Disclosure Requirements - Cyprus
Disclosure Category: 2
Disclosure requirements in Cyprus might result from the following laws:
- Law on Transparency Requirements (Securities admitted to trading on a Regulated Market) - Law 190 (1) 2007;
- Law on Insider Dealing and Market Manipulation (Market Abuse) - Law 116(I) of 2005;
- SRD II as transposed into Cypriot law;
- The Cypriot Banking Law.
CBL may also fall under an obligation under the Regulatory Decisions of the Council of the CSE on the Operation of a Central Securities Depository and Central Registry to disclose the name of the beneficial owners and their holdings on applicable securities.
In order to comply with the legislation detailed below, customers entering into transactions in the Cypriot domestic market consent and are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, the listed company or its agent or the regulator) as their attorney-in-fact, under power of attorney, to collect from CBL such information as is required to be disclosed. Customers who do not want to grant such authority to CBL should refrain from holding such shares in their account with CBL.
Background and legal basis
Disclosure requirements of the Regulatory Decisions of the Council of the CSE on the Operation of a Central Securities Depository and Central Registry
In accordance to the provisions of Article 4 (11)(b) of the Regulatory Decisions of the Council of the CSE on the Operation of a Central Securities Depository and Central Registry, the Cypriot regulator (CYSEC) may require the entity in whose name the Share Account (or another account which the CYSEC considers as omnibus account) is created at the Central Securities Depository and Central Registry (that is, CBL) to disclose upon request information in regards to the beneficial owners of the securities and their voting rights.
Failure to comply with the above disclosure requirements may result in an administrative fine imposed by the CYSEC not exceeding the amount of €350,000 and/or administrative fine not exceeding the amount of €850, for every day during which such refusal or violation continues, as provided by article 37 of the Cyprus Securities and Exchange Commission Laws of 2009, as amended from time to time.
Other reporting obligations
The obligation may fall on CBL, as account holder in Cyprus in which case it is cascaded down to the CBL customer and final beneficial owner.
Notification must be made to the Cypriot Stock Exchange (CSE), to the Cypriot Securities and Exchange Commission (CySEC) and to the issuing company in any of the following cases:
Notification of acquisition or disposal or exercise of considerable holdings in a listed company
Part V of the Law 190 (1) 2007 on Transparency Requirements provides that acquisition or disposal of listed shares (either listed in the CSE or in any organised market of any other EU Member State) crossing directly or indirectly 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% thresholds of the total voting rights of the issuing company must be notified to the issuer, the CySEC and/or the CSE. The obligation to notify the CSE only applies where the securities are listed on the CSE.
The notification must be made in writing not later than the next business day after the settlement of the transaction and shall include the following information:
- The quantity of voting rights;
- The chain of controlled undertakings through which voting rights are effectively held;
- The date on which the threshold was reached or exceeded; and
- The identity of the shareholder and, if the shareholder is not entitled to exercise the related voting rights, the name of the person entitled to exercise those on behalf of that shareholder.
However, in accordance with the respective law, this notification requirement does not apply in the following cases:
- To shares acquired for the sole purpose of clearing and settling of transactions within three business days following the transaction;
- To a custodian holding shares in its custodian capacity, provided that the custodian can only exercise the voting rights attached to such shares under instructions given by the beneficiary of the shares in writing or by electronic means;
- To an acquisition or disposal of voting rights by market makers under specific conditions;
- To shares held in the trading book of a credit institution or an investment firm, provided that the voting rights attached to such shares do not exceed 5% of the total voting rights and are not exercised or otherwise used to intervene in the management of the issuer;
- To shares provided to or by the members of the European System of Central Banks in carrying out their function as monetary authority.
Notification of transactions dealt by persons discharging managerial responsibilities
Law 116(I) of 2005 on Insider Dealing and Market Manipulation (Market Abuse) as amended by Law 191(I) of 2007 imposes an obligation on persons discharging managerial responsibilities within an issuer of financial instruments and their connected persons to disclose any dealing on their own account in the shares of the issuer or any other derivatives or other financial instruments relating to those shares.
A person discharging managerial responsibilities under the respective law is:
- A member of the administrative, management or supervisory bodies of the issuer;
- A senior executive of the issuer who has regular access to inside information about the issuer and the power to take managerial decisions affecting the future development and business prospects of the issuer.
Such notification must be made to the CySEC and to the CSE before the opening of the exchange on the first business day that follows the dealing activity.
Notification of transactions dealt by certain specified persons working in the listed company
The chairman and any member or the secretary of the board, the general manager, the financial manager, the head of accounts department, the auditor and the employees' pension funds of a listed company or any person holding shares on behalf of any of the above must report any transaction regarding shares of the company to the CSE. Such notification must be made before the end of the next business day following the transaction.
Notification of acquisition or disposal of major holdings in a financial institution
Article 17 of the Cypriot Banking Law requires that any physical or legal person that intends to obtain control1 of a bank that is incorporated in the Republic of Cyprus or that intends to stop having such control is obliged to notify in advance and obtain the written consent of the Central Bank of Cyprus (CBC).
Any physical or legal person that intends to increase or decrease its holding in a bank or in its holding company as a result of which its voting rights or its holding reach or exceed or fall under 10%, 33% or 50% or the bank becomes or ceases to be its subsidiary, is obliged to notify in advance and obtain the written consent of the CBC.
Obligation to report holding or acquisitions during a public takeover bid
Law 41 (I) of 2007 foresees that, during the takeover bid process, the bidder or such other person holding 5% or more of the voting rights of the offeree company or the bidder, must announce immediately to the CSE and to the CySEC every acquisition of securities of these companies.
Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC with regard to the encouragement of long-term shareholder engagement (the second shareholder’s rights directive “SRD II”) has been transposed into local law by virtue of Cypriot Law 111 (I)/2021, published in the Cypriot Government Gazette issue 4840/A/12.05.2021 (the “SDR II Law”).
Failure to comply with the local disclosure requirements may result in:
- Administrative fines;
- Freezing of voting rights during general meetings;
- Prohibition on exercising an officer mandate at the board of directors or such similar position being assimilated to the one of a managing director;
- Criminal penalties and/or civil liabilities.
Shareholder identification as set out in the SRD II Law
The SRD II Law provides for the right for issuers to identify their shareholders, providing inter alia, that an issuer (or a third party nominated by the issuer) can request intermediaries at each level of a custody chain to promptly provide relevant information regarding shareholder identification.
In particular, pursuant to the SRD II Law, at the request of the issuer (or of a third party nominated by the issuer, such as Cyprus Stock Exchange), an intermediary (in this case, Clearstream Banking) shall transmit the relevant shareholder identification request to the next intermediary in the custody chain (that is, Clearstream Banking customers with holdings in the requested securities). A response to the shareholder identification disclosure request shall be sent by every intermediary in the custody chain directly to the issuer (or to such third party nominated by the issuer) and without delay. Clearstream Banking will generate the response as required, with information regarding shareholder's identity, limited to Clearstream Banking books only.
1. Any holding of at least 10% of the share capital or voting rights of the company or of its holding company or the right of any person to appoint the majority of the members of the board of directors of the company or of its holding company.