The EU Prospectus Directive, which has been in effect in the European Union since July 2005, has been causing problems for multinational companies operating in Europe and is putting certain employee benefits such as employee share schemes—also known as employee stock purchase plans—at risk for EU employees. The "single European passport"—the ability for issuers to use a prospectus that has been approved by the issuer's home member state regulator in any other member state without further regulatory approval or administrative procedures—is a key objective of the Directive. However, the application of the Directive to employee share schemes has been unclear and arbitrary.
Two recent reports, conducted by the Committee of European Securities Regulators (CESR) and the European Securities Markets Experts Group (ESME) and released in 2007, have highlighted several issues that are impeding the effectiveness of the Directive and which need to be corrected, possibly by amendment to the Directive. Of immediate concern is that the Directive has been applied and interpreted differently by the member states and therefore there has been no consistency for multinational companies across borders. Due to the lack of consistency and clarity in the Directive, some multinational issuers are finding themselves unwittingly being subject to an EU country's regulatory scheme, which may include burdensome prospectus delivery and other requirements. Consequently, many multinational companies are contemplating suspending or terminating their employee share plans within the European Union unless the provisions of the Prospectus Directive are clarified.
The European Commission is currently evaluating the Prospectus Directive and it is expected that a report will be published for consultation in the first half of 2008. This report will likely be accompanied by proposals for the amendment of the Prospectus Directive. In the interim, the CESR has received a letter from the EU Commissioner, Charlie McCreevy, requesting that regulators adopt a light-touch approach under the Directive to employee share offers, until certain amendments can be proposed to alleviate the problems for multinational employers.
The actions currently being taken by the CESR and the European Commission clearly indicate that change is forthcoming and will be welcome news. Employers who have been thinking about suspending their European employee share schemes may wish to delay making a final decision until the Commission's report is issued. The European Commission has recognized the issues and is seeking to ease the regulatory burdens the Directive has placed on employers.