Prospectus Directive – ECJ judgement – Luxembourg

A request for a preliminary ruling regarding Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading, as amended (the “Prospectus Directive”) was filed with Court of Justice of the European Union (“ECJ”) by Hoge Raad der Nederlanden (the Supreme Court of the Netherlands) on October 3rd 2012. The request concerned proceedings between Dutch companies Almer Beheer BV and Daedalus Holding BV (“Almer and Daedalus”) and Van den Dungen Vastgoed BV and Oosterhout II BVBA; it related to the claim by Almer and Daedalus that the enforced sale of securities held by them should be subject to the obligation to publish a prospectus.

A preliminary ruling was requested on two questions of interpretation under the Prospectus Directive (specifically concerning Article 3(1) and Article 1(2)(h)):

1. Must Article 3(1) of the Prospectus Directive be interpreted as meaning that the obligation to publish a prospectus laid down therein is also applicable in principle (that is to say, apart from the exemptions and exceptions for certain cases referred to in that directive) to an enforced sale of securities?
2. If the answer to Question 1 is yes, (a) should the concept of “the total consideration of the offer” used in Article 1(2)(h) of the Prospectus Directive then be interpreted as meaning that the sums deriving from an enforced sale of securities must be those reasonably to be expected, with due regard for the particular nature of an enforced sale, even if the sums reasonably to be expected are well below the real economic value? (b) If the answer to Question 1 is yes, but the answer to Question 2(a) is no, how should “the total consideration of the offer” referred to in Article 1(2)(h) of the Prospectus Directive be construed, particularly in the case of an enforced sale of securities?

In respect of the first question, the Second Chamber of the ECJ considered the objectives of the Prospectus Directive and concluded, for various reasons, that a sale of securities in the context of enforcement does not form part of the objectives of the Prospectus Directive and, accordingly, does not fall within the scope of that Directive.

Therefore, the ECJ ruled on September 17th 2014 that “Article 3(1) of Prospectus Directive must be interpreted as meaning that the obligation to publish a prospectus prior to any offer of securities to the public is not applicable to an enforced sale of securities, such as that at issue in the main proceedings”.

As the answer to Question 1 was negative, the ECJ did not need to answer Question 2. However it is interesting to note Advocate General Sharpston’s view on Question 2, which she expressed in her opinion delivered on June 19th 2014. In short, she concluded that the Prospectus Directive “does not apply to a situation in which securities are to be sold by auction in order to raise a sum which is known in advance to be below the threshold of EUR 5,000,000 laid down in Article 1(2)(h) of the Prospectus Directive”.