08 May 2002

Commission launches final consultation on transparency obligations of publicly traded companies

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The Commission launched a second and final round of open consultations on updating existing rules on the information which has to be regularly provided by companies whose securities are traded on regulated markets such as stock exchanges. The Commission intends to submit a proposal for new legislation to the European Parliament and the Council at the end of 2002.

The consultation document sets out a revised approach to disclosure requirements for issuers whose securities are traded on regulated markets. This covers:

Periodic obligations to provide financial information (annual, half-yearly and quarterly financial reports)

Ongoing obligations, such as the requirement to disclose changes in the capital structure (including voting rights) of companies issuing securities as well as changes to companies' internal rules on matters such as employee share schemes and managers holding shares and stock options, etc

Information obligations ensuring equal treatment amongst holders of securities (including the chance to participate in shareholder meetings). This touches on corporate governance issues.

The main issues on which the Commission services are seeking contributions concern:

Financial reporting: The new consultation paper suggests a more differentiated approach based on the size of the companies issuing equity. Those whose annual turnover exceeds € 25 million would have to provide, on a quarterly basis, a condensed set of financial statements and a management report. Smaller equity issuers would also report quarterly, but only on net turnover and profit or loss before and after deduction of tax. Issuers of debt securities whose shares were not admitted to a regulated market could be subject only to half-yearly reporting requirements.

Treatment of security holders: to improve participation in shareholder meetings, the Commission services are considering reinforcing shareholders' existing rights to equal treatment. Shareholders could be allowed to vote by proxy. More importantly, the Commission services invite views on the possibility of introducing electronic voting. It is also awaiting comments on this from the High Level Group of Company Law Experts chaired by Jaap Winter in its next report due later in the summer.

Disclosure of voting and capital structures: disclosure on the acquisition or disposal of major holdings in companies is an important element in an integrated European securities market. The Commission services are therefore considering:
- lowering the initial threshold for disclosure from 10% to 5% of the voting rights
- introducing further thresholds of 15% and 30% of voting rights, which would trigger an obligation to disclose to the public acquisitions or disposals of holdings
- standardising/shortening to five calendar days the current time limits within which the owner and the issuer must disclose the relevant information
- requiring the disclosure of complete information on the contents of agreements amongst shareholders.

Basic means for disseminating information: the Commission services are considering clarifying the issuer's direct legal obligation to provide information to the public, through Community rules on some basic ways information must be made available, such as on the issuer's website, and as at present - in newspapers. It would be left to the market to decide whether to devise any additional means.

Responses to the consultation document should be sent by 5 July 2002

Cover Note
Detailed Information
Summary of last Consultation
Commission press release

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