In review: governing rules for IPOs in France

All questions

Introduction

Founded in 1724, the Paris Bourse is one of the oldest stock exchanges in the world. Known today as Euronext Paris, it is among the largest exchanges in Europe, with over 800 listed companies.2 The Euronext group, created in 2000, includes exchanges in Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris, and is the largest pan-European stock exchange as measured by market capitalisation (approximately €6.3 trillion as of December 2022),3 with over 2,000 listed companies.4

Euronext Paris is the market manager for French-listed companies; it ensures proper market functioning and establishes admission requirements for companies planning to list in France. The Autorité des marchés financiers (Financial Markets Authority, or the AMF) is the French financial market regulator and is an independent body that administers and enforces French and European securities regulations for companies applying to be listed, or that are already listed, in France. It is responsible for safeguarding investments in financial instruments, ensuring that investors receive material information relating to securities issuances and financial instruments and maintaining orderly financial markets in France. Further to those responsibilities, the AMF is charged with authorising prospectuses for companies applying to be listed on Euronext Paris.

With its sophisticated financial infrastructure, strength in the high-tech sector and competitive regulatory framework, France offers an attractive capital markets framework to issuers and investors, particularly in the continuing wake of Brexit, and French and European markets aim to further develop growth industries, in particular the tech industry.

Ongoing French and EU regulatory efforts seek to make listing in France more efficient and accessible, while maintaining rigorous market and investor protections. For example, since 2015, the AMF has, in certain cases, permitted issuers to prepare prospectuses in English, enabling French issuers to communicate more effectively and directly with the international investor community, and has in recent years moved to a digital system for filing and accessing listing and reporting documents.

Similarly, the Euronext platform has shown its adaptability to accommodate a range of issuers, including during the recent wave of initial public offerings (IPOs) of special purpose acquisition companies (SPACs) and with its recently announced Tech Leaders segment and related initiatives.

Governing rules

The laws and regulations that are applicable and relevant to IPOs and equity securities listings in France include EU directives and regulations, French laws and regulations, the rules of Euronext Paris and Euroclear, and certain US laws and regulations applicable to certain securities offerings that are open to potential US investors but not registered with the US Securities and Exchange Commission (SEC).

Mainly owing to the ongoing harmonisation of regulations within the European Union, rules and regulations applicable to securities offerings in the European Union in general – and in France in particular – have been constantly evolving in recent years.

Following a consultation process, and in line with its first capital markets union action plan,5 the European Commission adopted a new prospectus regulation in June 2017 to further improve the EU prospectus regime (the Prospectus Regulation).6 This Prospectus Regulation constitutes, along with delegated acts7 adopted by the Commission in March 2019 (the Delegated Acts) (see Section II.iii), a full set of rules directly applicable in EU Member States in respect of prospectuses (collectively, the Prospectus Regulations). On 7 December 2022, the European Commission published a proposal to make detailed amendments to the Prospectus Regulation.8 This proposal aims to make it easier and less costly for issuers to draw up a prospectus and to provide more comprehensible and concise information to investors, enabling them to make better investment decisions. Suggested amendments include:

1. the deletion of the requirement to rank the most material risk factors;
2. a 300-page limit for prospectuses relating to shares or other transferrable securities equivalent to shares;
3. the reduction of the minimum period between the publication of a prospectus and the end of an offer from six to three days;
4. the reduction of the threshold below which offers will be exempt from the obligation to publish a prospectus to €12 million from €1 million; and
5. mandatory incorporation by reference in a prospectus, thus replacing the former optional regime.

i Main stock exchanges

Euronext Paris is the sole stock exchange operator and market manager in France for equity securities. When preparing equity securities for admission to listing or trading, or both, on Euronext Paris, companies select one of its three markets: the Regulated Market, Euronext Growth or Euronext Access (including Access+). The decision of which market to list on is generally based on size (valuation, offering size or issuer revenues), applicable regulatory framework and the types of investors to be targeted.9

The Regulated Market

The eligibility requirements of the Regulated Market are the most stringent of Euronext Paris’s three markets. Companies listed on the Regulated Market are subject to a number of rules that are applicable to all listings on regulated markets within the European Union, particularly in terms of financial reporting, accounting standards and ongoing disclosure obligations. For example, the European Market Abuse Regulation (MAR) applies to companies listed on the Regulated Market, as do EU securities regulations in the case of a public offering.

The Regulated Market is divided into three ‘compartments’:

1. Compartment A, for companies with a market capitalisation of more than €1 billion;
2. Compartment B, for companies whose market capitalisation is between €150 million and €1 billion; and
3. Compartment C, for companies with a market capitalisation of less than €150 million.10

Euronext Growth

Euronext Growth is an alternative market for small and medium-sized companies (SMEs), offering simplified access to the capital markets with fewer eligibility requirements and less stringent ongoing reporting obligations than the Regulated Market. It is open to investment by both professional and retail investors and is controlled, but not regulated, in accordance with EU securities regulations, although MAR applies to companies listed on Euronext Growth, as do EU securities regulations in the case of a public offering.

Companies seeking to be admitted to trading on Euronext Growth must appoint a duly accredited ‘listing sponsor’ to assist them during the admissions procedure and, following listing, will be responsible for advising and assisting a listed company in its interactions with the market.11

Euronext Access

Euronext Access is an alternative market for companies looking to access the capital markets without having to meet the more stringent eligibility criteria of the Regulated Market or Euronext Growth. Companies seeking to be admitted to trading on Euronext Access must appoint a duly accredited listing sponsor, and companies seeking to be listed must possess a website that includes at least two years of financial statements (which may be unaudited).

Euronext Access is not regulated in accordance with EU securities regulations, although MAR applies to companies listed on Euronext Access, as do EU securities regulations in the case of a public offering. Listed members are also required to communicate annually with Euronext’s compliance department to detail compliance with regulatory obligations.12

Euronext Access+

Launched in June 2017, Euronext Access+ is a special compartment of Euronext Access that is tailored to the needs of start-ups and fast-growing SMEs. Euronext Access+ is intended to help companies transition smoothly to the demands of being a public company and adapt to market practices.

Euronext Access+ has its own listing criteria, such as financial statements covering at least two years, including audited accounts for the previous year; €1 million minimum free-float; the obligation to have a listing sponsor, starting with listing and continuing throughout the market experience; and commitment to regularly communicate to the market. Companies admitted to trading on this market enjoy special assistance and greater visibility.13

ii Overview of listing requirements

To be listed on one of Euronext Paris’ markets, a company must file an application with Euronext Paris and comply with its admission criteria, as detailed below.14

	Regulated Market	Euronext Growth	Euronext Access+	Euronext Access
Initial admission
Free float	25 per cent or 5 per cent (if it represents more than €5 million on the Regulated Market)	€2.5 million	€1 million	Not applicable
Documentation	AMF-approved EU prospectus	Information document (or EU prospectus in the case of public offers above €8 million)
Financial statements	Last three years of audited accounts (plus most recently reviewed half-yearly accounts if admission will be more than nine months after close of last full fiscal year)	Last two years of audited accounts	Last two years, including the audited accounts of the last financial year	Last two years of accounts if relevant (audited accounts not required)
Accounting standards	International Financial Reporting Standards (IFRS)	IFRS or French generally accepted accounting principles
Intermediary	Listing agent	Listing sponsor
LEI required?	Yes
	Ongoing requirements
Annual financial reporting	Annual financial report (annual financial statements, business report and auditor’s report on annual financial statements)	Annual financial report (annual financial statements, business report and auditor’s report on annual financial statements)	Audited financial statements	Unaudited financial statements
Price-sensitive information, list of insiders, market survey	MAR applies
Declaration of transactions	MAR applies
Declarations of breaches of threshold (withholding of capital and voting rights)	Applicable	Not applicable
Anti-money laundering	Applicable
Intermediary	Not required	Listing sponsor	Not required
Website required	Yes

iii Overview of law and regulationsEU securities regulations

EU securities regulations that are applicable to French IPOs principally comprise:

1. the Prospectus Regulation;
2. the Delegated Acts;
3. the European Transparency Directive (the Transparency Directive);15 and
4. MAR.16

The Prospectus Regulation is directly applicable in EU Member States and, along with the Delegated Acts adopted in March 2019, repealed and replaced the former Prospectus Directive17 regime, including Commission Regulation (EC) No. 809/2004.18 An overview of the current regulatory environment is provided below. The Prospectus Regulation, which as previously mentioned is currently the subject of a reform proposal,19 is a step by the European Commission towards the implementation of its capital markets union action plan. It ensures that adequate and equivalent disclosure standards are in place in all EU countries so that investors can benefit from the same level of information and protection across the European Union.

The Prospectus Regulation requires a prospectus to be published by a company in connection with offers of securities to the public within EU Member States20 or admissions of shares to be listed on a regulated market situated or operating within an EU Member State (e.g., the Regulated Market of Euronext). A prospectus is a legal document that describes, among other things, a company’s business, the risks it faces, its financial and shareholding structure, as well as the securities that are being issued or admitted to trading. It provides investors with the information they need to make an informed investment decision.

The Prospectus Regulation sets out the format and the disclosure requirements for EU prospectuses, whereas the Transparency Directive provides the disclosure obligations for issuers listed in the European Union.

The Prospectus Regulation was intended to reinforce investor protection and reduce regulatory complexity and compliance costs for companies when going through the public listing and trading process and introduce certain changes to the previous regime for filing prospectuses.

One of the Prospectus Regulation’s key means of streamlining listed companies’ access to the market is the Universal Registration Document (URD). The URD can be used instead of the annual report and the half-yearly report, as long as the URD is published within four months of the issuer’s financial year end or within three months of its half-year end. The URD is intended to incentivise companies to go public as it reduces the costs of being a listed company post-IPO by avoiding duplicative disclosures to the market.

Other key provisions of the Prospectus Regulation include:

1. the ability to use a passportable EU growth prospectus, which is available to SMEs, certain medium-sized companies admitted to an SME growth market and other non-listed issuers where the offer of securities to the public is for a total consideration of less than €20 million per year and which is composed of a summary, registration document and securities note;
2. to the simplified disclosure requirements in such a prospectus are intended to focus on the relevance and materiality of information for investors and address the need for proportionality between the size of the company and the costs of producing a prospectus;
3. the elimination of the requirement for prospectuses to include the auditor’s report on profit forecasts and estimates, as this was considered too costly for issuers compared to the protection it provided to investors;21
4. a simplified prospectus summary, which may be of a maximum length of seven pages and should be written in language that is clear, non-technical, concise and comprehensible for investors;
5. a streamlined presentation of risk factors, which must be categorised and presented within each category in order of materiality to ensure that investors can assess the relevant risks related to their investment; and
6. a simplified disclosure regime for issuers already listed on a regulated market or SME growth market with regard to secondary issuances.

French securities regulations

In addition to EU directives and regulations, French laws, rules and regulations pertaining to French IPOs and French-listed equity issuers include:

1. the Commercial Code (for issuers incorporated in France);
2. the Monetary and Financial Code;
3. the AMF’s General Regulation; and
4. the corporate governance code of listed companies (the AFEP-MEDEF Code) in respect of the governance of listed companies on a ‘comply or explain’ basis.

US securities regulations

In addition to preparing an EU prospectus, companies seeking an IPO in France also generally prepare an ‘international offering circular’ to assist with marketing the global offering outside France. The international offering circular must contain the same information as the prospectus and usually includes specific disclosure regarding, or pursuant to, US securities laws and regulations. This is because the global offering will be made:

1. by relying on the registration exemptions provided by Rule 144A under the US Securities Act of 1933 (the Securities Act) for sales to ‘qualified institutional buyers’, or one of the safe harbours provided by Regulation S under the Securities Act for offshore transactions outside the United States; and
2. in compliance with US anti-fraud provisions, notably Rule 10b-5 of the US Securities Exchange Act of 1934 (the Exchange Act).