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Securities prospectuses

As of March 8 2006, the Czech Republic implemented the EU Prospectus Directive (2003/71/EC) by way of amendments to the Czech Capital Markets Act and the Czech Act on Notes. Accordingly, for the purposes of a public offer or admission to a regulated market, the prospectus approved by the competent authority of the issuer's home EU state, or the EU state where the security was first publicly offered or admitted to the regulated market (which may be different from the issuer's home state), is generally also valid in the Czech Republic (and any other EU member state). Numerous foreign issuers (banks and real estate investors) have already made use of this option to easily expand the territory of their securities offers, mostly to the central European region.

To passport an approved prospectus into the Czech Republic, a confirmation by the home state's supervisory authority that the prospectus complies with EC Regulation 809/2004 (which stipulates the required contents of a prospectus), and a copy of the prospectus in Czech or English must be submitted to the Czech National Bank. (Separately from the implementation of the Prospectus Directive, the capital market supervisory powers have been transferred from the (now defunct) Securities Commission to the Czech National Bank as of April 1 2006).

Before a public offering or listing in the Czech Republic, the prospectus must be published either in Czech or English; however, its summary must always be published in Czech. The prospectus must be published in one of the ways envisaged by Article 14(2) of the Prospectus Directive. The Czech Republic did not make use of the option under Article 14(3) of the Prospectus Directive, that is, no publication of a special notice is required on how the prospectus has been made available and where the public can obtain it.

In line with the Prospectus Directive, the Czech Capital Markets Act does not apply to certain offers and types of securities and a number of offers and securities are exempt from the obligation to publish a prospectus. Unlike the Prospectus Directive, the Czech Capital Markets Act stipulates that it does not apply to securities included in an offer with a total consideration (over 12 months) of less than €200,000. The Prospectus Directive itself does not apply to securities included in an offer with a total consideration (over 12 months) of less than €2.5 million and the obligation pursuant to the Prospectus Directive to publish a prospectus does not apply to an offer of securities with a total consideration of less than €100,000 (over 12 months).

For notes issued in the Czech Republic (that is, either handed over to the first acquirer in the territory of the Czech Republic or registered in favour of the first acquirer in a Czech register), the Czech Act on Notes would apply. The simplified passporting and publication requirements would only apply if the notes' issue terms (as defined by the Czech Act on Notes) were approved together with the prospectus. A foreign issuer issuing notes in the Czech Republic would also have to inform the Czech National Bank before the issue date of the volume of the issue, form of the notes, their yield and maturity.

Note programmes may also be passported into the Czech Republic. Typically, the base prospectus is first approved by the home state's authority and passported at the launch of the programme. Subsequently, the supplements of the base prospectus specifying the individual notes' issues and their final terms are approved by the home state's authority and notified to the Czech National Bank, without the need for a new approval. The publication requirements for prospectuses apply for the supplements accordingly.

Paul Sestak and Michal Pravda

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