New rules for issuers at OMX (1 July 2008)

Date 10 sep. 2008

 

On 1 July 2008, a new set of rules on ”Rules for issuers of shares” at OMX will take effect.

 

Chapter 3 of the rules – ”Disclosure Requirements for Issuers of Shares” – implies fundamental changes to the companies’ disclosure requirements. The changes imply that the companies must update their internal set of rules and their internal procedures and routines in order to enable the issuer to meet the new disclosure requirements.

 

This newsletter only points out the most important changes in the disclosure requirements for the Danish OMX-companies.

 

Structural changes

The rules imply a new structure. At the same time, ”disclosure requirements at the admission of shares to trading” is removed from OMX’s set of rules. In the future, Danish issuers of shares at OMX will, thus, be encompassed by one set of rules with the structure described below:

  1. Ordinary requirements
  2. Conditions for the admission of shares to trading
  3. Disclosure requirements for issuers of shares
  4. Special stock rules for issuers of shares
  5. Violation

Requirement for announcement of expectations is removed

The set of rules removes the special exchange requirements for the announcement of expectations in the issuers’ interim financial reports and annual financial reports. Thus, the special rules in accounting legislation for the announcement of expectations in the companies’ annual and interim financial reports still apply. It is emphasized that the interim financial reports (which are produced in accordance with the executive order on interim financial reports and IAS 34) must comment on changes in previous estimates/expectations, in case these no longer constitute a fair presentation.

 

Furthermore, the issuers are continuously obliged by the continuous correction duty in Section 27(1), item 3 and the codification hereof in item 3.1.1, 3.3.1 and 3.3.2 in OMX’s new set of rules, if expectations which have formerly been disclosed are no longer correct.

 

A practical consequence hereof is that the new rules for issuers who use the calendar year as financial year will not have practical relevance until the financial year 2009.

 

Moreover, the set of rules contains requirements for information on the assumptions and conditions on which the expectations are based.

 

The most important consequence of the new set of rules is that the issuers no longer need to be particularly specific in their propositions on expectations in the interim financial reports and annual financial report. It is, however, recommended that a change of an issuer’s disclosure policy based on the new rules is considered published for the market.

 

Duty of disclosure on takeover bids and other important circumstances

A new duty of disclosure to OMX, in connection with takeover bids and company announcements which may have significant effect on the market value, is introduced.

 

The duty of disclosure implies briefing if:

  • The company has made internal preparations for the introduction of a public buy order to buy securities in another issuer of listed securities and there is reason to expect that these preparations will result in a public buy order, or
  • The company knows that a buy order will be made on the company and if such public buy order has not been published in an announcement and there is reason to expect that the intention of making a public order is being carried out, or
  • It is the intention of the company to publish an announcement which is expected to have a particularly noticeable influence on the pricing of the securities.

Formal requirements for the announcement exist, and according to the comments on the new set of rules a notification may usually be made by way of a phone call to OMX’ Surveillance.

 

A notification of OMX may imply a selective disclosure of confidential information. It is therefore strongly recommended that the issuers, in order to secure documentation, either notify OMX in writing or carefully register the time at which the notification was given to OMX and the content of the notification. OMX is obliged to handle these inquiries with strict confidentiality.

 

Changes in the issuer’s management and accountant

The new set of rules implies that also suggestions for changes in the company’s board of directors must be announced. As regards suggestions for changes in the board of the company, an announcement hereof in the notice of a general meeting will suffice.

 

All other important changes in the management of the company (including in important subsidiary companies) must also be published. The announcement must contain information on the relevant person’s experience and former employment, which includes information on former and present management positions and relevant education, among other things.

 

Appointment and retirement of the company’s accountant must also be published.

 

Announcement of share-based payment programmes

The disclosure requirement is limited to share-based payment programmes. At the same time, the content requirements for the company announcement are changed.

 

Regardless of the fact that OMX no longer requires publication of extraordinary bonus schemes and the like for the board of directors, the management and other executives, a publication hereof will, normally, be a direct consequence of the disclosure requirements in Section 27 of The Securities Trading Act. In addition, a publication hereof will be in accordance with corporate governance recommendations.

 

Changes in the company’s identity

If, over a short period of time, significant changes in a company or its activities take place to such extent that the company may be considered to be a new company, the company must publish detailed information on these changes and the consequences hereof.

 

In such a significance evaluation a number of factors will, normally, be included. Typically, such factors will be changes in ownership structure, management, assets and if large acquisitions or divestments will result in such changes.

 

The rule thus catches so called “backdoor stock market listings”. It implies that an issuer subject to a change of identity will be obliged to publish a company announcement the content and scope of which comply with the requirements of the prospectus rules for the prospectuses which are prepared for listings/issues of shares.

 

Decisions on admission and deletion from trade

In future, issuers must, as soon as possible, publish a company announcement when it applies for the first time for admission of its securities for trade on OMX in Copenhagen or a secondary admission on another market. The same requirements apply when applying for deletion.

 

Issuing of securities

The issuers must publish any suggestion and any decision to change the share capital.

 

Compared to the rules now in force, the new set of rules does not contain as thorough an enumeration of the contents of the announcements which must be published in connection with the issuing of securities.

 

The new rules only require the company announcement to contain information on the conditions for issue, including on (i) the cause of the issue, (ii) the expected proceeds, (iii) offering price and (iv), if relevant, who the issue is directed at.

 

Moreover, the issuer must publish the development of the issue. Among other things, such publication must include information on whether the issue is fully subscribed. Normally, a repetition of the subscription price will also be of relevance, especially in cases where a price fixed in advance has not been used (bookbuilding-method).

 

In the new set of rules, it is no longer required that changes in capital position are prepared to take place at a time which does not involve the publication of an announcement hereof just before or just after the announcement of financial results or annual reports.

 

Financial calendar

In future, the financial calendar must be published prior to each financial year. This is different from the rules formerly applying, according to which the financial calendar was to be published within the first month of the calendar year.

 

The financial calendar must include a statement on the dates of publication of (i) annual financial statements, (ii) interim financial reports, (iii) period announcements, (iv) the date of the ordinary general meeting and (v) the expected week of publication of the annual report.

 

Annual financial statements and interim financial reports

According to the new set of rules, the issuer may choose to publish annual financial statements based on either the revised or the unrevised annual report.

 

If the annual financial statement is based on a revised annual report, the announcement must be published no later than three months after the expiry of the accounting period.

 

The new set of rules also contains fewer requirements for the contents of the annual financial reports and interim financial reports than the rules presently applying, and in this connection, the forms used today, which place detailed content requirements on these announcements, are abolished.

 

Requirement for homepage

In the future, the OMX-companies are required to create a homepage on which their company announcements must be available. The announcements must be available on the homepage for 3 years, and the announcement of financial results must be available for 5 years.

 

Transactions with related companies

Companies are still required to publish an announcement on transactions between the company and its related companies which are not conducted as part of normal business operations, as soon as possible.

 

The new set of rules adds that the duty of disclosure only applies, if the transaction is important to the parties involved.

 

A new and more elaborate definition of what is considered “related companies” is introduced. 

 

Information on purchase and sale of companies and activities

In future, the information on purchase and sale of companies or activities must be much more detailed than what is presently the case and must include information on (i) price, (ii) form of payment, (iii) relevant information on the company or activity purchased or sold, (iv) the reasons for the transaction, (v) the expected consequences for the operation of the company, (vi) the time-frame of the transaction and (vii) the main terms or conditions of the transaction.

 

If a purchase of a company or activities is in question, the announcement must also contain a description of the most important business areas as well as result history and economic position.

 

Decisions made at general meetings

Decisions made at general meetings, in future, only have to be published if they are important. That means that there is no obligation to publish, for example, decisions of a more technical nature.

Decisions, in which the board of directors is authorized to make decisions on a subject, such as the issuing of securities or repurchase of own shares, must always be published. In such cases, the company must also publish the board’s decision to utilize the authorization.


If you have questions or comments regarding the above, please contact attorney Dan Moalem (dmo@mwblaw.dk) or assistant attorney Christian RJ. Nielsen (crn@mwblaw.dk).


The above does not constitute legal counselling, and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.