Publication date: May 05, 2025
The issue of securities is one of the key elements of the functioning of the capital market. Thanks to it, companies can obtain funds for development, and investors gain the opportunity to invest capital. However, in order to ensure transparency and protect market participants, European Union legislation and national regulations impose specific requirements regarding the publication of information about issues. The key document that serves to achieve this goal is the issue prospectus. Depending on the nature of the issue, it is also possible to use a simplified prospectus, and in certain situations the law provides for the possibility of conducting a non-prospectus issue.
Prospectus – definition, requirements and conditions of use
The prospectus is a detailed document containing information about the issuer, the securities offered and the risks associated with the investment. Its primary purpose is to provide investors with reliable data that will allow them to make an informed investment decision. The requirement to publish a prospectus results primarily from Regulation (EU) 2017/1129 of the European Parliament and of the Council (Article 3, paragraph 1), which specifies the rules for public offerings and the admission of securities to trading on a regulated market. According to this legal act, the obligation to prepare a prospectus occurs when securities are to be offered to a wide group of investors or admitted to trading on a regulated market. This document must be approved by the Polish Financial Supervision Authority, which ensures its compliance with legal requirements and information standards.
However, it is not always necessary to publish a full prospectus. In cases where the offer is addressed to investors who already have access to the relevant information, it is possible to use a simplified prospectus. It is intended primarily for issuers whose securities have already been listed on a regulated market for at least 18 months (Article 14 of Regulation (EU) 2017/1129 of the European Parliament and of the Council). The simplified form of the document allows for shortening the issue process and reducing the costs associated with preparing the documentation. Despite its less extensive content, the simplified prospectus must still contain key information about the issuer, its financial situation and risk factors.
Non-prospectus issue – when is it possible?
It is also possible to conduct a prospectus-free issue, which significantly simplifies the process of offering securities. The regulations provide for several cases in which there is no obligation to prepare a prospectus. This applies to public offers in which the number of addressees is fewer than 150 people in the territory of a given EU Member State (Article 1 paragraph 4 letter b of Regulation 2017/1129). In addition, the exemption is granted if the total value of the offer does not exceed the threshold specified in the regulations.
The exemption from the obligation to prepare a prospectus also applies in a situation where securities are offered only to qualified investors (Article 1, paragraph 4, letter a of Regulation 2017/1129). In such cases, the regulations assume that these investors are able to independently assess the risk associated with the investment, which eliminates the need to provide them with extensive information documentation. In the context of Polish law, it is also important to take into account the Public Offering Act, which in Articles 37a and 37b indicates specific situations in which a prospectus may not be required.
Although public issues below EUR 5 million are exempt from the obligation to prepare a full prospectus, issuers still have to meet a number of information requirements to ensure the transparency of the offer and investor protection. According to the guidelines of the Polish Financial Supervision Authority, in addition to the investment memorandum, which contains key information about the issuer and details of the offer, it is necessary to prepare an offer document, which may include, among others, a description of the terms of the issue, risks related to the investment, as well as the financial situation of the company. In the case of some offers, issuers may also be required to provide other additional information materials that help investors make an informed decision. Despite the lack of a prospectus, the entire process is aimed at ensuring transparency and trust in the capital market, which is necessary for effective capital raising.
An investment memorandum is a document prepared by a company to present potential investors with details of a planned investment or project. Its main purpose is to provide investors with all the information necessary to make a decision to invest, including a description of the project itself, financial structure, financial forecasts, risks associated with the investment, and an assessment of the market in which it is to take place.
This document also includes information about the project management team, details on how the investment will be implemented, what steps will be taken in each phase, and what financial results are expected in the future. The investment memorandum is crucial, especially in the case of offers that aim to obtain external capital, and is the basis for assessing the risks and potential benefits of the investment.
An offer document is a detailed description of the offer that a company presents to potential customers or investors. Its main purpose is to present products, services or terms of cooperation in a way that encourages recipients to make a decision to buy or invest. The offer document contains information about the details of the offer, prices, delivery terms, implementation schedule and other elements that may influence the decision of a potential contractor.
This document may also contain additional information about the company offering the product or service, such as its experience on the market, references, certificates or quality guarantees. Offers are usually tailored to the specific needs of a specific recipient and often play a negotiating role, allowing for modification of the terms in response to the requirements of the other party. The offer document is a key tool in the sales process and building business relations.
Additionally, under Polish law, public offerings of securities may benefit from an exemption from the obligation to prepare an issue prospectus, provided that certain value thresholds are met. According to the applicable regulations, public offerings with a value of:
Liability for errors in the prospectus in the context of case law
One of the cases concerning the civil liability of the issuer for irregularities in the prospectus is the case of Bankia SA against the mutual insurance company UMAS. Bankia, a Spanish bank, conducted a public offering of shares, during which a prospectus containing serious inaccuracies was used. UMAS, as a qualified investor, acquired Bankia shares on the basis of this document, which incorrectly presented the financial situation of the company.
The Court of Justice of the European Union was asked to decide whether a qualified investor, who theoretically has greater knowledge and experience, has the right to claim compensation for errors in the prospectus – even though Directive 2003/71/EC (the so-called Prospectus Directive) does not specify this directly. The CJEU supported a broad interpretation of the provisions of the directive, emphasizing that every investor – regardless of their status – has the right to expect that the information contained in the prospectus will be complete, reliable and not misleading. The protection provided for in Article 6 of the Directive therefore also covers qualified investors, especially in situations where the public offer was directed in parallel to retail investors. At the same time, the Court noted that national law may take into account the fact that a qualified investor had (or should have had) access to other sources of knowledge about the financial condition of the issuer – especially if he had certain economic relations with it. However, such a possibility exists only if national provisions are consistent with the principles of effectiveness and equivalence of EU law. This means that they cannot make pursuing claims practically impossible or less advantageous than in the case of other, similar claims provided for in the national law. The Bankia case shows that the issuer’s liability for misleading investors through an issue prospectus is of a real nature and may concern not only retail investors, but also institutional investors. At the same time, it indicates that the limits of this liability may be differentiated depending on the status of the investor, provided that this does not violate the foundations of EU law.
Preparation of the prospectus – tax aspects
In addition to the legal conditions related to the need to prepare an issue prospectus, it may also give rise to tax consequences, particularly in the area of corporate income tax (CIT). In an individual interpretation of December 12, 2023 (ref. 0111-KDIB1-2.4010.268.2023.3.ANK), the Director of the Polish National Revenue Information addressed the issue of qualification of expenses incurred in connection with the preparation of the issue prospectus and its approval by the Polish Financial Supervision Authority. According to this interpretation, these expenses may be recognized as tax-deductible costs, provided that the issue is used to obtain funds for the company’s operating activities, its development, investments or repayment of liabilities. In such a situation, the costs related to the prospectus are indirectly related to the revenues achieved and as such constitute indirect costs that may be settled when they are incurred. They are not directly assigned to a specific revenue, but to general business activity, which means that they are recognized as a tax cost in accordance with Article 15, Section 4d of the CIT Act. In practice, this means that costs such as fees for preparing and submitting a prospectus, advisory fees, notary or court fees and other expenses related to preparing the issue may be recognized as costs of obtaining revenue, provided that they are properly documented and incurred in connection with the conducted activity. Regardless of whether a full prospectus, a simplified prospectus is prepared or the issue is carried out without a prospectus, the purpose of the issue and the actual purpose of the funds obtained are of key importance.
Examples of Case Law relating to the prospectus
In Polish case law, there are numerous examples of judgments concerning issue prospectuses, and one of them is the judgment of the Court of Appeal in Warsaw of 23 February 2017 (case file reference I ACa 1383/16). The case concerned the liability of the issuer of securities for false information contained in the issue prospectus. The court indicated that the issuer is liable for misleading investors, because the issue prospectus is an important element of the public offering and is a source of information necessary to make an investment decision. The court found that the information contained in the prospectus must be reliable, true and cannot mislead potential investors. The issuer’s liability covers situations in which the prospectus contains incomplete, outdated or false information that may lead to erroneous investment decisions. The court drew attention to the issuer’s obligation to ensure full transparency of the offer and to the need to adapt the content of the prospectus to statutory requirements. The judgment also emphasised that although the issuer has the right to state its position in the prospectus, this does not release it from liability for misleading information that may influence investors’ decisions. This judgment is of significant importance in the context of investor protection, especially in terms of the reliability and truthfulness of information provided by issuers of securities in issue prospectuses.
Another example of case law in the area of prospectuses is the judgment of the Voivodship Administrative Court in Gliwice of 9 March 2016 (file reference I SA/Gl 15/16), which referred to the issue of expenses incurred for legal advisory services in connection with the transformation of a company and the preparation of an issue prospectus. The case concerned the assessment of whether expenses related to the increase in share capital, including the costs of legal services, can be recognised as costs of obtaining income. The tax authority found that the expense incurred for legal advisory services in the area of the transformation of the company and the preparation of the issue prospectus was necessary and directly related to the process of increasing the share capital, which was to justify its inclusion in the costs of obtaining income.
However, the administrative court, after considering the case, found that such a position of the authority was incorrect. The justification of the judgment indicated that the expenses incurred for the preparation of the issue prospectus, although related to the process of increasing the share capital, do not constitute costs of obtaining income. The court emphasized that these costs are related to capital-related activities and are not directly related to generating income. Therefore, in the court’s opinion, these expenses do not meet the conditions for recognizing them as costs of obtaining income within the meaning of the income tax regulations. In the context of this judgment, the Court clearly indicated that legal advisory services related to the transformation of the company and the preparation of the issue prospectus, although they were related to the increase in share capital, do not meet the conditions resulting from the provisions of the Income Tax Act to be recognized as a cost of obtaining income. Expenses of this type are more administrative in nature and related to capital-related activities, and not to direct operational activities aimed at generating income.
Conclusions
In summary, the obligation to prepare an issue prospectus is a fundamental tool for protecting investors and ensuring transparency on the capital market. However, the regulations provide for various forms of simplifying this process, depending on the scale of the issue and the profile of investors. Each issuer should carefully analyze the applicable regulations and adjust the issue strategy to its needs, taking into account both formal aspects and investor expectations and regulatory requirements. It is also worth following the interpretations of supervisory authorities and market practice in order to properly adjust the issue strategy to the dynamically changing legal and economic environment.