Companies Act 2006 – Part 43
Part 43: Transparency obligations and related matters – Transparency Directive(2004/109/EC)
1747. Sections 1265, 1266, 1267, 1268, 1270, 1271, and 1272 in Part 43 (Transparency
obligations and related matters) of the Act implement Directive 2004/109/EC 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.
Section 1266 inserts seven new sections into Part 6 of the Financial Services and Markets Act
2000; sections 89A, 89B, 89C, 89D, 89E, 89F and 89G. The new sections give power to the
competent authority (at present the Financial Services Authority (“FSA”)) to make rules for
the purposes of the Transparency Directive (2004/109/EC) (“Transparency Directive”) and
connected regulatory purposes. Sections 1267 and 1268 insert three and four sections,
respectively, into Part 6 of FSMA (89H to 89N) setting out the regulatory powers of the FSA
in connection with the Directive. Section 1270 inserts new sections 90A and 90B into FSMA,
which set out the issuers’ liability in damages for disclosures required under the
Transparency Directive, and section 1271 inserts a new section 100A into FSMA setting out
provisions in relation to the exercise of the FSA’s powers where the UK is a host member
state.
1748. The Transparency Directive imposes minimum harmonisation requirements on the
information to be provided to the public about issuers whose securities are traded on a
regulated market and the control of votes attached to shares in those issuers. It permits Home
Member States to impose more stringent requirements on entities that they regulate but Host
Member States, i.e. those states in which the issuers securities are traded on a regulated
market but whose competent authority are not responsible for primary oversight of that
issuer, are not permitted to impose any requirements more stringent than those contained in
the Transparency Directive.
1749. There are three main categories of obligation that are imposed under the Transparency
Directive and that the FSA’s transparency rules will implement in respect of UK markets and
issuers:
a) requirements for issuers to make public, at regular intervals, information about their
financial position and the progress and management of the business of the issuer;
b) requirements for holders of votes attached to shares of issuers to notify the issuers
when the number of votes they control reaches specified proportions of the total votes
available; and
c) requirements for issuers to treat the holders of the same securities equally.
1750. The detailed and technical provisions about the required notifications, disclosures and
treatment of security-holders will be prescribed in rules made by the FSA under the new rulemaking
power at section 89A of the Financial Services and Markets Act 2000. The FSA is
required by that Act to carry out consultation and a cost benefit analysis when making any
rules under this power.
1751. Having the power to make these rules will promote the harmonisation of practice with
other EU jurisdictions, and help enhance investor confidence through increased transparency
of the financial markets.
1752. Responsibility for the transposition of the Transparency Directive lies both with HM
Treasury and with the FSA. The measures in the Companies Act that implement the
Transparency Directive are the responsibility of HM Treasury.
1753. The table below describes the substantive provisions in the Act implementing the
Transparency Directive.
Part 43: Transparency obligations and related matters
Article Objective Implementation
1. Sets out scope of the Directive and two
derogations from the requirements of the
Directive. The Member States may apply the
derogations in respect of securities issued by
the government, local government or a state’s
national central bank.
Part 43 of the Act inserts new provisions
into the Financial Services and Markets
Act 2000 (“FSMA”) to give the Financial
Services Authority power to make
Transparency Rules.
Most provisions in the Transparency
Directive will be implemented by the
FSA’s Transparency Rules. Other
provisions in the Act or in FSMA
implement the other requirements.
If the derogations are to be implemented,
the FSA’s Transparency Rules will do this.
2. Provides various definitions used in the
Directive.
These will be applied in Transparency
Rules, or apply in relation to the
implementation of the Article to which
they relate.
3. Limits the circumstances in which Member
States may impose more stringent
requirements than those contained in the
Directive on issuers of securities and holders
of interests in those issuers’ shares.
Transparency Rules and new FSMA
section 100A(2) introduced by section
1271 of the Act.
4. Requires issuers of securities which are traded
on regulated markets to make public its
annual financial report consisting of its
audited financial statements and the
management report.
Transparency Rules: see in particular new
sections 89A and 89C of FSMA, inserted
by section 1266 of the Act.
5. Requires issuers of shares or debt securities
which are traded on a regulated market to
make public a half-yearly financial report.
Transparency Rules: see in particular new
sections 89A and 89C of FSMA, inserted
by section 1266 of the Act.
6. Requires issuers whose shares are traded on a
regulated market to make public an interim
quarterly statement.
Transparency Rules: see in particular new
sections 89A and 89C of FSMA, inserted
by section 1266 of the Act.
7. Requires Member States to ensure that
responsibility for the information to be drawn
up and made public in accordance with
Articles 4, 5, 6 and 16 lies at least with the
issuer or its administrative, management or
supervisory bodies and to ensure that their
laws, regulations and administrative
provisions on liability apply to the issuers, the
bodies referred to in this article or the persons
responsible within the issuers.
Provisions relating to liability inserted into
FSMA as new sections 90A and 90B by
section 1270 of the Act.
8. Provides various exemptions from the
requirements of articles 4, 5 and 6 including
to optional exemptions.
Transparency Rules.
9. Provides that where a shareholder with a
significant level of holding acquires or
disposes of shares of an issuer whose shares
are admitted to trading on a regulated market
and to which voting rights are attached, such
shareholder notifies the issuer of the
proportion of voting rights in the issuer held
by the shareholder as a result of the
acquisition or disposal where that proportion
reaches, exceeds or falls below the thresholds
of 5%, 10%, 15%, 20%, 25%, 30%, 50% and
75%.
Transparency Rules: see in particular new
sections 89A and 89B of FSMA, inserted
by section 1266 of the Act.
10. The notification requirements in Article 9
shall also apply to a natural person or legal entity to the extent it is entitled to acquire, to
dispose of, or to exercise voting rights in any
of the cases set out in the Article or a
combination of them.
(Voting rights acquired through agreement or
interest).
Transparency Rules.
11. Exempts shares provided to or by the
members of the ESCB in certain
circumstances from the notification
requirements imposed by Articles 9 and 10.
Transparency Rules.
12. Sets out the information that must be included
in the notification under Articles 9 and 10 and
includes provision on the timing of the
notification and when aggregation of holdings
required. Paragraph (6) requires the issuer to
make public all information contained within
a notification within 3 days.
Transparency Rules.
13. Requires the holders of financial instruments,
which are to be specified by the Commission,
to notify the issuer of their control of votes in
accordance with the requirements in Article 9.
Transparency Rules.
14. Requires an issuer of shares admitted to
trading on a regulated market to make public
the proportion of its own shares that it holds
when those proportions reach, exceed or fall
below the thresholds of 5% or 10%.
Transparency Rules: see in particular new
sections 89A and 89C of FSMA, inserted
by section 1266 of the Act.
15. Requires the Member State to ensure that an
issuer of shares traded on a regulated market,
makes public the total number of voting rights
and capital at the end of each month during
which the number changes.
Transparency Rules.
16. Requires issuers of securities to make public
information about any changes in the rights
attached to their securities and any new loan
issues and any guarantee or security in respect
of such loans.
Transparency Rules: see in particular new
sections 89A and 89C of FSMA, inserted
by section 1266 of the Act.
17. Requires issuers of shares admitted to trading
on a regulated market to treat their
shareholders, who are in the same position,
equally. It provides for information to be
distributed in particular ways and for
shareholders to be able to exercise their rights
in specified ways.
Transparency Rules.
18. Makes similar provision as that contained in
Article 17 but in respect of issuers whose debt
securities are admitted to trading on a
regulated market.
Transparency Rules.
19. Requires issuers to file information that they
are required to make public under the
Directive, with the FSA and permits the FSA
to publish that information itself. It also
requires issuers to inform the FSA and the
regulated market to which its securities are
admitted of any proposed change to its
instrument of incorporation.
Transparency Rules.
20. Sets out the rules for determining which
language the issuer must use to disclose
regulated information in various
circumstances.
Transparency Rules.
21. Requires issuers to disclose regulated
information in a manner ensuring fast access
to such information on a non-discriminatory
basis.
Also requires each Member State to have an
officially appointed mechanism for the central
storage of regulated information.
Transparency Rules.
22. Requires the competent authorities of the
Member States (for the UK it is the FSA) to
draw up guidelines to create an electronic
network at national level to share information
between the various competent authorities,
operators of regulated markets and national
company registers. Such guidelines must aim
to further facilitate public access to be
disclosed under this Directive, Directive
2003/6/EC (the Market Abuse Directive) and
Directive 2003/71/EC (Prospectus Directive).
The FSA will draw up guidelines in
accordance with the obligations under this
Article.
23. Enables the FSA to exempt issuers based in
third countries from certain disclosure
requirements if there are equivalent provisions
in the third country. Requires the FSA to
ensure that where a third country issuer is
regulated in the UK for EU purposes, any
information which may be important to the
public in the Community is disclosed in
accordance with Articles 20 and 21.
Transparency Rules.
24. Requires each Member State to designate a
central competent authority responsible for
ensuring that the Directive is applied and to
give that competent authority specified
powers which are necessary for the
performance of its functions.
Permits each Member State to designate a
competent authority for examining that
information is drawn up in accordance with
the relevant reporting framework.
The central competent authority in the UK
will be the FSA, by virtue of the
amendments being inserted into Part 6 of
FSMA.
The FSA already has various powers under
FSMA. Other powers for the FSA to
perform its functions are contained in new
FSMA sections 89H to 89N inserted by
sections 1267 and 1268 of the Act.
The Act provides power to designate a
competent authority for reporting
framework purposes by amending the
Companies (Audit, Investigations and
Community Enterprise) Act 2004. See
Schedule 15 (Part 2) of the Act.
25. Imposes a requirement for professional
secrecy on those who work for the competent
authority and requires cooperation between
the competent authorities of the various
Member States.
FSMA already contains provisions relating
to professional secrecy for those who work
for the FSA and the Companies (Audit,
Investigations and Community Enterprise)
Act 2004 also contains provisions in
relation to authorities appointed under that
Act.
26. Provides for host Member States to take
action in relation to infringements where an
issuer or security holder continues to infringe
the requirements of the Directive.
New section 100A of FSMA introduced by
section 1271 of the Act.
27. Sets out the committee procedure for the
Commission to make implementing measures
required by the Directive.
No implementing provision required.
28. Requires, without prejudice to the right of
Member States to impose criminal penalties,
Member States to ensure, in conformity with
their national law that at least the appropriate
administrative measure may be taken or civil
and/or administrative penalties imposed in
respect of the persons responsible.
Schedule 15 (Part 1) of the Act amends
section 91 of FSMA to enable the FSA to
impose financial penalties for breach of
the Transparency Rules.
29. Requires a right of appeal to the courts to be
in place.
No further implementation is required.
FSMA already makes provision for
appeals of FSA decisions to the Financial
Services and Markets Tribunal and to the
Court of Appeal.
30 – 35 These articles contain transitional and final
provisions, including the date by which the
Directive must be transposed – 20 January
2007.
No specific implementation is required for
most of these provisions. New sections
89B(4) and 89D(1) introduced by section
1266 of the Act make provision for
transitional arrangements.