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The information contained
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On April 13, 2007, Act 6/2007 of
April 12 amending Act 24/1988 of July 28 on the Securities Market, in order to
modify the rules for takeover bids and the transparency of issuers (the “Act
6/2007” or the “Transparency Act”) was published in the Spanish
Official Gazette [Boletín Oficial del Estado] (“BOE”). This
Act, which will enter into effect on August 13, 2007, is intended to
partially transpose into the Spanish legal system, Directive 2004/25/EC of
the European Parliament and of the Council of 21 April 2004 on takeover bids
(the “Takeover Directive”) and Directive 2004/109/EC of the European
Parliament and of the Council of 15 December 2004 on the harmonisation of
transparency requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market and amending
Directive 2001/34/EC (the “Transparency Directive”).
This newsletter is intended to
provide a brief analysis of the main provisions of the Transparency Act
regarding the applicable system in relation to transparency and the
information duties of issuers of listed securities set out in the
Transparency Act. In addition to this document, we have also prepared a
newsletter regarding the developments applicable to takeover bids [ofertas públicas de adquisición].
KEY
DEVELOPMENTS REGARDING TRANSPARENCY
·
Reform of the rules in relation to periodical financial information
applicable to listed companies and fixed income issuers (see section 1).
·
New developments regarding the communication system in relation to
significant stakes (see section 2).
·
New information obligations for issuers of securities, including some
new developments regarding significant events (see section 3).
·
Establishment of a civil liability system in connection with the
financial information disclosed by issuers of securities (see section 4).
·
New developments in the supervision system, including the attribution
of powers to the National Securities Market Commission [Comisión Nacional del Mercado de Valores] (CNMV) in relation to
the revision of accounting information (see section 5).
REFORM OF LISTED COMPANIES’
TRANSPARENCY SYSTEM
1.
Changes in the rules regarding periodical financial information
The Transparency Act introduces
several changes to the rules relating to the periodical financial information
to be published by issuers of securities. Among them, the following must be
highlighted:
a)
Annual Report: In the event Spain is the Member State of origin, the issuers of
securities traded in an official secondary market or in other EU domiciled
regulated markets will disclose their annual financial report (which must
include the audited annual accounts, the audited management report and the
declaration of liability regarding its content), and their auditing report
within a maximum of 4 months following the end of the fiscal year. In
addition to this, the issuers mentioned above will ensure that the reports
remain accessible to the public during at least five years.
b)
Biannual report: Additionally, in the event Spain is the Member State of origin, the
issuers of shares or debt securities traded in an official secondary market
or in other EU domiciled regulated markets will prepare and disclose a
biannual financial report (which must include the summarised annual accounts,
the intermediate management report, and the declarations of liability
regarding its content) relating to the first six months of the fiscal year,
during the two months following the end of the corresponding period. In
addition to this, the issuers mentioned above will ensure that the reports
described above remain accessible to the public for at least five years.
Until now, issuers of fixed income
securities were not subject, in practice, to the duty to prepare financial
information on less than an annual basis, the reason being that although this
possibility is set out in section 35 of the Securities Market Act [Ley del
Mercado de Valores] (“LMV”) as it is currently drafted, it has not
been subject to the necessary regulatory development.
Among others, issuers who only
have outstanding debt securities issues worth a nominal aggregate value of at
least €50,000 are exempt from the obligation to disclose periodic financial
information.
In the event Spain is the Member
State of origin, during the two months following the end of the corresponding
period, issuers of shares traded in an official secondary market or in other
EU domiciled regulated markets will prepare and disclose a biannual financial
report relating to the twelve months of the fiscal year. However, issuers of
shares traded in an official secondary market who disclose their annual
financial report during the two months following the end of the preceding
fiscal year will be exempt from preparing and disclosing the periodic
financial information relating to the second semester of the preceding fiscal
year.
c)
Intermediate quarterly declaration for listed companies: In the event Spain is the Member
State of origin, issuers whose shares are admitted to trading on an official
secondary market or on other EU domiciled regulated markets will disclose and
circulate on a quarterly basis, during the first and second semester, an
intermediate declaration that will include the following: (i) an explanation of the significant facts and transactions which
occurred during the corresponding period; and, (ii) a general description of the issuer and its group’s general financial
situation and results during this period. This intermediate declaration will
not be mandatory for issuers who disclose quarterly financial reports.
Finally, a series of issues are
left unresolved and will require regulatory development. These include: (i) time limits and other requisites for the submission of financial
information to the CNMV; (ii) the content of the declaration of
liability in addition to the issuer’s corporate body or person that comprises
it; (iii) the content of the quarterly and
biannual financial information and the eventual adaptations and exceptions
that may exist in relation to certain types of securities, markets or
issuers; (iv) the accounting principles to be
considered acceptable for issuers of non-EU Member States, as well as any
other aspect that may be necessary in order to apply these rules.
These obligations relate to the
disclosure of periodical financial information are not applicable to
investment funds and collective investment companies with variable share
capital [Sociedades de inversión colectiva de capital variable]
regulated by the Undertakings for Collective Investment Act [Ley de Instituciones de Inversión Colectiva].
2.
Duty to notify of significant stakes
The system which establishes the
duty to notify significant stakes, also introduces new developments:
a)
The duty to notify of the holding of a significant stake will be
applicable not only to the acquisition and transfer of shares but also to
cases in which, even if in the absence of the acquisition or transfer of
shares, the ratio of an individual’s voting rights exceeds, reaches or is
below the percentages which trigger the duty to notify as a consequence of an
alteration in the total number of voting rights of an issuer on the basis of
the information provided to the CNMV and made public by it.
b)
Anyone with a right to acquire, transfer or exercise voting rights
granted by the shares, regardless of the actual ownership of the shares; and
anyone owning, acquiring or transferring, be it directly or indirectly, other
securities or financial instruments which grant a right to acquire shares with
voting rights, will also have to notify the holding of a significant stake in
accordance with the regulations.
c)
Directors of listed companies, in addition to notifying any
transaction concerning the shares or other securities or financial instruments
of the issuer which are linked to these shares, will have to inform the CNMV
of their stake upon appointment or resignation.
d)
The duty to notify the Stock Exchange of significant stakes is
removed, and a duty on the issuer to notify the information received is
established.
e)
Although it is established in the regulations, listed companies are
required by Act 6/2007 to notify transactions concerning their treasury
shares [Autocartera].in certain cases.
Once again, Act 6/2007 states that
this system of notifying a significant stake will not apply to investment
funds nor to collective investment companies with variable capital, which are
regulated by the Variable Capital Undertakings for Collective Investment Act
[Ley de Instituciones de Inversión Colectiva].
3.
Other information duties
The
Transparency Act also refers to other information duties of the issuers of
securities. Among the most relevant modifications, the following must be
noted:
3.1 Significant events
a)
As a general rule, the CNMV will be informed of any significant event
simultaneously to their disclosure in any media. However, should the issuers
intend to communicate significant events which may alter the appropriate
progress of the transactions concerning the securities of the issuers or threaten the protection
given to investors, the CNMV will be informed prior to their publication. In
turn, the CNMV will disclose this information immediately.
b)
An issuer may delay, under its own responsibility, the publication and
disclosure of a significant event when it considers that the information
damages its legitimate interests, provided that this omission is not
misleading for the market and the issuer guarantees the confidentiality of
the information. In turn, the issuer will immediately notify the CNMV.
3.2 Other requirements
a)
In the event Spain is the Member State of origin, the issuers of
securities traded in an official secondary market or in any other EU
regulated market will make public and disclose any amendment to the rights
arising from the securities as well as any other information regarding the
issue of debt, and will send this information to the CNMV;
b)
The issuers of shares or debentures listed in an official secondary
market or any other EU regulated market will guarantee that all the
mechanisms and information required for shareholders and holders of
debentures to exercise rights are available in Spain, and that the
information is complete, in the event Spain is the Member State of origin.
Listed companies will comply with this obligation by having their own web
page in which they include the minimum information requirements set forth in
the applicable regulations. The requirements applicable to issuers of debt
will be developed in regulations;
c)
In the event Spain is the Member State of origin, the issuers which
securities are traded in an official secondary market or in any other EU
domiciled regulated market intending to amend their deed of incorporation or
their bylaws, will submit the amendment proposal to the CNMV and notify the
market or markets where their securities are traded, as established by law.
This notification will be made not later than the date of the calling of the
general meeting in which the voting or notification will take place.
4.
Liability for the content of the information
The new regulation includes, for
the first time, a specific civil liability system for the information referred
to in section one above. This system is based on the one established for
civil liability arising in relation to the content of the informative
prospectuses of initial public offerings (IPOs), sale and admission
of securities to trading [folletos informativos de ofertas públicas de
suscripción y venta y admisiones de valores].
In accordance with this regime, at
least the issuer and its directors will be responsible for the preparation
and publication of the referred information, notwithstanding the applicable
regulatory conditions. Both the issuer and its directors will be liable for
all damages caused to the holders of securities because the information does
not provide a true and fair view of the issuer. The action to be filed in
order to seek a remedy for damages [acción de responsabilidad] will be
time barred for three years from the moment when the claimant could have
become aware of the fact that the information does not provide a true and
fair view of the issuer.
5.
Supervision and sanction system. Entry into force.
Finally, in relation to the
disclosure obligations established in it, the Transparency Act includes
several provisions relating to the system of supervision, inspection and
sanction.
For instance, one of the new
developments contained in the Transparency Act establishes that the CNMV has
authority to verify that the periodic information has been prepared in
accordance with the applicable regulations. Otherwise, the Transparency Act
confers on the CNMV the power to order the issuer to comply with these
obligations. In order to carry out the functions mentioned above, the CNMV
may request in writing any necessary documents or information from the
issuer’s auditors in accordance with the Auditing Act [Ley de Auditoría de
Cuentas]. The CNMV may also compel the issuers to disclose additional
information or amendments to the periodic information.
In addition, in the event Spain is
the host Member State, the CNMV will inform the competent authority of the
Member State of origin if it becomes aware that the issuers, the holders of
shares or other financial instruments and any other individuals or legal
persons obliged to disclose the information mentioned above, have incurred in
any irregularities or failed to comply with their obligations. If the issuer
continues breaching its regulatory or legal obligations in spite of the
adequate or inadequate measures adopted by the competent authority of the
Member State of origin, or if such authority has adopted no measures at all,
the CNMV will adopt the appropriate measures in order to protect the
investors, when they have informed the competent authority of the Member
State of origin. Likewise, the CNMV will immediately inform the European
Commission of the measures adopted.
Moreover, the Transparency Act
establishes new types of infringements and major infringements (depending on
the relevance of the infringing act) related to the failure to comply with
disclosure obligations.
Lastly, as mentioned above, the
Transparency Act will enter into force four months after its publication in
the BOE, that is, on August 13, 2007.
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The information contained in this
Newsletter is of a general nature and does not constitute legal advice