H.M. TREASURY

H M TREASURY

GUIDANCE NOTE

PUBLIC OFFERS OF SECURITIES AMENDMENT REGULATIONS 1999

MARCH 1999

These notes on the Public Offers of Securities (Amendment) Regulations 1999 have been produced by the Treasury to assist issuers of securities, investors and their professional advisers in understanding the main features of the amendments.

The notes are intended to be read together with the POS Regulations 1995 and the Amendment Regulations 1999 and do not represent legal advice. Issuers and investors should seek appropriate professional advice in connection with any matters covered by the legislation discussed in these notes.

The Treasury can accept no responsibility for any loss or damage suffered as a result of reliance on anything which is stated in, omitted from or implied by these notes.

Financial Stability and Markets Team

HM Treasury

ISBN: 0 947819 62 2

Copies of this publication are available from:

HM Treasury

Public Enquiry Unit

Room 110/2

Parliament Street

London SW1P 3AG

Tel: 0171 270 4558

Fax: 0171 270 5244

INTRODUCTION

On August 20, HM Treasury published a consultation document "Public Offers of Securities". proposing amendments to the Public Offers of Securities Regulations 1995 ('POS Regulations'), which implements the EC Public Offers/Prospectus Directive ('POP') . The consultation period came to a close on 9 November 1998. The Public Offers of Securities (Amendment) Regulations 1999 ('Amendment Regulations') which will come into force on [10 May] will make a range of alterations to the POS Regulations.

CHANGES MADE BY THE AMENDMENT REGULATIONS

The Amendment Regulations make changes to the circumstances in which an offer of securities is deemed not to be an offer to the public for the purposes of the POS Regulations, the contents requirements of a prospectus, the requirements for cross-border offers within the European Economic Area and responsibility for a prospectus. These are explained briefly on the following pages.

This guidance note also contains below a view of HM Treasury on the circumstances in which an offer may be considered an offer to the public.

GUIDANCE ON PUBLIC OFFERS

Definition of public offer

There is no exhaustive definition of what constitutes an offer to the public, although regulation 6 provides that "an offer which is made to any section of the public, whether selected as members or debenture holders of a body corporate, or as clients of the person making the offer, or in any other manner, is to be regarded as made to the public". It will be a question of fact in each case whether a given offer is made "to the public" or "to any section of the public".

The exemptions in regulation 7 deem certain types of offer not to be offers to the public in the United Kingdom. The fact that no exemption applies to a particular offer does not necessarily mean that the offer is one to which the Regulations apply. It is only necessary to rely on the exemptions if an offer would otherwise be one "made to the public" in the first place. As noted above, that will depend on the facts of each particular case.

EXEMPTIONS

Euro-securities

The Euro-securities exemption is amended so that for these purposes underwriting includes subscription and acquisition with a view to resale. The advertising restrictions are altered to permit the Euro-securities offer to be advertised to existing customers of credit or financial institutions through which the Euro-securities may be acquired and to certain other persons to whom unapproved investment advertisements (within the meaning of the Financial Services Act 1986) may be issued by unauthorised persons.

Exemption for offers pursuant to pre-emption rights in private companies

New Regulation 7(2)(ff) gives an exemption from the requirement to prepare a prospectus where securities of a private company are offered in accordance with pre-emption requirements in the company's articles of association or an agreement between holders of securities in the company.

Employee offers

The Amendment Regulations permit exempt offers to be made to employees by employee trusts as well as the employer itself. In addition, employees may be offered securities in companies which are part of the issuer's group. For this purpose, "group" is to be construed in accordance with paragraph 30 of Schedule 1 of the Financial Services Act so that, for example, employees of joint venture companies may be offered securities in their parent companies. Employee offers may also be made in conjunction with certain other exempt offers of securities.

Fifty persons exemption

For the purposes of offers made reliant on the fifty persons exemption, offers made to several persons jointly, such as trustees of a trust or members of a partnership in their capacity as such, will be treated as offers to a single person.

Takeover offers

The exemption for takeover offers is amended. In the case of offers for UK companies the exemption will, as now, apply to takeover offers within the meaning of Part XIIIA of the Companies Act 1985. However, takeover offers for foreign companies will be subject to an exemption which, while based on Part XIIIA of the Companies Act, applies to offers for "substantially all" the shares of the target company and does not include the requirement for the terms of the offer to be the same in relation to all the shares. The exemption for partial offers is not materially altered.

Bonus offers

The record date for shares offered to current holders of shares must now be within 60 days of the issue date.

Offers with a high minimum consideration

This exemption has been amended to make its meaning more apparent.

Prospectuses for listed securities

The amendments to exemptions from the requirement to produce prospectuses for offers of unlisted securities are mirrored in the changes to the exemptions from the requirements to produce prospectuses for listed securities in Schedule 11A to the Financial Services Act.

CONTENTS REQUIREMENTS AND ASSOCIATED AMENDMENTS

Approved exchange company contents requirements omissions

In determining whether the information required by an approved exchange is equivalent to that which must be included in a prospectus, certain requirements to include statements by persons responsible for accounts are to be disregarded.

Legal form of the offeror

Where the requirement to include in the prospectus any information is inappropriate to the offeror's legal form, the requirement is to have effect as a requirement that the prospectus contain information equivalent to the required information. This is relevant to the requirement to include a declaration by the directors of the offeror in paragraph 10(1) of Schedule 1.

Declaration of responsibility

Where the directors of the issuer are responsible for the prospectus, they are required to make the declaration of responsibility for the contents of the prospectus. Only where the issuer is not responsible for the prospectus are the directors of the offeror required to make a declaration of responsibility.

Financial information

Both as regards the requirement for the inclusion of accounts of subsidiaries for companies under paragraph 45(2) of Schedule 1 and for accounts of subsidiaries required under paragraph 45(9) of Schedule 1, a proviso is included to the effect that this information is not required where it is not reasonably necessary for making an informed assessment of the issuer's financial position or the securities being offered.

Responsibility for a prospectus

Where the issuer is responsible of the prospectus in accordance with regulation 13, the prospectus was drawn up primarily by the issuer and the offeror is making the offer of securities in association with the issuer, the offeror is not responsible for the prospectus. A related amendment to the Financial Services Act makes equivalent changes to responsibility for prospectuses for offers of listed securities.

CROSS BORDER OFFERS

Mutual recognition of prospectuses

Mutually recognised prospectuses "incoming" to the United Kingdom will no longer require translation or the addition of taxation information relevant to the United Kingdom. It is still open to offerors to translate their prospectuses or add additional UK tax information, but this is no longer a requirement.

Certain Companies Act provisions relevant to mutually recognised prospectuses

Paragraph 11 of Schedule 4 to the POS Regulations is repealed.

MISCELLANEOUS AMENDMENTS

Banking Act 1987 (Advertisements) Regulations 1988

A redundant provision of these regulations relevant to prospectuses is repealed.