Australian companies providing share purchase or equity incentive plans in one or more of the 25 European Union countries, need to take care this year.  In the finest Eurocratic tradition, a new EU directive will be interpreted and implemented in 25 different ways that may make employee alignment with shareholders that much more difficult.

The European Union’s (EU’s) “Prospectus Directive (PD)” is one of 42 measures comprising the Financial Services Action Plan (FSAP).  The ultimate, but not yet achieved, goal of the FSAP is to unify securities law and capital markets across the EU.  The complication for companies with employees in the EU is determining whether or not they are subject to the extensive disclosure required by the PD.

The prospectus filing is substantial (300 to 500 pages) and could cost anywhere from $50,000 to $1,000,000, according to the legal firm Linklaters.  Certainly, the ability of Australian organisations to avoid the PD will have implications on the costs of compliance and even the possibility of continuing to provide equity to EU-based employees.  There are three ways to avoid having to issue a prospectus:

• Ensuring the equity is not technically a public offering
• Qualifying for an exclusion from the directive
• Looking to the PD for an exemption

It also depends to an extent on the EU countries in which multinationals operate.  As with other EU directives, there is a fair amount of leeway for member countries to interpret and adapt its requirements to existing securities laws.  Which may make you wonder what good will be achieved from it all. 

Still, if this is a concern for you, please contact us for additional detail on what may be required of your organisation.

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