The new rules on disclosure of large shareholdings in listed companies will continue to apply to issuers of shares and equity certificates listed on the Oslo Stock Exchange and Euronext Expand with Norway as its home state, and not to issuers on Euronext Growth. The deadline for submitting notifications of large shareholdings will be slightly extended in certain situations. Furthermore, amendments have been made to the rules regarding consolidation and the types of instruments and positions to be included when calculating the holding of a shareholder. The thresholds for disclosure will, however, remain unchanged. In this newsletter, we mention the most important changes that will enter into force on September 1st.
Background
The EU Directive 2004/109/EF (the "Transparency Directive") provides certain minimum requirements regarding the disclosure of large shareholdings in listed companies. The requirements are already implemented in chapter 4 of the Norwegian Securities Trading Act and its supplementary regulation. As the Transparency Directive only provides minimum requirements, each EEA state may adopt stricter rules and regulations. The current Norwegian rules on disclosure of large shareholdings are stricter than the requirements in the Transparency Directive, especially as regards the deadline for disclosure. The Transparency Directive has been amended in accordance with Directive 2013/50/EU (the "Amendment Directive") which makes several amendments of importance to the transparency regime. These amendments mainly require harmonisation, meaning that Norwegian authorities must implement the rules set out in the Amendment Directive without changes.
The most important changes
Derivates linked to listed shares with be included in holdings
Prior to the entry into force of the new rules, only shares and equity certificates listed on the Oslo Stock Exchange and Euronext Expand, as well as call options and other rights to such shares and equity certificates are required to be included when calculating an investor's holding.
From September 1st, the disclosure obligation will also apply to holdings of derivatives linked to listed shares (or equity certificates) provided that said derivatives have a similar economic effect to holding of shares or rights to shares, whether or not they confer a right to physical or financial settlement. It's sufficient that the instrument provides the investor with an exposure against changes to the price of the underlying share or equity certificate, and in that way a similar economic effect to holding of shares or rights to shares. As a result, various derivatives with financial settlement must be disclosed, such as financially settled options and forwards. This is an important change to be noted by investors.
Subscription rights, options with rights to non-issued shares and ordinary convertible loans no longer be relevant
Pursuant to the new rules, only instruments giving an unconditional right to existing shares shall be included in the holding and be required to be disclosed. Consequently, ordinary convertible loans, subscription rights and similar instruments giving a right to non-issued shares will no longer be subject to the disclosure obligation. An important consequence is that options and other instruments issued in connection with various employee incentive programs, which give a right to shares which have not yet been issued, will be excluded from the disclosure obligation.
Extended disclosure deadline in certain situations
Prior to the entry into force of the new rules, reaching, exceeding or falling below ("crossing") a threshold is required to be disclosed "immediately" after entering into a binding agreement, or in the case of passive crossings, as soon as the shareholder should have become aware of the crossing. Pursuant to the new rules, the deadline will be "immediately, but no later than the opening of the regulated market on the second trading day" after the crossing.
The main rule will still be that disclosure is required "immediately" after crossing a threshold, which in practice means the time it takes to draft and disclose the notification. An absolute deadline is, however, included in order to provide the regulator with some discretion due to special circumstances such as time zones, complicated calculations due to financial settled derivatives etc. This is in our view a justified and important amendment.
We expect the Norwegian Financial Supervisory Authority to update its guidelines with a description on how to comply with the new rules. We further expect them to continue to accept that it is sufficient to disclose a crossing before the market opens the following trading day, if the crossing occurs after close of the markets at 17:30 (CET).
The lender will be required to disclose lending of shares
Lending of shares will also be made subject to the disclosure obligation under the new rules, and not only the borrowing and return of the borrowed shares by the borrower.
Calculation of holdings of financial instruments with cash settlement and financial instrument related to indexes
New, and rather detailed, rules on how financial instruments with financial settlement and financial instruments related to indexes are calculated, will enter into force on September 1st.
Financial instruments with similar economic effect to holding of shares and rights to acquire shares which provide for cash settlement, such as financially settled options and forwards, shall be calculated on a delta-adjusted basis, meaning that the notional amount of underlying shares shall be multiplied with the delta of the instrument. The delta indicates how much the financial instrument's theoretical value would move in the event of variation in the underlying instrument's price and provides an accurate picture of the exposure of the holder to the underlying instrument. For example, an investor holding financial settled derivatives representing 100 shares with a delta of 0.5 will have a holding equivalent to 50 shares. All instruments relating to the same underlying issuer shall be included in the calculation, but long positions shall not be netted with short positions.
Amendments to the definition of closely associated persons
A new definition of closely associated persons will be implemented, noting that this definition will differ from the definitions of closely associated persons in relation to the mandatory offer rules and the rules applicable to primary insiders.
The most notable change is that the holdings of close, personal relatives, shall no longer be consolidated, including the holdings of spouses and minor children. Further, consolidation due to acting in concert is only required where the investors have committed to a lasting common policy regarding the exercise of the voting rights they hold or where such holding is controlled by the investor as further set out in the new rules.
Limited changes to the content of the notification
We expect the Norwegian Financial Supervisory Authority to prepare a standard formula to be used when disclosing crossings. The information in the notification will to a large extent remain unchanged, but with the addition that the notification must include a breakdown between shares held, financial instruments giving a right to acquire already issued shares and financial instruments with economic effect similar to that of the shares, and whether they confer a right to physical or financial settlement.
A new general exception for shares acquired for stabilisation purposes
The existing exceptions from the obligation to disclose crossings will remain in force with certain minor changes. The changes apply to shares acquired for the sole purpose of clearing and settling within the usual short settlement cycle (now two trading days, not three trading days), and shares held by custodians in their custodian capacity.
In addition, a new general exemption will be implemented for voting rights attached to shares acquired for stabilisation purposes, provided the voting rights attached to those shares are not exercised or otherwise used to intervene in the management of the issuer.
Possibility for suspension of voting rights
With effect from September 1st, the Norwegian Financial Supervisory Authority may not only impose violation charges on legal or natural persons, but also suspend voting rights for shares that exceed the relevant threshold.
