The Luxembourg law of 10 May 2016 (the "Amending Law") implementing amendments to the Luxembourg transparency law for issuers of securities has entered into force on 15 May 2016.
The Amending Law implements Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 1 (the "Amending Directive") and Article 1 of Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014 2 and amends the Luxembourg law of 11 January 2008 on transparency requirements of issuers (the "Transparency Law") and, on one point only, the Luxembourg law of 10 July 2005 on prospectuses for securities. The Grand Ducal Regulation dated 11 January 2008 on transparency requirements of issuers of securities is also amended by a new Grand Ducal Regulation dated 10 May 2016.
- For issuers for which Luxembourg is the home Member State: reduction of administrative burden by the removal of certain transparency requirements.
- For foreign issuers for which Luxembourg is the home Member State and who are active in extractive industries or the logging of primary forests: new requirement to publish a report on payments to governments.
- For investors: notification obligations are now imposed on investors taking exposure on shares via a much wider range of financial instruments, the definition of which is considerably widened, and introduction of aggregation rules.
- The Commission de surveillance du secteur financier ("CSSF") receives significant new injunction and sanction powers.
- Changes are also introduced with respect to the disclosure of the home Member State.
1. Main changes for issuers with Luxembourg as home Member State:
- Quarterly financial reports:
The requirement to publish interim management statements or quarterly financial reports is now formally abolished.
In its press release of 27 November 2015 the CSSF had already announced it would not take any enforcement action against issuers not publishing quarterly reports or interim statements for the period ending September 30, 2015 or thereafter. This was because the deadline for implementing the Amending Directive expired on 26 November 2015.
- Reports on payments to governments:
Issuers for which Luxembourg is the home Member State for purposes of the Transparency Directive and which are active in the extractive industries or the logging of primary forests must, beginning with their financial year starting on or after 1st January 2016, publish an annual report on payments made to governments. That report must comply with the requirements set out in Directive 2013/34/EU 3.
For Luxembourg incorporated issuers, this requirement has already been introduced into company law by a law of 18th December 2015 4.
The deadline for publishing such report for issuers subject to the Transparency Law is 6 months after the end of the financial year (versus 12 months under article 340sexies of the law of 10th August 1915 on commercial companies).
- Extension of publication deadline and of the period during which information must be available:
The deadline for publishing half-yearly financial reports is extended from 2 to 3 months after the end of the reporting period. The period during which annual financial reports and half-yearly financial reports must remain publicly available is extended from 5 to 10 years. Reports on payments to governments must also remain available during 10 years.
- New bond issues and proposed changes to articles:
The obligations to disclose new bond issues to the market and to communicate to the CSSF proposals to amend the issuer's articles of association are abolished. In its November 27, 2015 press release, the CSSF had, likewise to what is mentioned above, indicated it would not take enforcement action against issuers who failed to comply with these requirements after 26 November 2015. It must be noted though that should a bond issue or a proposed change to the articles constitute non-public price sensitive information, issuers will remain liable to publish such information.
- New home Member State rules
Issuers of debt securities the denomination per unit of which is at least 1,000 euros have the option to select their home Member State.
Issuers of securities who have the option to select their home Member State must disclose it to (i) the competent authority of the Member State where they have their registered office (if they are organised within the European Union), (ii) the competent authority of the home Member State and (iii) the competent authorities of all host Member States.
These issuers must publish their choice within 3 months from the date the issuers' securities are first admitted to trading on a regulated market, failing which the home Member State is deemed to be the Member State(s) where the securities are admitted to trading on a regulated market.
2. Changes for investors:
- Significant broader list of financial instruments triggering the obligation to notify the acquisition or disposal of major holdings:
Individuals and legal entities will be subject to the notification obligations when they, directly or indirectly, hold:
(a) financial instruments which, on maturity, give the holder, under a formal agreement (that is, an agreement which is binding under applicable law), either the unconditional right to acquire or the discretion to acquire already issued shares with voting rights of an issuer whose shares are admitted to trading on a regulated market; and/or
(b) financial instruments other than those included in (a) but which are referenced to issued shares with voting rights and whose economic effect is similar to that of the instruments referred to in (a). The instruments under (b) will be in scope irrespective of whether they confer a right to physical or cash settlement (article 12 of the amended Transparency Law).
These financial instruments include transferable securities, option agreements, futures, swaps, forward rate agreements, contracts for differences and any other agreements with a similar economic effect. The European Securities and Markets Authority (ESMA) has drawn up a list of financial instruments subject to notification requirements 5. With respect to financial instruments held before 15 May 2006, the CSSF has in its press release of 17 May 2016 extended the deadline by which these holdings will need to be notified to 31 May 2016.
Contrary to the previous situation, investors holding both shares with voting rights and qualifying financial instruments, will now need to aggregate the underlying voting rights and to notify such holdings if the aggregate number of voting rights reaches or exceeds (or falls below) a reporting percentage. The CSSF has by its press release of 17 May 2016 extended the deadline to 31 May 2016 for holders coming into an obligation for notifying major holdings as a result of aggregation.
- Calculation of voting rights in case of qualifying financial instruments:
In principle, the number of voting rights must be counted by reference to the full notional amount of shares underlying qualifying financial instruments. However, where a financial instrument provides exclusively for a cash settlement, the number of voting rights is calculated on a "delta-adjusted basis" by multiplying the notional amount of underlying shares by the delta of the instrument.
Investors must aggregate and notify all financial instruments relating to the same underlying issuer. Long positions may not be netted with short positions.
- Trusts and entities without legal personality:
The notification obligations are extended to trusts and entities without legal personality.
- Notification period:
The 4 Luxembourg6 stock exchange days period for notification now starts on the day following the day on which the trigger event occurs (typically, but not limited to, the day of the acquisition or sale of shares or entry into of a qualifying financial instrument), irrespective of whether that trigger event day is a Luxembourg stock exchange day or not.
- Additional exemption:
Voting rights attached to shares acquired for stabilisation purposes (in accordance with Commission Regulation (EC) No 2273/2003 of 22 December 20037) are excluded from the scope of the mandatory notification of acquisition or disposal of major holdings provided that the voting rights attached to those shares are not exercised or otherwise used to intervene in the management of the relevant issuer.
3. Extension of CSSF powers:
The Amending Law increases the powers of the CSSF to ensure that the provisions of the Transparency Law are complied with.
The CSSF now has the express power in case of non-compliance with the Transparency Law to require (i) that regulated information be re-published or re-notified, (ii) that a corrected version of the regulated information be published or notified or (iii) that the correction or modification be made in the publication or notification of subsequent regulated information.
The law now specifies that in addition to the power to order issuers or holders of shares or other financial instruments as well as certain other persons to comply with the law, the CSSF also has the power to enjoin them to cease the conduct in breach and to desist from any repetition of that conduct.
The Amending Law also clarifies that the CSSF has the power to direct the withdrawal of securities from trading in case of breach or suspected breach of the Transparency Law.
The Amending Law has implemented the penalties provided for by the Amending Directive. In case of failure to make public or notify regulated information or notify the acquisition or disposal of a major holding within the required time limit, the CSSF may impose the following administrative pecuniary sanctions:
(i) in case of legal entities, fines may reach the higher of (i) 10,000,000 euros or 5% of their annual turnover (on a consolidated basis for groups) or (ii) twice the amount of the profits gained or losses avoided because of the breach, where those can be determined;
(ii) in case of individuals, fines may reach the higher of (i) 2,000,000 euros or (ii) twice the amount of the profits or losses avoided because of the breach, where those can be determined.
In the event of non-compliance by a legal entity, sanctions can be applied to the members of its administrative, management or supervisory bodies, and to any other individuals who are responsible for the non-compliance under applicable law.
5. Publication of sanctions:
As required by the Amending Directive, every sanction decision of the CSSF for non-compliance with the Transparency Law shall be published on the CSSF website. The publication shall include the type and nature of the non-compliance and the identity of the individuals and legal entities responsible for therefor.
Such publication may be delayed or be made on anonymous basis (i) where, in the event that the sanction is imposed on an individual, publication of personal data is determined to represent a disproportionate sanction; (ii) where publication would seriously jeopardize the stability of the financial system or an ongoing official investigation; or (iii) where publication would, in so far as it can be determined, cause disproportionate and serious damage to the institutions or individuals involved.
1 Directive 2013/50/EU of the European Parliament and of the Council of 22 October 2013 amending Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (the “Transparency Directive”), Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC.
2 Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014 amending Directives 2003/71/EC and 2009/138/EC and Regulations (EC) No 1060/2009, (EU) No 1094/2010 and (EU) No 1095/2010 in respect of the powers of the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority).
3 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC.
4 Law of 18 December 2015 amending the law of 10th August 1915 on commercial companies and the law of 19th December 2002 on the register of commerce and the accounting and annual account of undertakings and implementing Directive 2013/34/EU. For the consolidated report: articles 340 ter et seq. of the law of 10 August 1915 on commercial companies. For the stand alone report: article 72 septies of the law of 19 December 2002 on the register of commerce and companies and the accounting and annual accounts of undertakings, as amended.
5 ESMA/2015/1598, Indicative list of financial instruments that are subject to notification requirements according to Article 13(1b) of the revised Transparency Directive, 22 October 2015.
6 Including for issuers which are not listed in Luxembourg.
7 Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments.