The Cyprus Prospectus Law transposed the equivalent EU Directive 2017/1129. The national law and the directive are similar to a large extend. The aim of both authorities is not to capture every issues. Paragraph 15 of the Prospectus Directive more specifically mentions that:
Before relying on anything in this Blog, please read the disclaimer
Where an offer of securities is addressed exclusively to a restricted circle of investors who are not qualified investors, drawing up a prospectus represents a disproportionate burden in view of the small number of persons targeted by the offer, thus no prospectus should be required.Paragraph 15 of the Prospectus Directive
The application to any offer of securities to the public with a total consideration of less than EUR 1.000.000 is excluded from the EU Prospectus Directive’s scope. The Cyprus Law on the other hand raises the threshold to EUR 5.000.000. Both conclude that the maximum number of retail members should be restricted to 150 natural and legal persons ( Section 4(3)(a) Law).
How is this information useful?
In a previous publication regarding alternative financing I highlighted the usefulness of such exemptions from the requirement to publish a prospectus. Accordingly a private company may issue corporate bonds up to Eur 5.000.000 and up to 150 persons (natural or legal). Each bond to have a value of Eur 33.333,33.
The same is true for the issue of shares, however in the issue of shares, the Companies Law, Chapter 113, restricts the number of individuals to 50 (The value of each share to be Eur 100.000) for a private company whereas for Public Companies no restriction applies.