European Commission Announces Revisions To The Transparency Directive

Author:Mr Alix Prentice, Ramona Simms and Nick Shiren
Profession:Cadwalader, Wickersham & Taft LLP

Under the headline "More responsible businesses can foster more growth in Europe", the European Commission (the "Commission") unveiled proposals for directives to amend several legislative measures on 25 October 2011, including a directive to amend the Transparency Directive (the "Amendment Directive")1. Key aspects of the proposed Amendment Directive include: Determining notification requirements for major shareholdings by aggregating holdings of shares with holdings of financial instruments (derivatives); Widening the range of financial instruments subject to a notification requirement in order to prevent 'hidden ownership' of listed companies; Abolition of the requirement for listed companies to publish interim statements and/or quarterly reports; and Compulsory reporting of payments made to governments by businesses in the extractive and logging industries. Increased Notification Requirements for Major Shareholdings The draft Amendment Directive provides for the extension of notification requirements to all instruments which have a similar economic effect to holdings of shares and entitlements to acquire shares, whether or not they create an entitlement to physical settlement. This is a legislative response to recent instances of investors acquiring controlling stakes in listed companies without having to inform the markets as a result of using financial instruments such as cash-settled derivatives. Added to this, whereas the existing Transparency Directive does not require holdings of voting rights to be aggregated with holdings in financial instruments in order to calculate when the thresholds for notification of major holdings have been triggered, the Amendment Directive would introduce such an obligation. The resulting notification will be required to include a breakdown of the holding by type of financial instrument held, in order to provide the market with the most detailed information possible. Reduced Reporting Requirements In an effort to streamline the requirements involved in listing on regulated markets and to encourage long-term investment, the Commission proposes to abolish the obligation for listed companies to publish interim management statements. At the same time however, the Commission has confirmed that issuers will still be permitted to publish these statements in response to strong demand from investors. Reporting of Payments to Governments from the Extractive Industries Under the draft Amendment Directive, listed...

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