On 22 July 2022, the Central Bank of Hungary (MNB) suspended the placement of shares of FuturAqua Nyrt. (Issuer) to be issued in the course of the share capital increase and imposed a supervisory fine of HUF 5 million (~ EUR 12,500).
On 29 June 2022, the Issuer decided to increase its share capital through a private offering of shares. In the event of an increase of share capital with a cash contribution, the shareholders of the issuer will have a preferential right to receive the new shares to be issued. In its extraordinary announcement (Announcement), the issuer invited shareholders to exercise their pre-emptive subscription rights, which will be valid for a period of 15 days after the decision.
MNB established that the Announcement was a public offer and the process is a public offering, since it contained sufficient information for the offer and the offered securities to the investors. Prior to the public offering of securities, and at the beginning of the public offering at the latest, the issuer must publish a prospectus or a minimum prospectus, which must be approved in advance by MNB. Based on the preferential right, the issuer is not automatically exempted from the obligation to draw up a (minimum) prospectus, and the offer to the public for the purpose of securing a right of pre-emption may also constitute a public offer. To sum it up, if the offer for the purpose of securing pre-emptive subscription rights does not qualify for an exemption under the applicable laws, the issuer is obliged to draw up a (minimum) prospectus. In this case the Issuer did not publish any approved minimum prospectus, so MNB decided that the Issuer has not complied with its obligation.
The disclosure of a (minimum) prospectus is essential to protect investors. Failure to disclose it in an appropriate manner is a fundamental breach of the legitimate interests of investors and, except in cases of exemption, the subscription or contract of sale of the securities in a public offering is therefore null and void. The suspension lasts until the issuer publishes an approved minimum prospectus in a way that is available to the public.
By Krisztian Brody, Attorney at Law, KCG Partners Law Firm
