Continuing Obligations for Listed Companies

Main Market Companies

Listing Principles (LR7)

The Listing Rules contain two overreaching “listing principles” applicable to all companies with a premium or standard listing, plus six “Premium Listing Principles” applicable to issuers with premium listings of equity securities on the Main Market only. These listing principles are enforceable by the FCA as “rules” and are designed to ensure that issuers adhere both to the spirit and to the letter of the Listing Rules. The FCA has emphasised that whilst disciplinary cases may be brought in conjunction with action for breach of a specific rule or rules, it is willing to take enforcement action on the basis of the listing principles alone.

The listing principles require a relevant issuer to:

i. Listing principle 1: Take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations +
The FCA has clarified that this listing principle is limited to a listed company’s obligations under the Listing Rules, Disclosure Rules, Transparency Rules and corporate governance rules.

FCA guidance has determined that the focus of this listing principle is on listed companies having adequate procedures, systems and controls in relation to:

  • identifying whether any obligations arise under Chapters 10 and 11 of the Listing Rules (i.e., announcements and circulars in relation to significant transactions and related party transactions); and
  • timely and accurate disclosure of information to the market (LR 7.2.2G).

The timely and accurate disclosure of information to the market is a key obligation of listed companies, and for these purposes FCA guidance provides that a listed company with a premium listing of equity securities should have adequate systems and controls to be able to ensure that:

  • it can properly identify information that requires disclosure under the Listing Rules or DTR in a timely manner; and
  • any such information is properly considered by the directors and such consideration encompasses whether the information should be disclosed (LR 7.2.3G).

In order to satisfy their obligations for dealing with inside information, the GC100 Guidelines (see section iii below) recommend that listed companies implement compliance procedures designed to:

  • lead to the identification of potential inside information, as it arises;
  • ensure that potential inside information that has been identified is reported and assessed by the appropriate personnel to determine whether it should be announced; and
  •  ensure that announcements are accurate and complete.
ii. Listing principle 2: Deal with the FCA in an open and co-operative manner +
This listing principle supplements LR 1.3.1R(3) of the Listing Rules, which states that an issuer must provide the FCA as soon as possible with“any other information or explanation that the FCA may reasonably require to verify whether listing rules are being, and have been, complied with”.

In July 2013, in light of the imposition by the FCA of a financial penalty of £14 million on Prudential plc for failing to deal with it in an open and co-operative manner in breach of listing principle 6, the UKLA provided guidance on this listing principle, stating that the obligation under the principle is broader than simply requiring issuers to ensure that they deal with the FCA in an open and co-operative manner on ongoing matters. In particular, the principle also requires issuers to approach the FCA in relation to certain types of significant transactions (including, by way of example, reverse takeovers and Class 1 disposals by issuers in severe financial distress). The FCA advises that issuers who are unclear on the application of this listing principle to a transaction should consult the FCA “at the earliest possible stage”1.

iii. Premium Listing Principle 1: Take reasonable steps to enable its directors to understand their responsibilities and obligations as directors +

This requires listed companies to operate appropriate training programmes for directors covering their obligations under the Listing Rules and the DTR.

This listing principle requires the listed company to take “reasonable steps”, and breach of this principle will therefore be assessed by the FCA by reference to an objective test.

In October 2015, the GC1002 published updated guidelines for establishing procedures, systems and controls to ensure compliance with the Listing Rules (the “GC100 Guidelines”). Compliance with these guidelines is not mandatory, but they do serve as useful “best practice” recommendations. In order to comply with listing principle 1, the GC100 Guidelines recommend that issuers ensure that:

  • all directors receive an up-to-date induction programme on joining the board3 and a memorandum on their duties as directors and on the DTR (the GC100 Guidelines also recommend that issuers ask directors to confirm in writing that they have read and understood this memorandum);
  • all directors attend a regular programme of ongoing training to update and refresh their skills and knowledge; and
  • clear written records are kept of all training given to directors and of any decisions taken or relevant changes implemented by directors following such training.
iv. Premium Listing Principle 2: Act with integrity towards holders and potential holders of its premium listed equity securities +
There is clearly an overlap here with the DTR and the “market manipulation” regime4, and the behaviour targeted by this listing principle could include any deliberate act to mislead shareholders or potential shareholders.
v. Premium Listing Principle 3: All equity shares in a class that has been admitted to premium listing must carry an equal number of votes on any shareholder vote +
The FCA’s stated intention behind Premium Listing Principles 3 and 4 is to prevent attempts by issuers to circumvent the various protections in the Listing Rules that apply to premium listings, via structural changes to share classes and constitutions. The FCA’s guidance on both of these principles is that it is seeking to prevent flagrant abuses rather than focus on borderline cases. Premium Listing Principle 3 is aimed at preventing super-voting shares from being included in premium listed classes of shares via issuers’ constitutions.
vi. Premium Listing Principle 4: Where a listed company has more than one class of equity shares admitted to premium listing, the aggregate voting rights of the shares in each class should be broadly proportionate to the relative interests of those classes in the equity of the listed company +
Premium Listing Principle 4 is intended to prohibit artificial structures involving multiple classes of shares with different voting powers. With regard to the application of Premium Listing Principle 4, LR 7.2.4G provides guidance on the factors that the FCA will take into account when assessing whether voting rights attaching to different classes of premium listed shares are proportionate. These include, without limitation, the extent to which the rights of the classes differ other than voting rights (e.g., dividend or return-of-capital rights), the extent of dispersion and liquidity of the classes, and the commercial rationale for the difference in the rights.
vii. Premium Listing Principle 5: Ensure that it treats all holders of the same class of its listed equity securities which are in the same position equally in respect of the rights attached to such listed equity securities +
The reference to holders who“are in the same position” retains some flexibility for issuers that are restricted by the laws of other jurisdictions from treating all shareholders in exactly the same way.

Some issuers have sought to include compulsory acquisition or mandatory redemption provisions in their articles that would typically be triggered upon a transfer of shares to a new shareholder, which may cause the company to suffer, for example, a “pecuniary, tax, financial or other material disadvantage”5. Not surprisingly, the FCA has recommended6 that any such powers be considered carefully to ensure that they do not offend the “equality of treatment” principle. The FCA currently takes the view that a compulsory acquisition power is not likely to contravene the “equality of treatment” principle, where shareholders are selected according to a fully disclosed pre-set formula (rather than, for example, by management discretion). Any such power, however, would need to be properly defined and disclosed in the issuer’s circular or prospectus so as to enable shareholders to understand precisely the circumstances and manner in which it was intended to operate.

viii. Premium Listing Principle 6: Communicate information to holders and potential holders of its listed equity securities in such a way as to avoid the creation or continuation of a false market in such listed equity securities +
This listing principle overlaps with the DTR in particular. In response to market concerns regarding the relationship between this listing principle and the DTR, the FCA has provided guidance stating that this listing principle is designed to remind issuers, at a high level, that accurate and timely communication with the market is an important part of the UK regulatory regime. The FCA has emphasised that it is not intended to cut across or change existing rules relating to disclosure and that it does not go beyond or require more than the detailed Listing Rules or DTR. In particular, the FCA has clarified that this listing principle does not require an issuer to prevent inappropriate market reaction, as this would extend the listing principle to matters outside an issuer’s control.
When the listing principles were first introduced, opinion was divided on the merits of adding overarching “principles” to the Listing Rules. It was accepted that the use of “general principles” in the City Code on Takeovers and Mergers provided a useful context for the interpretation of specific rules and where no particular result was dictated. However, there was a concern that the FCA might exploit the inherent ambiguity in the drafting of the listing principles and might use them to pursue issuers in the absence of a specific breach. In addition, the listing principles were criticised, as they duplicate, in some respects, the more detailed rules.

The FCA responded to market concerns by confirming that it would exercise enforcement powers “reasonably and proportionately” and that “in policy terms, the listing principles are not intended to apply different standards and processes to issuers than are expected under the existing rules”. Guidance in the Listing Rules confirms that the principles should be interpreted together with the underlying rules and guidance and that they are designed to assist issuers in identifying their obligations under the underlying rules. The FCA has also clarified that the principles do not expand the scope of the rules, particularly in the case of detailed provisions such as the DTR. Nonetheless, these general principles to the Listing Rules require issuers to take a broader view of their regulatory obligations and undoubtedly make it more difficult for any issuers wishing to circumvent the specific rules to do so without consequence. As directors of issuers are likely to be involved in establishing adequate systems and controls under the listing principles, they may be “knowingly concerned” in breaches of the Listing Rules (which include the listing principles) if any systems and controls are inadequate, and they may be held personally liable to disciplinary action for breach under FSMA.

Disclosure Rules and Transparency Rules

i. Structure of the DTR +

The Disclosure Rules and Transparency Rules (the "Pre-MAR DTR") implemented the EU’s Market Abuse Directive (2003) and the Transparency Directive (2004) in the UK. The Disclosure Rules were first introduced in 2005, with the Transparency Rules following on 20 January 2007. The Pre-MAR DTR underwent significant changes on 3 July 2016 as a result of the introduction of the Market Abuse Regulation ("MAR") coming into force. These include:

  • the Pre-MAR DTR have been renamed "Disclosure Guidance and Transparency Rules" ("DTR"). The sections relating to disclosure in the DTR are now guidance only as opposed to rules and the substantive rules are instead found in MAR;
  • the Pre-MAR DTR 1 to 3 have been largely removed and replaced with signposts to the relevant provisions of MAR; and
  • the Model Code (which was set out in Annex 1 to LR 9) has been repealed and replaced with general guidelines on restricting dealings with securities by "persons discharging managerial responsibilities".

Where relevant, this Part B will discuss the disclosure obligations that have been introduced by MAR and outline where these obligations differ from those under the pre-MAR DTR.

DTR 2 and 3 contain the main body of the Disclosure Guidance regulating both the disclosure of information to the market and the notification obligation of issuers, PDMRs, and their connected persons in relation to share dealings. DTR 1A, 4, 5 and 6 set out the Transparency Rules covering periodic financial reporting, vote holder/issuer notification rules and certain continuing obligations, and access to information. Finally, DTR 1B, 4 and 7 contain what are commonly referred to as the “FCA’s corporate governance rules”. These rules are discussed in more detail in this chapter.

The implementation of the Transparency Directive Amending Directive ("TDAD") on 26 November 2015 introduced a number of changes to the DTR including: an obligation on issuers to declare their home member state under DTR 6.4; extending the period within which half yearly reports must be published to three months after the end of the financial period and replacing the definition of "qualifying financial instrument" in DTR 5.3 to reflect the wording in the impending Transparency Directive.

ii. Disclosure of Inside Information +
The disclosure obligations for issuers under the DTR and MAR are designed to ensure that there is prompt and fair disclosure of relevant information to the market. Issuers are under an express responsibility to ensure that inside information is made public in a manner which enables fast access and complete, correct, and timely assessment of the information. This is coupled with a further requirement that issuers must not combine the disclosure of inside information with the marketing of activities7.

Article 17(1) MAR provides that issuers must inform the public as soon as possible of inside information which directly concerns the issuer, unless Article 17(4) MAR applies (which allows the disclosure of inside information to be delayed in certain circumstances)8.

  • Definition of “inside information” ( Article 7 MAR and DTR 2.2.4G to 2.2.8G)

“Inside information” is information of a precise nature that:

  • has not been made public;
  • relates directly or indirectly to one or more issuers or to one or more financial instruments; and
  • would, if it were made public, be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments9.

For these purposes, information will be “precise” if it indicates a set of circumstances which exist or may reasonably be expected to come into existence (or an event that has occurred or may reasonably be expected to occur), where it is specific enough to enable a conclusion to be drawn as to the possible effect of those circumstances or that event on the prices of the financial instruments. The test therefore requires issuers to form a judgment on the likelihood of the circumstances taking place and whether there is sufficient certainty as to what will happen to enable the effect of the information to be measured.

Central to the operation of the “inside information” test is the issue of price sensitivity. In determining the likely price significance of information, Article 7(4) MAR states that an issuer should consider whether it is information that a reasonable investor would be likely to use as part of the basis of his or her investment decisions. 

Note that MAR extends the scope of the market abuse regime by providing specific definitions of inside information for commodity derivatives, emissions allowances and for persons charged with the execution of orders concerning financial instruments (and derivative instruments in relation to such products).

DTR 2.2.4G(2) indicates that there is no figure (percentage change or otherwise) that can be set for any issuer when determining what constitutes a significant effect on the price of the financial instruments, as this will vary from issuer to issuer. Guidance on the operation of the “reasonable investor test” requires an issuer to take account of the fact that the significance of information will vary between issuers and depend on a variety of factors, such as the issuer’s size, recent developments, and market sentiment about the issuer and the sector in which it operates. In addition, the issuer is to assume that a reasonable investor will make investment decisions relating to the investment to maximise his economic self-interest10.

Furthermore, any assessment should take into consideration the anticipated impact of the information in light of the totality of the issuer’s activities, the reliability of the source, and other market variables. Information that is likely to be considered relevant to a reasonable investor’s decision includes information that affects:

  • the assets and liabilities of the issuer;
  • the performance or expectation of performance of the issuer’s business;
  • the issuer’s financial condition;
  • the course of the issuer’s business;
  • major new developments in the issuer’s business; and
  • information previously disclosed to the market11.

  • Timing of disclosure

Subject to a very limited ability to delay disclosure, MAR provides that any required announcement must be made “as soon as possible”.

Guidance under the DTR (DTR 2.2.8G) requires the issuer’s directors to carefully and continuously monitor any changes in the company’s circumstances that may mean that an announcement is required. Compliance with the DTR will therefore require an issuer’s executive officers to monitor performance and give consideration to whether there has been a change in the company’s expectation as to its performance. They must call to the attention of the board any material change in expectation as soon as possible so that the board may review it and make a formal decision on any required announcement. The FCA has specifically reiterated the need for company directors to consider their general disclosure obligations (under Article 17(1) MAR) as regards to any potential inside information arising out of such regular monitoring of, for example, their companies’ cash flow position, available bank or finance facilities, and covenant compliance. When changes in the company’s circumstances are under consideration, a listed company should also consider consulting its financial advisers as early as possible.

Note that the FCA is not likely to regard the inability physically to convene a full board meeting as justifying a delay in releasing inside information. Most issuers can delegate authority to make “emergency” announcements to a small number of directors, who can quickly agree a course of action during a telephone meeting. Where an issuer is faced with an unexpected event, it may be able to issue a holding announcement.

  • Unexpected events and holding announcements

Whilst, as a general rule, an issuer must announce all inside information in its possession as soon as possible, where it is faced with an unexpected and significant event, a short delay may be acceptable if necessary to clarify the situation (DTR 2.2.9G). The duration of any acceptable delay will depend on the circumstances in question. However, this will be judged by the FCA with the benefit of hindsight, so it will be important for an issuer to be able to demonstrate that it reacted reasonably and expeditiously to the event in question.

Guidance under the DTR states that an issuer should make a holding announcement where it believes there is a danger that inside information is likely to leak out before the facts and their impact can be confirmed. In such cases, the announcement should contain as much detail of the subject matter as possible, the reasons why a fuller announcement could not be made and an undertaking to announce further details as soon as possible (DTR 2.2.9G).

Where the issuer is unable or unwilling to make a holding announcement, trading of its securities may be suspended until it is in a position to make such an announcement (DTR 2.2.9G(3)). Note that an issuer whose trading is suspended must still comply with the applicable MAR. An issuer that is in any doubt about the timing of its disclosure obligations should consult the FCA at the earliest opportunity.

  • Communication with third parties

FCA guidance (DTR 2.2.10G) acknowledges that many issuers provide unpublished information to third parties such as analysts, employees, credit-rating agencies, finance providers and major shareholders, often in response to queries from such parties. Whilst accepting that the fact that information is unpublished does not in itself make it inside information, the guidance emphasises that any unpublished information which does constitute inside information may be disclosed only in accordance with the DTR, and issuers must ensure compliance at all times.

  • Publication on an issuer’s website (Article 17(1) MAR)

The general disclosure obligation under Article 17(1) MAR requires that an issuer must, for a period of five years following publication, post on its website all inside information that it is required to disclose publically. Note that this is a more onerous requirement than the equivalent obligation under Pre-MAR DTR 2.3.5R (which has now been repealed), which only required information to be published on the website for one year. ESMA's Final Report on the draft technical standards states that all information to be published on a website must appear in an "easily identifiable section of the website". The Law Society has clarified that issuers can comply with the requirement by posting the information on the section of their website that contains all of the regulatory information12. Under Article 17(10) MAR, ESMA is tasked with developing technical standards on the public disclosure of information which will be submitted to the Commission for eventual adoption. These draft standards are likely to provide further technical information regarding the publication of information on an issuer's website. ESMA published its Final Report on the draft technical standards on 28 September 2015 and it is currently with the Commission for approval.  

iii. Delaying Disclosure; +

Article 17(4) MAR an issuer may delay public disclosure of inside information so as not to prejudice its legitimate interests where:

  • immediate disclosure is likely to prejudice the legitimate interests of the issuer;
  • delay of disclosure is not likely to mislead the public; and     
  • the issuer is able to ensure the confidentiality of the information.

MAR introduces a further requirement that an issuer must notify the FCA in writing of its decision to delay an announcement immediately after the information is disclosed to the public. The notification is made using an online form and must contain certain prescribed information such as the date and time of the decision to delay disclosure and the identities of the people responsible for making that decision. The draft technical standards published by ESMA also set out the requirements for the internal records that an issuer must maintain when delaying disclosure. MAR also requires issuers to provide a written explanation of the decision to delay but currently the FCA proposes that this information will only need to be provided upon request. In any event, it is essential that issuers keep clear and comprehensive records of any decisions to delay disclosure of inside information.

Whilst accepting that “delaying disclosure of inside information will not always mislead the public”, the FCA has emphasised that developing situations should be monitored in case a disclosure is required if circumstances change. This reinforces the guidance to the directors under DTR 2.2.8G to continuously monitor circumstances to ensure compliance with the DTR.

In applying Article 17(4) MAR, legitimate interests may, in particular, relate to the following nonexhaustive circumstances:

  • negotiations in course or related elements where the outcome or normal pattern of these negotiations would be likely to be affected by public disclosure. In particular, where the issuer’s financial viability is in grave and imminent danger (although not within the scope of insolvency law), public disclosure of the information may be delayed for a limited time where public disclosure would seriously jeopardise the shareholders’ interests by undermining the conclusion of specific negotiations designed to ensure the issuer’s long-term financial recovery (note that this does not allow an issuer to delay public disclosure of the fact that it is in financial difficulty or of its worsening financial condition but is limited to the fact or substance of the negotiations to deal with such a situation);

  • with regard to dual-board structures only, decisions taken or contracts made by the issuer’s management body that need approval of one of the issuer’s other bodies to become effective, where the organisation of the issuer requires separation between these bodies, provided that a public disclosure of information before approval, together with the simultaneous announcement that this approval is still pending, would jeopardise the public’s correct assessment of the information (as UK companies typically have a unitary-board structure, this limb is of little use in the UK)13; and

  • where the company or a member of its group has been in receipt of liquidity support by the Bank of England or by another central bank14.

Pursuant to Article 17(11) MAR, ESMA published its final report on the guidance on the legitimate interests of issuers to delay inside information on 28 September 2015. In addition to the first two scenarios detailed above ESMA has also identified the following situations as ones in which the legitimate interests of the issuer could be prejudiced by the disclosure of information to the public:

  • where the issuer has developed a product or invention and the immediate public disclosure of such information may jeopardise the rights of the issuer;
  • where the issuer is planning to buy or sell a major holding in another entity and the disclosure of such information would jeopardise the conclusion of the transaction; and
  • where a transaction previously announced is subject to a public authority's approval, and such approval is conditional on additional requirements, where the immediate disclosure of those requirements will likely affect the ability for the issuer to meet them and therefore prevent the final success of the transaction.

ESMA has issued a non-exhaustive indicative list of the situations in which delay of disclosure of inside information is likely to mislead the public more particularly, where the inside information whose disclosure the issuer intends to delay is:

  • different from the previous public announcement of the issuer on the matter to which the inside information refers to;
  • or regards the fact that the issuer's financial objectives are not likely to be met, where such objectives were previously publicly announced; or
  • in contrast with the market's expectations, where such expectations are based on signals that the issuer has previously sent to the market, such as interviews, road shows or any other type of communication organised by the issuer or with its approval.

In any of these circumstances, immediate and appropriate disclosure is always necessary and mandatory however. As stated in the ESMA guidelines, there will be other circumstances where delay in disclosure would mislead the public.

The guidance given by the FCA is that a company should not be obliged to disclose “impending developments” that could be jeopardised by premature disclosure. Whether or not a company has a legitimate interest that would be prejudiced by the disclosure of certain inside information is an assessment which must be made by the company in the first instance. However, the FCA considers that other than in relation to “impending developments” or matters described above, there are unlikely to be other circumstances where delay would be justified15. In November 2015 the FCA proposed removing this assertion in order to clarify that issuers could have a
legitimate reason to delay disclosure in other situations. Whatever the rationale, where an issuer decides to delay disclosure, it should follow the steps set out below.

In summary, and as a matter of good practice, an issuer considering delaying disclosure should:

  • satisfy itself that the negotiations or impending developments would be likely to be prejudiced by early disclosure;
  • satisfy itself that nondisclosure would not be likely to mislead the market;
  • confirm that recipients of the inside information owe a duty of confidentiality to the issuer;
  • prepare an internal form which details why the delay is legitimate;
  • prepare a notification to the FCA in the prescribed form stating that it is delaying disclosure;
  • monitor leaks and other changes in circumstances to determine whether an obligation to make an announcement has been triggered; and
  • prepare a holding announcement for immediate release in the event of an actual or likely breach of confidentiality.
iv. Liquidity Support +

Article 17(5) MAR replaces Pre-MAR DTR 2.5.5AR in relation to liquidity support but the content broadly remains the same: it may be appropriate to allow the delay of the disclosure of inside information by credit or financial institutions in order to preserve the stability of the financial system. The disclosure of inside information, including information which is related to a temporary liquidity problem and, in particular, the need to receive temporary liquidity assistance from a central bank or lender of last resort, may be delayed provided that:

  • the disclosure of the inside information entails a risk of undermining the financial stability of the issuer and of the financial
  • it is in the public interest to delay the disclosure;
  • the confidentiality of that information can be ensured; and
  • the FCA has consented to the delay on the basis that the three conditions above are met.

The FCA will ensure that the disclosure is only delayed for a period as is necessary in the public interest and it shall evaluate, at least on a weekly basis, where the conditions above are satisfied. However, in the event of any leak of such information, an immediate disclosure would be required.

FCA guidance on Pre-MAR DTR 2.5.5AR (the equivalent provision to Article 17(5) MAR) explained that the provision is intended only to apply to liquidity support that is bespoke to the recipients, i.e., in terms of its duration, cost and the collateral requirements associated with it. It is not typically envisaged that the receipt of liquidity support provided by the Bank of England, where the support could be accessed on the same terms by all eligible market recipients (e.g., as part of a common liquidity facility), would constitute inside information. However, information that an issuer had accessed such a facility to a very significant extent could constitute inside information.

v. Selective Disclosure +
Article 17(8) MAR allows selective disclosure of inside information only where the recipient owes a duty of confidentiality to the company. Under MAR, unless a company is delaying disclosure in accordance with Article 17(4), it must ensure that no inside information is released. If it is released to a third party in the normal course of the exercise of an employment, profession or duties, the issuer must announce that information publicly either simultaneously where the disclosure was intentional or as soon as possible where the disclosure was unintentional.

Depending on the circumstances, DTR 2.5.7G provides guidance which states that an issuer may be justified in disclosing inside information to the following persons:

  • its advisers and the advisers of any other persons involved in the matter in question;
  • persons with whom the company is negotiating, or intends to negotiate, any commercial financial or investment transaction;
  • employee representatives or trade unions acting on their behalf;
  • any government department, the Bank of England, the Competition Commission or any other statutory or regulatory body or authority;
  • its major shareholders and lenders; and
  • credit-rating agencies.

Note that the above list of persons is not exhaustive. Selective disclosure to any of the above persons is not automatically justified in every circumstance, and issuers should bear in mind that the wider the group of recipients of inside information, the greater the likelihood of a leak, which would then trigger an announcement.

vi. Dealing with Analysts +
The FCA has previously given informal advice on good practice when dealing with analysts, which includes the following:

  • issuers should have a clear policy about the extent to which they should answer analysts’ questions;
  • issuers should not answer analysts’ questions where, individually or cumulatively, the answers would provide inside information. If analysts’ comments or views appear inaccurate (because they are based, for example, on a mistaken view of sales growth), companies can consider what public information is available to draw to their attention;
  • in most circumstances, an issuer is not obliged to make an announcement correcting public forecasts by analysts. The knowledge that an analyst’s forecast is materially inaccurate is not likely to amount to inside information, and even if it does, it is likely that issuers will be able to delay disclosure of such information. However, an issuer should consider making an announcement to correct significant errors that come to its attention which in its view have led to widespread and serious misapprehension in the market. Note that the knowledge that a forecast is inaccurate is more likely to amount to inside information if an issuer is covered by only a small number of analysts;
  • if an analyst sends an issuer a draft report for its comments, the issuer can choose whether to respond. Issuers should not consider themselves obliged to correct incorrect statements or assumptions, and issuers are free to decline to comment on any aspect of a draft report from an analyst. However, the FCA does not prohibit issuers from correcting analysts’ reports, and sometimes it may be necessary to comment, as to do otherwise would be misleading. In commenting on a draft report, an issuer should take care not to breach the DTR;
  • issuers should consider establishing internal procedures to avoid mistakenly providing inside information in meetings with analysts. These procedures could, for example, include ensuring that more than one representative of the issuer is present during these meetings and that accurate records of all discussions are kept, or providing access to a nonparticipating audience through telephone lines; and
  • employees meeting analysts during visits should be briefed on the extent and nature of the information that they can communicate.
vii. Dealing with Journalists and Market Rumours +
  • Embargoes and the "Friday night drop"

The FCA advises issuers not to provide inside information to journalists or others under an embargo that seeks to prevent them from using the information until it has been formally announced, as this essentially amounts to selective disclosure. Although selective disclosure is permitted, to persons owing a duty of confidentiality to the issuer, this does not contemplate inside information being given to journalists. The FCA has emphasised that in disclosing information to third parties under an embargo, an issuer risks losing control over the information as soon as the disclosure is made.

The practice of delaying disclosure of inside information until Friday evening when most RISs have closed for business (the “Friday night drop”) has also been criticised by the FCA. The FCA has emphasised that this practice is not allowed under the DTR—an issuer may delay the disclosure of inside information only where it is able to ensure the confidentiality of the information, and this is unlikely to be the case where inside information is disclosed to the press.

  • Rumours

Where there is press speculation or market rumour concerning an issuer, the issuer should assess whether its general obligation to make an announcement has arisen under MAR 17(1). To do this, the issuer needs to assess carefully whether the speculation or rumour has given rise to a situation where the issuer has inside information.

If the press speculation or market rumour is largely accurate and the information underlying the rumour is inside information, then it is likely that the issuer can no longer delay disclosure pursuant to Article 17(4) MAR, as it can no longer ensure confidentiality of the inside information, and it should announce the inside information as soon as possible Article 17(7) MAR).

Conversely, the knowledge that the press speculation or market rumour is false is not likely to amount to inside information. However, the FCA has informally acknowledged that there is a possibility that the issuer’s knowledge that a particular piece of information or story is false could, in very limited circumstances, amount to inside information. Even if it does, the FCA expects in most cases that an issuer would be able to delay disclosure (often indefinitely) in accordance with the standard set by Article 17(4) MAR.

The FCA does not usually require an issuer to make a negative statement denying a wholly unfounded rumour. If the issuer does decide to make such a denial, it should consider doing so by making a formal announcement, and where a denial is likely to affect the share price, then a formal announcement would be best practice. The FCA also suggests that an issuer should announce a negative statement over a RIS in circumstances where it is concerned that reaction to a wholly unfounded rumour is resulting in a disorderly market.

The FCA is, of course, likely to contact an issuer or its advisers if there are rumours relating to it in the media, and it will expect a full justification for the issuer’s proposed course of action and confirmation of the issuer’s true position so that it can monitor developments properly.

viii. Control of Inside Information and Compliance Procedures +
The DTR require issuers to have a framework for the control of inside information and:

  • to establish effective arrangements to deny access to inside information to persons other than those who require it for the exercise of their functions within the issuer;
  • to have in place measures to enable public disclosure to be made via a RIS as soon as possible if the company cannot ensure the confidentiality of the inside information;
  • as mentioned above, where an issuer is delaying disclosure under Article 17(4) MAR, to prepare a holding announcement (in accordance with DTR 2.2.9G(2)) to be released if and when any actual or likely breach of confidence occurs; and
  • to take the necessary measures to ensure that employees with access to inside information acknowledge the legal and regulatory duties entailed and are aware of the sanctions for misusing or improperly circulating information.

The GC100 Guidelines recommend that issuers establish procedures designed to facilitate the identification, control and verification of inside information. Key recommendations include the following:

  • Identification

In order to ensure that inside information is identified, the GC100 Guidelines recommend that issuers:

  • identify likely sources of inside information (including trading information, events and projects) and set out how in each case the identification objective will be met;
  • allocate responsibility for internal reporting and assessing information that may be inside information;
  • establish financial and nonfinancial key performance indicators for internal-reporting purposes (thresholds should be conservative)16;
  • assess regular internal reports submitted routinely;
  • identify at their inception relevant projects that could result in inside information; and
  • identify individuals likely to become aware of a relevant event.
  • Control

The GC100 Guidelines recommend that, in dealing with inside information, issuers should:

  • establish clear reporting lines (to facilitate early disclosure, these should be as short as practicable);
  • identify people responsible for making decisions (and ensure that they have access to adequate information and advice);
  • determine the extent of board involvement and establish a suitable “emergency procedure”;
  • allocate responsibility for keeping “market expectations” under review;
  • maintain a record of any forward-looking statements made;
  • establish and maintain “insider lists” (see below for further details);
  • ensure confidentiality of information pending disclosure/leak announcements;
  • consider adopting communication policies;
  • keep records of inside information announced and information deemed not “inside information”; and
  • provide appropriate training for directors and employees and audit compliance procedures on a regular basis to ensure their continued effectiveness.    
  • Verification

Listed companies are under an obligation to take all reasonable care to ensure that any announcements made are not misleading, false or deceptive and do not omit anything likely to affect the import of the information.

In light of this, issuers should ensure appropriate verification of announcements, and responsibility for verifying and approving the text of announcements should be allocated. The obligation to announce inside information “as soon as possible” will inevitably preclude the undertaking of a lengthy verification process, but nonetheless, sufficient verification must be carried out to ensure the accuracy of an announcement. If the company is faced with an unexpected and significant event, a short delay may be acceptable if necessary to clarify the situation. Note that in these circumstances, a holding announcement may be required, particularly if there is risk of a leak.

ix. Insider Lists (DTR 2.8) and Article 18 MAR +
Since the entry into force of MAR on 3 July 2016, the rules governing the adoption and maintenance of insider lists are contained within Article 18 MAR.

Under Article 18(1) MAR issuers must compile lists of all persons who have access to inside information and who are working for them either (i) under a contract of employment or (ii) otherwise performing tasks through which they have access to inside information i.e. as advisers, accountants or credit rating agencies. Insider lists must be provided to the competent authority as soon as possible on request.

Under MAR, the requirements for the information to be included on the insider lists are more onerous than before. Now, the insider list must include, amongst other things, the dates and times on which access to the inside information was obtained, full names, National Identification Numbers, phone numbers and addresses of individuals.

The insider list must be updated promptly where the reason for including an individual on the list changes, where a new individual needs to be added to the list or where a person ceases to have access to inside information, and each update to the list shall specify the date and time when the change triggering the update occurred.

Issuers or any person acting on their behalf or on their account, shall take all reasonable steps to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of insider information. In circumstances where another person acts on behalf of the issuer to draw up and update the insider list, the issuer remains responsible for complying with Article 18 MAR.

Insider lists need to be kept by issuers, or any person acting on their account or behalf, for a period of at least five years from the date on which they are drawn up or updated.

x. Disclosure of Dealings by “Persons Discharging Managerial Responsibilities” +
Article 19(1) MAR (which is referred to inDTR 3.1.2RA requires persons discharging managerial responsibilities as well as persons closely associated with them to notify the issuer and the competent authority in respect of transactions conducted on their own account relating to the shares or debt instruments of the issuer or to derivatives or other financial instrument(s) linked to them.

Notification under Article 19(1) is only required once the PDMR has surpassed the de minimis threshold for disclosure of dealings of €5000 per calendar year. The threshold for disclosure is calculated by adding all relevant transactions within a year so it will be necessary to keep accurate records. Such notifications must be made to the FCA as competent authority promptly and in any event no later than three business days after the date of the transaction. The notification form is available on the FCA's website.

Issuers must notify all PDMRs of their obligations under Article 19 MAR in writing. PDMRs must notify the persons closely associated with them of their obligations under Article 19 MAR and keep a copy of this notification. Issuers are also required to keep a list of all PDMRs and persons closely associated with them.

PDMRs must not conduct any transactions on their own account or on behalf of a third party, directly or indirectly, relating to the shares or debt instruments of the issuer or to derivatives or other financial instruments linked to them during a closed period, being the period of 30 calendar days before the announcement of an interim financial or year-end report which the issuer is obliged to make public.

For these purposes, a PDMR is defined as a person within an issuer who is:

  • a member of the administrative, management or supervisory body of that entity (e.g., a director); or
  • a senior executive of the issuer who is not a member of the administrative, management or supervisory body but who has regular access to inside information relating directly or indirectly to that entity and the power to take managerial decisions affecting the future developments and business prospects of that entity.

Under MAR, a "person closely associated" ("PCAs") with a PDMR includes:

  • a spouse or civil partner of the PDMR;
  • a dependent child, in accordance with national law, of the PDMR      
  • a relative who has shared the same household of the PDMR for at least one year on the date of the transaction concerned; and 
  • a legal person (e.g., a body corporate), trust or partnership, the managerial responsibilities of which are discharged by a PDMR or by a PCA, which is directly or indirectly controlled by such a person, which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person.

The FCA had previously provided guidance on what would be considered to be a body corporate "connected" with a PDMR17 and issuers had been advised to consider the level of control that the PDMR or its connected persons had within that body corporate. Under MAR, the definition of a body corporate that is considered a PCA is wider and it includes situations where either the PDMR or a PCA holds a managerial role or an economic interest in that body corporate in addition to situations where either the PDMR or a PCA exercises direct or indirect control over that body corporate.

Prior to MAR coming into force, the FCA had reported numerous breaches of the timeline and content requirements in respect of disclosures by PMDRs and their connected persons and it has said that it would consider taking public disciplinary action for serious breaches. Therefore it is essential to ensure that the MAR disclosure obligations are complied with and the guidance in DTR 3 followed. Note that these disclosure obligations supplement the requirements set out in Chapter 5 of the DTR (see paragraph D below for details).

Periodic Financial Reporting

i. Introduction +
Chapter 4 of the DTR sets out certain periodic financial reporting requirements and, in addition to the Listing Rules’ requirements (see below), applies to companies whose transferable securities are admitted to trading on a regulated market (e.g., the UK’s Main Market) and whose home member state is the UK. A company whose securities are admitted to trading on a regulated market whose home member state is not the UK will need to comply with the corresponding law of its home member state.

Partial exemptions from the full requirements apply to certain issuers of the following types:

  • issuers of wholesale debt (the denomination per unit of which is at least €100,000 (or an equivalent amount)) and issuers on the PSM are required to prepare annual reports and may use accounting standards other than IFRS (i.e., there is no requirement to prepare half-yearly reports)18;
  • issuers of convertible securities or depositary receipts are required to prepare annual financial reports (i.e., there is no requirement to prepare half-yearly reports); and
  • non-EEA issuers whose laws are considered by the FCA to impose “equivalent” requirements are exempted from the periodic financial reporting requirements in the DTR. A list of such non-EEA States is maintained by the FCA on its website.
ii. Annual Financial Reports +
Contents and timing (DTR 4.1.3R to 4.1.12R)

An annual financial report must be published within four months of the financial year-end to which it relates and must include:

  • the issuer’s audited financial statements prepared in accordance with the applicable accounting standards19;
  • a management report containing a fair review of the issuer’s business and a description of the principal risks and uncertainties facing it20; and
  • appropriate responsibility statements from persons responsible in the company (usually the directors) on behalf of the issuer21  confirming that the financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the issuer and undertakings included in the consolidation taken as a whole and that the management report includes a fair review of the business and the position of the issuer and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.    
  • In addition to the requirements of the Transparency Rules, directors of listed companies should be aware of the recommendations of the UK Corporate Governance Code that affect the presentation and content of a company’s published financial information and include recommendations for the directors to explain their responsibility for preparing the accounts and presenting a balanced and understandable assessment of the company’s position.

Furthermore, the Listing Rules (LR 9.8) contain certain additional content requirements that include the following:

  • a statement of the amount of interest capitalised by the group during the period;
  • details of any arrangement under which a director has waived or agreed to waive emoluments;    
  • details of any arrangement under which a shareholder has waived or agreed to waive any dividends;
  • particulars of any issue of shares for cash made otherwise than pro rata to the company’s existing shareholders and not specifically authorised by the company’s shareholders; similar information must be given for any unlisted major subsidiary of the company;
  • particulars of any contract of significance subsisting during the period under review to which any member of the group is a party and in which a director is or was materially interested;
  • particulars of any contract of significance between any member of the issuer’s group and a controlling shareholder (a person or persons acting jointly by agreement, whether formal or otherwise, who are entitled to exercise, or control the exercise of, 30 percent or more of the company’s voting rights or who are able to control the appointment of directors who themselves are able to exercise a majority of the votes at board meetings) subsisting during the period under review;
  • in the case of an issuer that is a subsidiary, details of any participation in a placing by its parent;
  • particulars of any contract for the provision of services to any member of the group by a controlling shareholder subsisting during the period under review;
  • details of long-term incentive schemes set up for individual directors in order to facilitate, in unusual circumstances, their recruitment or retention;
    in the case of a UK issuer or an overseas issuer, a statement of the issuer’s compliance with the UK Corporate Governance Code, together with an explanation of the details and reason for any noncompliance22; and
  • an auditor’s report.

Note that there are additional content requirements for issuers incorporated in the UK.

LR 9.8.4(14) requires premium listed companies to include in their annual reports a statement made by the board of directors that the company has complied with the independence provisions in any agreements entered into with controlling shareholders and that so far as the company is aware, so did the controlling shareholder and each of its associates. To the extent that a company did not enter into a relationship agreement with its controlling shareholder when obliged to do so (further information in respect of which is discussed in paragraph G(iii) of this chapter) or there has been any noncompliance by either the company or the controlling shareholder, the annual report must include a statement that the FCA has been notified of that noncompliance and must provide a brief description of the background to and reasons for failing to enter into the agreement that enables shareholders to evaluate the impact of noncompliance on the listed company.

Such amendment stems from the proposals that all issuers with controlling shareholders are required to enter into agreements with such shareholders to ensure that they are capable of operating without undue influence from their major shareholders.

iii. Strategic Reports (Companies Act 2006 s. 414A‒E) +
For financial years ending on or after 30 September 2013, under sections 414A‒E of the Companies Act 2006, issuers must prepare a strategic report in addition to the directors’ report that forms part of their annual financial report. The strategic report replaces the existing requirement to produce a business review under section 417 of the Companies Act 2006, and whilst the new requirements largely replicate those in relation to the business review, section 414 of the Companies Act 2006 now requires companies to include additional disclosures relating to environmental matters; employees (including, in particular, details on gender diversity); and social, community and human rights issues. The strategic report must be presented as a separate section of the annual financial report and must include a description of the company’s strategy and business model (aligning the Companies Act 2006 requirements with the existing requirements under the UK Corporate Governance Code to include such detail in annual financial reports). The detailed content requirements for strategic reports are set out in section 414C of the Companies Act 2006. The Financial Reporting Council has issued draft guidance for companies (and, in particular, listed companies) on the requirements for preparing strategic reports.
iv. Preliminary Statement of Annual Results (LR 9.7A.1R) +
The issue of a preliminary statement (“prelim”) is optional. However, if companies do choose to issue prelims, they will need to comply with the requirements of LR 9.7A.1R, including the requirement that they be published as soon as possible after being approved by the board and the requirement for them to be agreed by the auditors.

As mentioned earlier in this chapter, the FCA has noted that it is market practice for many issuers to retain their pre-Transparency Directive annual financial reporting procedures. Whilst announcing prelims, to be followed by the annual report and accounts two months later, is not strictly in keeping with the obligations under the DTR, the FCA has offered tentative guidance as to what issuers should do in these circumstances. Issuers still publishing prelims should include the information required by DTR 6.3.5(2)(b) (the information required for half-yearly reports to be reproduced in unedited full text) as if the prelim was an annual financial report. The FCA has urged issuers to then refer to the prelims when making the later release of the annual report and accounts.

Issuers that do not elect to issue prelims will still be required to publish inside information as soon as possible in line with their obligations under DTR 2.

v. Half-Yearly Financial Reports (DTR 4.2) +

A half-yearly financial report (no longer referred to as an “interim statement”) must be issued no later than three months23 after the end of the period to which it relates24 and must include:

  • a condensed set of financial statements;
  • an interim management report, including an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements, and a description of the principal risks and uncertainties facing the company in the next six months, together with details of related party transactions;
  • a responsibility statement identifying those particular individuals responsible for the half-yearly report and their functions; and
  • an indication of whether or not it has been audited or reviewed by auditors; if so, the audit report or review must be reproduced in full.

In October 2008 the FSA commented on the need for companies to provide a description of the principal risks and uncertainties facing them in the next six months. The FSA stated that as companies gave significant thought to such risks in their annual reports, it would be acceptable for issuers to state in their half-yearly reports that the principal risks and uncertainties have not changed, to summarise those risks and to cross-reference the relevant sections of the annual reports containing a detailed explanation of these. Given the economic turbulence, however, issuers should think carefully about whether any new principal risks or uncertainties have arisen.

vi. Interim Management Statements (DTR 4.3) +
Following the implementation of TDAD in November 2015 interim management statements are no longer required to be published by issuers and DTR 4.3 has accordingly been deleted.
vi. Close Periods Under the Model Code +
Prior to the introduction of MAR, the definition of closed periods was found in the Model Code, which formed part of LR 9. The Model Code has now been deleted and a "closed period" in *Article 19(11) MAR) is the period of 30 calendar days before the announcement of an interim financial report or a year-end report which the issuer is obliged to makes public according to the rules of the market on which the issuer trades or national law.

As stated above, listed companies are not obligated to publish preliminary statements. Where they choose to do so however, the Model Code previously prescribed a close period prior to the statement which ended once the preliminary statement is made.  The FCA recognised that there was some confusion amongst issuers as to whether under MAR issuers that announce their preliminary results need to impose closed periods either before the preliminary results, the year-end report, or both. ESMA has subsequently clarified that where preliminary results are announced, the closed period ends with the announcement of the preliminary results.25 The European Commission has published a draft delegated regulation which clarifies a non-exhaustive list of share plan dealings which are permitted during close periods, and this remains broadly the same as dealings which were previously permitted under the Model Code. A further change under MAR is that premium listed companies will need to have "effective systems and controls" to ensure that PMDRs obtain clearance to deal in a company's securities at all times rather than only during close periods as is currently the case. The FCA is consulting on this issue, particularly in relation to the definition of "dealing" given that the existing definition of this term in the Model Code will be deleted. Once the FCA has published its final guidance issuers will need to incorporate the above changes into their share dealing codes.

Shareholder Notification Requirements

i. Introduction +
Chapter 5 of the DTR and sections 89A to 89L of FSMA implemented the Transparency Directive provisions on the disclosure of major shareholdings.

In 2009, the changes to DTR 5 (as discussed below) widened the scope of the regime to cover those financial instruments that give rise to a similar economic effect to qualifying financial instruments. Following the implementation of TDAD, which came into force on the 26 November 2015, various amendments were made to DTR 5 as outlined above in section B of this chapter.

ii. Applicability of Chapter 5 of the DTR +
Chapter 5 of the DTR applies to issuers with shares admitted to trading on a regulated market (e.g., the Main Market) for which the UK is the home member state  and to other UK issuers with shares admitted to trading on a prescribed market26. (DTR 5.11.5).27
iii. Announcement of Share Capital and Voting Rights by Issuers (DTR 5.6) +
In order to ensure that the notification regime provides investors with the information they need to make the appropriate disclosures in a timely manner, each issuer is required to make a public announcement of the total number of voting rights and capital for each listed class of shares (distinguishing the voting rights attaching to shares held in treasury) both: (i) at the end of each calendar month during which there is an increase or decrease in its share capital; and (ii) as soon as possible and in any event no later than the end of the business day after the day on which the increase or decrease occurs, following the completion of a transaction by an issuer (unless its effect on the total number of voting rights is immaterial when compared with the position before completion).
iv. The Disclosure Obligation +
Disclosure thresholds (DTR 5.1.2)

Subject to the exemptions described below, a person with an interest in the share capital of an issuer to which Chapter 5 of the DTR applies28 will be obliged to disclose its aggregated interest in shares that it holds as shareholder and shares it is deemed to hold through its direct or indirect holding of financial instruments (as discussed below) where its interest crosses the following thresholds:

  • For UK issuers: 3 percent of its voting rights and each whole percentage point after that.
  • For non-UK issuers: 5 percent, 10 percent, 15 percent, 20 percent, 30 percent, 50 percent and 75 percent.

Time limits for notification and manner of notification (DTR 5.8 and 5.9)

Disclosure to the relevant issuer must be made within two trading days in the case of UK issuers and four trading days in the case of non-UK issuers. The time limit runs from when the shareholder became aware or should have become aware of the relevant acquisition or disposal. Note that where a person has instructed a third party to effect the transaction, he will be deemed to have knowledge of the transaction no later than two trading days thereafter.

A notification in relation to shares admitted to a regulated market (e.g., the Main Market) must be made using Form TR1, available in electronic format at the FCA’s website (DTR 5.8.10R). The relevant holder must at the same time file a notification with the competent authority of the home member state of the issuer as well as with the issuer itself (DTR 5.9.1R).

The issuer must release details to a RIS as soon as possible on receipt of a notification and by no later than the end of the following trading day for UK issuers with shares admitted to trading on a regulated market and by no later than the end of the third trading day for other issuers.

Interests to which the disclosure obligation applies (DTR 5.2)

DTR 5.2 sets out the types of shareholding that will potentially lead to a notification obligation. Both “direct” and “indirect” holdings of shares are covered by the disclosure regime. For example, the parent company of a subsidiary that holds shares will generally be an indirect shareholder, and the shares held by the parent will generally have to be aggregated with those held by its subsidiary when determining if a notification obligation arises. Interests held by family members are not generally aggregated when determining if a notification obligation has arisen, although the rules in relation to direct and indirect holdings should be examined in each case to ascertain if interests need to be aggregated.

In addition to shareholdings, notification obligations can arise from the holding of certain financial instruments. The defined list of financial instruments, which trigger a notification requirement previously included under DTR 5.3 has been removed following implementation of the TDAD in the UK. Now, under DTR 5.3, as amended, holders of financial instruments granting on maturity the unconditional right to acquire or discretion as to the right to acquire shares to which the voting rights are attached must make a notification. From June 2009, the definition of “financial instruments” was widened to include those financial instruments that give only an economic exposure to the underlying shares, without conferring voting rights (e.g., contracts for differences, or “CfDs”). Such instruments’ terms will be referenced to an issuer’s shares and will give the holder a long position on the shares, thereby potentially enabling the holder to gain an economic advantage in acquiring, or gaining access to, the underlying shares.

As a result, any person holding such a financial instrument, either directly or indirectly, must disclose its interest in the shares that it is deemed to hold by virtue of holding the financial instrument, where its interest crosses the threshold requirements set out in DTR 5.1.2R (i.e., in the case of a UK issuer, 3 percent of its voting rights and each whole percentage point thereafter).

Principal exemptions from disclosure (DTR 5.1.3R)

The notification requirements of DTR 5.1.2 do not apply in the following cases:

  • shares acquired for the sole purpose of clearing and settlement within a settlement cycle not exceeding three days;
    • persons holding shares in their capacity as custodian or nominee, provided that they can exercise voting rights only under written or electronic instructions;
    • a market maker holding less than 10 percent in that capacity, provided that it does not intervene in the management of the company or exert influence on the company to buy back shares or back the share price. As soon as the 10 percent threshold is reached, the entire holding is disclosable;
    • shares or the shares underlying financial instruments representing less than 5 percent of the voting rights of a company held within a trading book of a credit institution or investment firm, provided that the institution or firm ensures that the voting rights in respect of those shares or the shares underlying financial instruments are not exercised or otherwise used to intervene in the management of the company;
    • shares held by a collateral taker under a collateral transaction involving an outright transfer of securities, provided that the collateral taker does not declare any intention of exercising (and does not exercise) the voting rights; and
    • shares acquired for stabilisation purposes in accordance with the Buyback and Stabilisation Regulation (Regulation 2273/2003), if the voting rights attached to those shares are not otherwise used to intervene in the management of the company.

    In addition to the above, the following voting rights are to be disregarded for the purposes of determining whether a person has a notification obligation unless the holdings reach the 5 percent, 10 percent and higher thresholds29:

    • shares held by persons in their capacity as investment managers;
    • shares held by operators of unit trusts and certain other collective investment schemes; and
    • shares held by investment companies with variable share capital.

    The amendments introduced in June 2009 created an exemption for financial instruments held by client-serving intermediaries, such as CfD writers, who do not attempt to intervene in or exert influence on the management of an issuer. This exemption is designed to reduce the number of meaningless disclosures from such intermediaries acting in client-serving roles and effectively providing only liquidity.

    Specific Disclosure Obligations

    In addition to the general obligation of disclosure under the DTR, issuers are subject to an obligation under the Listing Rules (Chapter 9) to announce without delay any of the following events or facts:

    • any change of name of the company (LR 9.6.19R);
    • any proposed change in its capital structure (including the structure of its listed debt securities)30 (LR 9.6.4R(1));
    • any change in its accounting reference date (and if the change in the accounting reference date leads to an extension of the accounting period to more than 14 months, the issuer will be required to produce a second interim report in accordance with LR 9.6.21R) (LR 9.6.20R to 9.6.22G);
    • any redemption of its listed securities (LR 9.6.4R(3));
    • any extension of time granted for the currency of temporary documents of title (LR 9.6.4R(4));
    • the results of any new issue of listed shares or other equity securities or of a public offering of shares or other equity securities (LR 9.6.4R(6)). Where the securities are subject to an underwriting agreement, the issuer may, at its discretion, delay notifying a RIS for up to two business days until the obligation by the underwriter to take or procure others to take securities is finally determined or lapses. In the case of an issue or offer of securities that is not underwritten, notification of the result must be made as soon as it is known;
    • dealings in securities by directors and persons discharging managerial responsibilities (and their connected persons) (DTR 3.1.2R and 3.1.4R);
    • the appointment of a new director, including details of the status of the new director, any particular executive responsibilities or functions assumed by the new director, and the date of appointment (LR 9.6.11R);
    • the removal or resignation of a director, and any important changes in the functions or executive responsibilities of a director (LR 9.6.11R);
    • any lock-up arrangements not already disclosed, changes to any lock-up arrangements previously disclosed and any disposals under exemptions permitted thereunder (LR 9.6.16R and 9.6.17R);
    • all shareholder resolutions passed (other than ordinary business at an annual general meeting) (LR 9.6.18R);
    • the following information in respect of any new director appointed to its board, unless such details have already been disclosed in a prospectus or other circular published by the issuer (LR 9.6.13R):
    • details of all directorships held by such director in any other publicly quoted company at any time in the previous five years, indicating whether or not the individual is still a director;
    • any unspent convictions in relation to indictable offences; details of any receiverships, compulsory liquidations, creditors’ voluntary liquidations, administrations, company voluntary arrangements, or any composition or arrangement with its creditors generally; or any class of its creditors of any company where such person was an executive director at the time of or within the 12 months preceding such event;
    • details of any compulsory liquidations, administrations or partnership voluntary arrangements of any partnerships where such person was a partner at the time of or within the 12 months preceding such event;
    • details of receiverships of any asset of such person or of a partnership of which the person was a partner at the time of or within the 12 months preceding such event; and
    • details of any public criticisms of such person by statutory or regulatory authorities (including recognised professional bodies) and whether such person has ever been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of any company; and
    • any changes in this information in respect of current directors (LR 9.6.14R).

    Annual Information Update

    The Prospectus Directive Amending Directive (2010/73/EU) deleted Article 10 of the Prospectus Directive, which set out the requirement for issuers to publish an annual information update, on the basis that it was duplicative of the requirements in the Transparency Directive. The FCA deleted Prospectus Rule 5.2 (requiring issuers to prepare an annual information update) with effect from 1 July 2012 to reflect the amendments made by the Amending Directive.

    Requirements with Continuing Application

    i. Admitted to Trading (LR 9.2.1R and 9.2.2R for premium listed companies and LR 14.3.1R for standard listed companies) +
    A listed company must ensure that its listed equity shares are admitted at all times to trading on, for example, the Main Market of the London Stock Exchange and must inform the FCA as soon as possible if trading in its listed equity shares has been cancelled or suspended.
    ii. Independent Business (LR 9.2.2AR) +
    LR 9.2.2AR requires that a listed company must carry on an independent business as its main activity at all times.
    iii. Controlling Shareholders (LR 9.2.2) +
    Where a listed company has a controlling shareholder, it must have in place at all times: (i) a written and legally binding agreement which is intended to ensure that the controlling shareholder complies with the independence provisions set out in LR 6.1.4DR; and (ii) a constitution that allows the election of independent directors to be conducted in accordance with certain election procedures set out in LR 9.22ER and LR 9.2.2FR.

    The "independence provisions” specified are undertakings that:

    • transactions and relationships with the controlling shareholder (and/or any of its associates) will be conducted at arm’s length and on normal commercial terms;
    • no controlling shareholder or any of its associates will take any action that would have the effect of preventing the new applicant or listed company from complying with its obligations under the Listing Rules; and  
    • no controlling shareholder or any of its associates will propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules.            

    The election procedures are contained in LR 9.2.2ER and LR 9.2.2FR and provide that the election or re-election of any independent director must be approved by separate resolutions of: (i) the shareholders of the listed company; and (ii) the independent shareholders of the listed company (i.e., all shareholders other than any controlling shareholders). If the election or re-election of an independent director is not approved by both the shareholders and the independent shareholders but the listed company wishes to propose that person for election or re-election as an independent director, the listed company must propose a further resolution to elect or re-elect the proposed independent director, which, rather than being voted on within a period of 90 days from the date of the original vote, must be voted on within a period of 30 days from the end of such period and must be approved by the shareholders of the listed company by ordinary resolution.

    Where as a result of changes in the ownership or control of a listed company, a person becomes a controlling shareholder, LR 9.2.2C requires that the listed company put in place an agreement with the controlling shareholder containing the independence provisions within six months of such event and has until the company’s next annual general meeting (except in circumstances where notice of the annual general meeting has already been given or is given within three months of the event) to amend its constitution to provide for the dual voting structure in relation to the election or re-election of independent directors. LR 13.8.17 requires that where a company has a controlling shareholder, a circular to shareholders relating to the election or re-election of an independent director must include details of any existing or previous relationship, transaction or arrangement that the proposed independent director has or had with the listed company, its directors, any controlling shareholder or its associates or a confirmation that there have been no such relationships, transactions or arrangements. It must also contain a description of: (i) why the listed company believes the proposed independent director will be an effective director; (ii) how the company has determined that the proposed director is independent; and (iii) the selection process that was followed.

    iv. Shares in Public Hands (LR 9.2.15R to 9.2.15AG for premium listed companies and LR 14.2.2R to 14.2.3AG for standard listed companies) +
    A listed company must ensure that the proportion of any class of its listed securities in the hands of the public in one or more EEA States does not fall below 25 percent of the total issued shares of that class (or, where applicable, such lower percentage as the FCA may have agreed). For these purposes, shares in “public hands” do not include shares which are subject to a lock-up period of more than 180 days and shares held by directors, their connected persons, persons with the contractual right to nominate a director, trustees of an employee share scheme, and any person (or persons in the same group or persons acting in concert) with an interest in 5 percent or more of the shares of the relevant class. Although technically only shares in public hands in one or more EEA States count towards the 25 percent threshold, the FCA does have the discretion (under LR 6.1.20G for premium listed companies and under LR 14.2.3R for standard listed companies) to include shares held outside the EEA. The FCA has confirmed that it would try to operate a flexible approach when exercising this discretion and would expect an issuer to demonstrate that the market would operate properly with a percentage lower than 25 percent held in public hands in EEA States (e.g., in circumstances where, although a significant proportion of the public-hands element is held outside the EEA, all trades will take place in London). LR 6.1.20G sets out the factors that the FCA will take into account when determining whether the market will operate properly where less than 25 percent of the shares are in public hands in EEA States. These include: (i) shares held in non-EEA States, even where they are not listed; (ii) the number and nature of the public shareholders; and (iii) the expected market value of shares in public hands at admission in excess of £100 million.

    Where the FCA has accepted a lower percentage of shares in public hands in accordance with LR 6.1.19R on the basis that the market will operate properly but the FCA considers that in practice the market for the shares is not operating properly, the FCA may revoke the modification in accordance with LR 1.2.1R(4).

    v. Settlement +
    An issuer must ensure that its shares are eligible for electronic settlement at all times, under the Central Securities Depositaries Regulation which came into force in September 2014 and which applies to both premium and standard listings.
    vi. Contact Details (LR 9.2.11R and 9.2.12G for premium listed companies and LR 14.3.8R for standard listed companies) +
    Each issuer must ensure that the FCA is provided with up-to-date contact details of at least one appropriate contact person in relation to the issuer’s compliance with the Listing Rules and DTR. The relevant contact will be expected to be knowledgeable about the issuer and the Listing Rules applicable to it, capable of ensuring that appropriate action is taken on a timely basis and contactable on business days between 7.00 a.m. and 7.00 p.m.

    The appropriate form for notifying the FCA of contact details is available on the FCA’s website.

    Other Continuing Obligations (DTR 6.1 and LR9)

    i. Equality of Treatment (DTR 6.1.3R) +
    Equality of Treatment (DTR 6.1.3R)31 As reinforced by listing principle 5, an issuer must ensure equality of treatment for all holders of the issuer’s listed securities who are in the same position.
    ii. Financial Agent (DTR 6.1.6R) +
    Financial Agent (DTR 6.1.6R)32 An issuer must designate, as its agent, a financial institution through which shareholders or debt security holders may exercise their financial rights.
    iii. Further Issues (LR 9.5.14R for premium listed companies and LR 14.3.4R for standard listed companies) +
    Where shares of the same class as the listed securities are allotted, an application for admission to listing of such shares must be made as soon as possible (and, in any event, for premium listed companies within one month of the allotment and for standard listed companies within one year of allotment).
    iv. Discounted Option Arrangements (LR 9.4.4R and 9.4.5R) and Discounted Equity Offerings (LR 9.5.10) +
    Directors or employees of a premium listed company or any subsidiary may not be granted (without prior approval by shareholders) options, warrants or other rights to subscribe for shares with an exercise price of a discount to market value (although this prohibition does not apply to options, warrants or other rights to subscribe for shares granted pursuant to an employee share scheme if participation is offered on similar terms to all or substantially all employees).

    A premium listed company may not issue equity shares pursuant to an open offer, placing, vendor placing or offer for subscription at a discount of more than 10 percent to the middle market price of the relevant shares at the time of announcing the terms of the offer or agreeing the placing unless the terms of the relevant offer or placing at that discount have been specifically approved by the issuer’s shareholders or the relevant offer or placing falls under a pre-existing general authority to disapply statutory pre-emption rights.

    v. Pre-Emption Rights (LR 9.3.11R and 9.3.12R) +

    Premium listed companies proposing to issue equity securities for cash (or to sell treasury shares that are equity shares for cash) must do so pre-emptively unless:

    • the proposed issue is within the terms of a general disapplication of statutory pre-emption rights pursuant to sections 570 and 571 of the Companies Act 2006 (or any equivalent law of the country of incorporation of an overseas company);
    • the issuer is selling treasury shares for cash to an employee share scheme; or
    • the issuer is undertaking a rights issue or open offer and the non-pre-emptive element relates to fractional entitlements or the exclusion of equity shares from the pre-emptive offer that the issuer considers necessary or expedient on account of the laws or regulatory requirements of another jurisdiction.

    Note that since 6 August 2010, this requirement to offer new shares on a pre-emptive basis has applied to overseas companies as well as UK issuers.

    vi. Proxy Forms (LR 9.3.6R) +
    A premium listed company must ensure that a proxy form provides for at least three-way voting on all resolutions (other than procedural resolutions) and states that if it is returned without an indication as to how the proxy should vote on any particular matter, the proxy will exercise his discretion as to whether (and, if so, how) he votes. DTR 6 also imposes requirements relating to proxies33. Shareholders and debt security holders must not be prevented from exercising their rights by proxy, and an issuer must make available, either with the notice of meeting or after the announcement of the meeting, a proxy form (in paper or electronic form) to each person entitled to vote at the relevant meeting.
    vii. Communications with Security Holders (DTR 6.1.4R and DTR 6.1.7G to 6.1.15R) +

    Communications with Security Holders (DTR 6.1.4R and DTR 6.1.7G to 6.1.15R)34 An issuer must ensure that all the facilities and information necessary to enable holders of shares and debt securities to exercise their rights are available in their home member states and that the integrity of data is preserved. Issuers may use electronic means to communicate with holders, provided that:

    • the decision to communicate electronically is approved by shareholders;
    • the use of electronic means is not dependent on the location or residence of the holders;
    • identification arrangements are in place so that the holders or other persons entitled to exercise or direct the exercise of voting rights are effectively informed;
    • holders are: (i) contacted in writing to request their consent for the use of electronic means for conveying information, and if they do not object within a reasonable period, their consent is deemed to have been given; and (ii) able to request at any time in the future that information be conveyed to them in writing35; and
    • any apportionment of the costs entailed in conveying information electronically is determined by the issuer in compliance with the principle of equal treatment mentioned above.

    In addition, issuers are required to disseminate certain prescribed information, including the following:

    • the place, time and agenda of meetings;
    • the total number of shares and voting rights;
    • information on the allocation and payment of dividends or interest (as applicable) and the issue of new securities, including information on any arrangements for allotment, subscription, cancellation, conversion, exchange and/or repayment; and
    • rights of holders to participate in meetings and exercise their rights.

    Any change in the rights attaching to listed shares or other securities must be announced without delay. Any new loan issues and, in particular, any guarantee or security in respect of such issues must also be announced without delay.

    viii. Sanctions for Default of “793 Notices” (LR 9.3.9R) +

    The Listing Rules prescribe certain constraints on a premium listed issuer’s ability to impose sanctions on a shareholder who is in default in complying with a notice served by the issuer under section 793 of the Companies Act 200636.

    These provide (amongst other things) that:

    • sanctions may not take effect earlier than 14 days after service of the notice;
    • the only sanction that may be imposed in respect of a shareholding of less than 0.25 percent is a prohibition against attending meetings and voting; and    
    • in respect of shareholdings above that level, sanctions may include prohibitions against attending meetings and voting, withholding payment of dividends, and placing restrictions on transfers (other than to sales to genuine unconnected third parties).

    This does not apply to overseas issuers.

    ix. Employee Share Schemes and Long-Term Incentive Plans (LR 9.4.1R to 9.4.3R) +
    UK-incorporated premium listed companies (and any of their major subsidiaries (including overseas subsidiaries)) must ensure that employee share schemes or long-term incentive schemes for directors are approved by shareholders.

    This requirement for shareholder approval does not apply to long-term incentive schemes that either:

    • offer participation on similar terms to all or substantially all employees; or
    • constitute an arrangement where the only participant is a director and the arrangement is established specifically to facilitate (in unusual circumstances) his recruitment or retention.


    i. Class Tests (LR 10) +
    The Listing Rules contain detailed requirements as to the provision of information and the obtaining of shareholders’ consent when a premium listed issuer proposes to enter into certain transactions. The level of disclosure required, and the requirement for shareholder approval, will depend on the size of the transaction in relation to the size of the listed company and the identity of the parties to thetransaction. All transactions of the listed company and its subsidiary undertakings are included, other than transactions of a revenue nature, or where finance is being raised by an issue of securities not involving the acquisition or disposal of any fixed assets.

    The specific requirements will depend upon the percentage ratios of the acquisition or disposal compared to the company on a number of bases, encompassing asset value, profits, consideration and market capitalisation. Further details of the applicable class tests are set out in Appendix VI. In addition, industry-specific tests are encouraged, where relevant, to support these bases. The acquisition or disposal will be compared on all relevant grounds and will be classified as Class 2 or Class 1, where any one of the percentage ratios is greater than 5 percent but each is less than 25 percent or any percentage ratio is greater than 25 percent, respectively. The FCA can aggregate two or more transactions over a period of 12 months. The latest transaction will then be treated as incorporating the earlier aggregated transactions for the purposes of determining the level of disclosure and consent required.

    In brief, Class 2 transactions require detailed particulars to be included in the press announcement; a Class 1 transaction requires an explanatory circular to be dispatched to shareholders and must be conditional upon the obtaining of members’ approval37.

    The concept of Class 3 transactions was deleted from the Listing Rules with effect from 1 October 2012 on the basis that the rules served no additional purpose to the disclosure obligations of issuers under DTR 2.2. Market participants responding to the FCA’s consultation on the matter considered that the Class 3 notification requirements resulted in “immaterial information being disclosed to the market”.

    ii. Reverse Takeovers (LR 5.6R) +

    In October 2012, the provisions relating to reverse takeovers in LR 10 were replaced with new provisions in LR 5.6R, applicable to both standard listed and premium listed issuers.

    Issuers are under an obligation under listing principle 6 to deal with the FCA in an open and co-operative manner and, when a reverse takeover is contemplated, to approach the FCA at the earliest possible stage. The new provisions of LR 5.6R do not apply when an issuer proposes to acquire shares in a target in the same listing category.

    Where the rules do apply, the FCA’s main concern is whether a suspension of the issuer’s shares is appropriate. The FCA will generally be satisfied that a suspension is not required in certain circumstances, including where the target is admitted to a regulated market or subject to a market with disclosure requirements that do not materially differ from the DTR.

    iii. Related Party Transactions (LR 11) +
    Transactions between a premium listed company and certain categories of related parties generally require shareholder approval before implementation38. The categories of related parties include:

    • a substantial shareholder, entitled at any time within the 12 months prior to the transaction to control 10 percent or more of the voting rights in the company;
    • any person who is or was within the 12 months prior to the transaction a director or shadow director of the company or any connected company;
    • a person exercising significant influence; and
    • any associate of the above.

    In January 2009, the FCA addressed concerns relating to circulars sent out by issuers proposing to ratify or fix some action or inaction by their directors that has resulted in an actual or potential breach of law or regulation. The issue in question is whether or not removing an actual or theoretical liability of the directors could be viewed as a related party transaction under LR 11.1.5(3). Despite the FCA’s acknowledgement that the risk of such an unintended effect of the circular is remote, it has admitted that there will be instances where a proposed ratification resolution confers a clear benefit on a related party (such as a director) and that these should also be regulated by Chapter 11 of the Listing Rules.

    As part of the changes made to the Listing Rules in May 2014 relating to controlling shareholders, LR 11.1.1C stipulates that in circumstances where: (i) a relationship agreement has not been entered into pursuant to LR 9.2.2AR(2)(a); (ii) a listed company or its controlling shareholder has not complied with its obligations under such agreement; or (iii) an independent director declines to support the statement required to be made in the company’s annual report relating to compliance with the independence provisions, the concessions relating to ordinary-course transactions and certain small transactions not being treated as related party transactions are suspended. The effect of such suspension is that any such transaction would require the approval of independent shareholders. The suspension will continue until the listed company publishes an annual report containing a clean compliance statement.

    iv. Purchase of Own Securities (LR 12) +
    Any decision by the board of directors to submit to shareholders a proposal for a premium listed company to be authorised to purchase its own equity shares (whether as a market purchase or an off-market purchase and whether the proposal relates to specific purchases or to a general authorisation to make purchases) other than the renewal of an existing authority must be notified to a RIS without delay, as must the outcome of the shareholders’ meeting. A circular must be sent to shareholders seeking their authority for the purchase by the company of its own shares. LR 13.7 sets out specific requirements as to the content of such circular. (Overseas issuers should contact the FCA to agree the content of the circular.) There are also special procedural requirements set out in Chapter 12 as to how the company may make the purchase of its own shares. (For example, buy-backs of more than 15 percent must generally be undertaken by way of a tender offer to all shareholders.)

    The issuer must notify a RIS of its intention to make a proposal to purchase any of its listed securities other than equity shares (and pending such notification, the company should ensure that no dealings take place on its behalf in such securities) and must provide the details of purchases of a certain size once made.

    The Market Abuse Directive created a safe harbour for share buy-backs, and this safe harbour is more restrictive than the provisions of LR 12. In accordance with FCA guidance, the Listing Rules have been broadly drafted to allow issuers to choose whether to comply with the safe harbour or continue as they have in the past.

    To fall within the safe harbour, issuers intending to repurchase shares under a general shareholder authority for on-market purchases in the UK must comply with the following:

    • the sole purposes of the buy-back programme must be to reduce the capital of an issuer (in value or in number of shares) or to meet obligations arising from: (i) debt financial instruments exchangeable into equity instruments; or (ii) employee share option programmes or other allocations of shares to employees of the issuer or of an associate company;
    • the buy-back programme must comply with the conditions laid down in section 701 of the Companies Act 2006;
    • prior to the start of trading, details of the programme approved under section 701 of the Companies Act 2006 must be adequately disclosed to the public in member states in which the issuer requests admission of its shares to trading on a regulated market39. The minimum details required to be disclosed are the maximum consideration, the maximum number of shares to be acquired and the duration of the period through which authorisation of the programme has been given;
    • the issuer must have in place a mechanism ensuring that it records in relation to each transaction of the buy-back programme the names and numbers of the instruments bought or sold, the date and times of the transactions, the transaction prices and the means of identifying the investment firms concerned;    
    • the issuer must publicly disclose details of all transactions referred to above no later than the end of the seventh daily market session following the date of execution of such transactions;
    • the issuer must not purchase shares at a price higher than the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out; and
    • the issuer must not purchase more than 25 percent of the average daily volume of the shares in any one day of the regulated market on which the purchase is carried out, except where the issuer informs the FCA of its intention and discloses that it will deviate from the 25 percent limits and where the volume of the buy-back does not exceed 50 percent of the average daily volume.

    Issuers are also restricted from selling their own shares during the buy-back period or repurchasing their own shares during either a close period or a period during which the issuer has decided to delay the disclosure of inside information.

    On 20 October 2011, the European Commission published its legislative proposals to replace the “MAD” with a regulation on insider dealing and market manipulation “MAR” and a directive on criminal sanctions for insider dealing and market manipulation (“CSMAD”). As discussed above, MAR was adopted in June 2014 and will apply in all Member States including the UK from 3 July 2016 on which date MAD will be repealed.40 The provisions relating to share buy-backs (contained in Article 5 of MAR) are similar to those contained in MAD. In order for a share buy-back to fall within the MAR safe harbour, “the full details of the programme [must be] disclosed prior to the start of trading, trades [must be] reported as being part of the buyback programme to the competent authority and subsequently disclosed to the public, and adequate limits with regards to price and volume [must be] respected.”41 MAR is yet to be adopted, but once it is, it will apply from 24 months after its entry into force (on which date MAD will be repealed). By way of transitional provisions, MAR permits market practices which were in existence prior to its entry into force and which had been accepted by competent authorities to remain applicable until 12 months after MAR enters into force in July 2016. Of note, the UK Government has decided to exercise its discretion to not opt into CSMAD at the present time, although it may do so at a later date.

    v. Break Fees +
    A payment or break fee payable to a third party if a proposed transaction is not completed will be treated as a Class 1 transaction (therefore requiring the prior approval of shareholders) if the value of the payment or fee exceeds 1 percent of the offer value (if the listed company is being acquired) and in any other case 1 percent of the market capitalisation of the listed company. The FCA has indicated that where an issuer has committed to more than one break fee as part of a transaction, it would expect the relevant break fees to be aggregated with the greatest potential amount being tested (although mutually exclusive break fees would not need to be aggregated).

    Cancellation of Listing (LR 5.2R to 5.2 12R

    An issuer wishing to cancel the listing of any of its equity securities that have a premium listing on the Main Market must, subject to certain limited exceptions, obtain the consent of not less than 75 percent of the holders of the shares voting on a resolution to approve the cancellation and, if the company has a controlling shareholder, of more than 50 percent of the votes attaching to the shares of independent shareholders who voted on the resolution. This requirement does not apply:

    • where the issuer is in financial difficulties and announces a restructuring proposal without which there is no reasonable prospect of avoiding formal insolvency proceedings and where the continued listing of the issuer would jeopardise the successful completion of the proposal (LR 5.2.7R); or
    • in the case of a takeover offer when the offeror or any controlling shareholder who is an offeror is interested in 50 percent or less of the voting rights of the company before announcing its firm intention to make its takeover offer and the offeror has acquired (or agreed to acquire) 75 percent of the voting rights of the issuer and has stated in the offer document (or subsequent circular) that a notice period of not less than 20 business days would be given prior to cancellation. This 20-business-day notice period will commence either on the offeror’s attainment of the required 75 percent or on the first date of issue of compulsory acquisition notices under section 979 of the Companies Act 200642 and is intended to give the holders of the remaining securities time to trade out their positions (LR 5.2.10R to 5.2.12R); or
    • in the case of a takeover offer when the offeror or any controlling shareholder who is an offeror is interested in more than 50 percent of the voting rights of the company before announcing its firm intention to make its takeover offer and the offeror has acquired (or agreed to acquire) 75 percent of the voting rights of the issuer and such acceptances represent a majority of the voting rights held by the independent shareholders on the date its firm intention to make its takeover offer was announced and has stated in the offer document (or subsequent circular) that a notice period of not less than 20 business days would be given prior to cancellation.