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Changes in reporting obligations of securities issuers

Recent amendments to the Transparency for Listed Companies Directive should improve the system for release of information by listed companies.

Studies by the European Commission on the functioning of the Transparency for Listed Companies Directive (2004/109/EC) found that most investors evaluated this segment of the capital market positively. Certain shortcomings were identified, however. This proved once again that market participants expect extensive access to information, but they also believe that procedures should be less bureaucratic and that requirements should be eliminated when their performance is doubtful and they provide little practical benefit.

Under Directive 2013/50/EU, amending Directive 2004/109/EC, the main changes include:

  • Elimination of the requirement to publish quarterly reports. Listed companies may continue to publish them if investors indicate the need.
  • Expansion of reporting obligations to include information about acquisition of financial instruments which do not bear voting rights or the right to acquire shares but which give the holder an influence over the condition of the company similar to share rights.
  • Harmonisation of obligations to report holdings of shares and other financial instruments. Under the prior directive, member states had imposed additional, differing obligations on investors, making it impossible to file collective notifications. Now an investor will be able to submit a comprehensive notification presenting the number of votes from shares held by the investor and from other instruments, and the number of other instruments providing comparable economic influence over the company.
  • Introduction of provisions enabling determination of a home member state for an issuer from outside the EU which has failed to select a home member state by the required time.

The amendment also directly introduces a new category of reporting obligations, which have been sought for some time, under which companies involved in extraction of natural resources (such as oil, gas and coal) will be required to report payments they have made to the governments of the countries where they conduct extraction.

Some of this information was already disclosed under the obligation for companies to publish financial reports, but the new provisions of the directive are intended to extend this requirement to cover cases where the financial reports did not directly indicate such payments.

The deadline for the member states to implement the amended provisions of the directive is at the end of November 2015—two years after the effective date of the amendment.

Jakub Koziński and Danuta Pajewska, Capital Markets and Financial Institutions practices, Wardyński & Partners