352 10 Exit of Shareholders
ried out via the internet so that retail investors could also participate directly. However,
internet auctions no longer appear to be used for the issuance of debt securities.”
IPO
The legal aspects of initial public offerings of securities were already discussed in
section 5.10 above. While private sales of shares are mostly unregulated at Com-
munity level, Community law plays a more important role in the capital markets.
Public offering, prospectus. A sale through a public offering can require the
publication of a prospectus under the Prospectus Directive.^101 The prospectus must
not be published until it has been approved by the competent authority of the
home Member State according to the home-country principle.^102
Application for a listing, prospectus. A shareholder cannot carry out an IPO
without the co-operation of the firm. Where shares have not yet been admitted to
trading on a regulated market in the EU, the party that is entitled to apply for ad-
mission is the issuer, that is, the company whose securities are the subject of the
application for listing.^103
The application for admission to official listing must cover all the shares of the
same class already issued.^104 However, where the securities have been admitted to
trading on a regulated market, they can subsequently be admitted to trading on
other regulated markets even without the consent of the issuer.^105
Any admission of securities to trading on a regulated market in the area of the
EU is subject to the publication of a prospectus.^106
Share Exchange Offers by a Third Party
Share exchange offers enable a shareholder to convert holdings in one company
into holdings in another company. Questions of company law and capital markets
law raised by share exchange offers have already been discussed in sections 5.11.5
and 5.11.6. Some general remarks can nevertheless be made.
Company law aspects of share exchanges. A share exchange offer raises ques-
tions of company law in the company making the offer.
Under the European legal capital regime, shareholders in general meeting either
decide on the issuing of new shares or authorise the board to decide on the matter.
As shareholders usually have pre-emptive rights to new shares issued by the com-
pany, a decision to issue new shares will have to be complemented by a decision
to waive pre-emptive rights in share exchange offers. The valuation of shares is-
sued by the company and the valuation of shares of the target company can be im-
portant, because a low valuation of shares issued by the company and a high
(^101) Articles 3(1) and 3(3) of Directive 2003/71/EC (Prospectus Directive).
(^102) Articles 3(1) and 13(1) of Directive 2003/71/EC (Prospectus Directive).
(^103) Articles 1(a), 5 and 11 of Directive 2001/34/EC (Listing Directive).
(^104) Article 49(1) of Directive 2001/34/EC (Listing Directive).
(^105) Article 40(5) of Directive 2004/39/EC (MiFID).
(^106) Article 3(3) of Directive 2003/71/EC (Prospectus Directive).