international market. This
involves publication, by the set deadline, of a provisional prospectus containing
all the information required except for last-minute loan terms settled and
published not later than the day before dealings commence.
62                                                                           S. 8/72
 ---pagebreak---  Thus in practice it is possible to print a document leaving two ot three spaces
 for particulars that will not be settled until the. last minute. Prospectuses that
 are incomplete in this respect only and have been checked by the competent
 authority can be published with the normal minimum clearance of three days.
 When the final terms of the loan are fixed, the public must be notified of
 them either by inserting the information in the pamphlets in stock or by
 issuing an addendum sheet so as to transform the provisional document into a
 complete prospectus and by then either distributing this sheet to all the
 recipients of the provisional document or publishing a notice in the press
 referring to the complete prospectus and indicating where it may be obtained.
Article 16: Publication of documents other than the prospectus
 In order that the prospectus shall be of the greatest possible service and shall
 really be the main source of information, it is necessary not only to establish
requirements for its drafting and vetting but also to lay down rules to ensure
 on the one hand that information released by the issuer in addition to that in
the prospectus, being often more accessible to the public and consequently
more likely to influence it, does not distort assessment of the securities, and on
the other hand, draws the attention of the public to the existence of the
prospectus. To this end :
1.       It has been laid down that any document published by the issuer in the
period between publication of the prospectus and the opening of official
dealings shall refer to the prospectus and indicate how it can be obtaine4 by
the public.                                          '                             .
2.       Furthermore, it was felt necessary to submit to the competent authority
for checking any documentation published by the issuer containing more
detailed information than a simple announcement of the issue or its admission
to quotation and the basic characteristics of the securities, in particular, the
partial or abridged prospectus. The purpose of this checking is to ensure that
such information, although incomplete, does not distort the impression given
by the complete prospectus.
3.       The Directive does not require all documents to be checked but only
those which are published by the issuer or on his behalf and which are not
confined to the announcement of the operation and the basic characteristics of
the securities.
Nor does it require an abridged or partial prospectus to be prepared for the
benefit of the general public; where one exists, it merely provides for it to be
checked by the authorities.
Member States are, nevertheless, recommended to encourage the publication of
abridged prospectuses presented in a way which is clear, comprehensible to the
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 ---pagebreak---  ■general public and yet objective, and drafted in accordance with the
  regulations and under the supervision of the competent authority.
 Such a prospectus would seem to be useful for the following reasons: ■
  (i)   it would enable the general public to learn at least the most important
        facts about companies when it was neither sufficiently knowledgable nor
        interested to read the complete prospectus ;
  (ii) it would facilitate the rapid provision of information to a more
        sophisticated public and enable it to discriminate among the large
        number of securities offered before undertaking an analysis in greater
        depth on the basis of complete prospectuses;
 ( iii) it would stimulate interest in securities and accustom the public to take
        account of more rational factors when reaching investment decisions ;
 (iv) it would contribute generally to raising the standard of economic
        information and knowledge about companies .
 4.     Finally, provision is made to forbid companies and financial
 intermediaries acting on their behalf in new issue work or in an admission to
 quotation to use information not contained in the prospectus in order that the
latter shall really be the most complete document and that unchecked
particulars shall not be used to the detriment of the public.
Article 17: New factors
                                                                        »
The requirement to publish any important new factors emerging between the .
time that the contents of the prospectus are finalised and stock exchange
dealings open is justified by the necessity for the public to have an up to date
and complete information document at its disposal . However, only factors '
likely to influence the public's evaluation of the securities in question should be
considered important. '
The method of checking such supplements to the prospectus will be the same
as for the prospectus itself.        .
In principle, the methods of publication will also be the same but they may be
decided case by case by the competent authority.
Section IV: Procedures for cooperation between Member States in the
implementation of the Directive
Article 18: Transactions affecting several Member States
Implementation of the Directive will result in a considerable degree of
alignment in the regulations and practices concerning information at the time
64                                                                           S. 8/72
 ---pagebreak---  of admission to stock exchange quotation in the various Member States.
 However, it will not lead to identical requirements for issuers, since Member
 States will be free to go beyond the minimum standards laid down in the
Directive and the competent authorities will have, in addition, some latitude of
 interpretation even of certain identical rules.
The Directive should not only improve the process of informing and protecting
 the saver at national level but should also facilitate quotation on several stock
exchanges within the Community by simplifying the formalities to which the
issuer is subject. To this end, it was felt advisable to provide for various
ways of coordinating the requirements imposed by the authorities without,
however, challenging their autonomy in decision-making.
 1.      It was felt advisable to require that the authorities coordinate as far as
possible their - prospectus requirements for issuers seeking quotation
simultaneously on the stock exchanges of several Member States in order to
arrive at a single text for the greater part of the prospectus. This could be
achieved by an appropriate use of the powers of the authorities.
2.       It was thought desirable that a similar result should be achieved where
admissions to quotation, though not simultaneous, take place at an interval of
less than six months .
3.       Finally, it is recommended that, by cooperating with each other, the
authorities of Member States on whose stock exchanges the-^ame security is
quoted should also ensure that information made available in one market
which might influence assessment of the merits of the security is made available
at or around the same time in all centres .
Artide 19: Contact Group
1.       Implementation of the Directive and especially that of the prospectus
Schedules will probably raise problems of interpretation. It is impossible to
predict all the practical difficulties which could arise in individual cases.
Since the competent authorities–who in the last analysis will have to
implement the Directive–will take decisions independently of one another, it
is necessary to institute regular consultation bearing on the practical problems
of implementing the Directive and especially the Schedules between
representatives of these authorities and the Commission in order to facilitate
uniform implementation of the Directive.
While the creation of a contact group will make possible a common
interpretation of the Directive, it will not be prejudicial to the prerogatives
invested by the Treaty in the Community institutions–especially the power of
interpretation possessed by the Court of Justice–and the duty of the
Commission to see to the implementation of Community provisions.
S. 8 /72                                                                         65
 ---pagebreak--- Nor will the contact group have the power to institute further requirements
for the competent authorities or for those subject to their control ; however, it
will be able to bring administrative practices closer together and assure as
uniform an implementation as possible of the Community provisions.
2.      Moreover, experience in all countries where publication and approval of
prospectuses are required has shown the need for gradual improvements and
additions to these. Such improvements and additions may become essential in
order to take account of new situations created by, for instance, developments
in law, financial techniques or the economic and monetary situations in both
Member and . non-Member States in which issuers seeking a stock market
quotation for their securities are domiciled.
It will be impossible to make such additions and improvements binding at
Community level without further directives. However, taking into account
the general duty incumbent on the competent authorities to ensure that the
prospectus gives a correct impression of the issuer's position, in so far as these
authorities are entitled to require information additional to that stipulated in
the Schedules annexed to the present Directive, and in so far as their powers
enable them to require or recommend such additions without amending their
national law, it will be helpful for the representatives of these authorities to
agree also on the extent of additional information which" they will require or
recommend within their own countries. . This concerting of action, already
practised on a bilateral basis, can better be achieved at multilateral level
within the contact group.
3.     Finally, this group will have a consultative function and will assist the
Commission, if necessary, in any new initiatives it may consider appropriate in
this field.
66                                                                          S. S/72
 ---pagebreak--- DRAFT RECOMMENDATION OF THE COUNCIL ---pagebreak---  The Council of the European Communities,
 "Whereas, in order to contribute to interpenetration of capital markets and at
 the same time ensure adequate protection for savings, it is appropriate to
 ensure that information which is sufficient and as objective as possible is
 provided for present and potential holders of the securities issued by the States
 or their local authorities when these securities are admitted for quotation on
 the Official List of a stock exchange; and whereas better information for the
 public concerning these securities is at the same time calculated to stimulate its
 interest in them, and thus to facilitate the financing of these public issuers;
 Whereas, for this purpose, it would be desirable that the Member States should
 voluntarily introduce for securities issued by themselves, by another State, or
 by a local authority a prospectus similar to the one which is required of
 companies within the meaning of Article 58(2) of the Treaty by Council
Directive No .      of . .
Recommends the Member States to make it a condition of transferable
 securities issued by a State or by a local authority being admitted or
introduced to the Official List of any stock exchange situated within their
territory that a prospectus is published or made available to the public which
comprises information concerning the prospectus signatories and the operation
similar to that specified in Chapters 1 and 2 of the " debentures " Schedule B
annexed to Council Directive No . ... of . . . and which contains information
on the economic and financial situation of the issuer.
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