Disclosure Requirements - UK
Disclosure Category 1
In the case of holdings in UK equities, CBL is under an obligation, under Section 793 of the Companies Act 2006, to disclose the identity and holdings of customers holding applicable positions.
In the case of threshold crossing disclosures the investors are directly responsible for disclosing such information to the relevant parties, the exchange, issuer, regulator, etc.
In order to comply with the legislation as mentioned below, customers entering into transactions in the UK market consent and are hereby deemed to consent to disclosure and to the appointment of the issuer, regulator or other requesting party as their attorney-in-fact, under power of attorney to collect from CBL such information as is required to be disclosed.
Customers are advised that local laws and regulations (including the UK City Code on Takeovers and Mergers) may require CBL to disclose securities trading and holding information and the identity of the ultimate beneficial owners of certain securities.
Background and legal basis
- Market Abuse Regulation relating to disclosure under article 22 of that Regulation
- FCA Rules
- Section 793 of the Companies Act 2006
Section 793 of the Companies Act 2006 gives a public company the power to investigate ownership of its shares.
A written notice (the “793 Notice”) is sent by the company to any person or company that holds or has held any of its share capital during the three years immediately preceding the date of issue of the 793 Notice, irrespective of the size of the holding.
The notice is addressed to the person or company whose name appears in the shares register. If this is a nominee, the notice will be passed on to the person or company represented by the nominee. The company can request that the final beneficial owner be revealed.
The UK market recognises the nominee concept and all UK shares held by CBL customers are registered in the name of Vidacos Nominees Ireland Ltd. The Companies Act 2006 gives the company the right to require disclosure down to the level of the final beneficial owner.
Although it may very rarely happen, the Financial Services Authority (FSA) can apply to the UK courts to have a court order granted to allow the FSA to request disclosure. Such an order would only be issued in serious cases (such as fraud or national security), where there appears to be evidence indicative of a crime.
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”) was transposed into Statutory Instrument 2020 No. 717 on 9 July 2020 (SDR II Law).
Non-compliance with the 793 Notice may result in the withdrawal of voting rights, the withholding of capital and income payments and the invalidation of any transfer of shares.
Non-compliance with a court order can have serious judicial consequences up to and including imprisonment.
Obligation to report threshold crossings
In accordance with the London Stock Exchange (LSE) rules, Panel of Takeover
and Mergers board (PTM) rules, an investor who acquires, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% of a UK Company, must, under the Companies Act 1985 Section 198, disclose their interests to the London Stock Exchange and the company, within two days. The company may impose sanctions if disclosure not completed.
In accordance with the Panel of Takeover and Mergers board (POTM) rules , and the Disclosure requirements of the Takeover Code (the “Code”) and Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree or offeror company must disclose any dealings and positions in any relevant securities of the offeree or offeror company, even if their interest in the relevant securities of the company dealt in is less than 1%.
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel’s website , including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified.
In accordance with the Transparency Rules Directive “DTR”, a person must notify the issuer of the percentage of its voting rights he holds as shareholder or holds or is deemed to hold through his direct or indirect holding of financial instruments falling within
- DTR 5.3.1R (1) (or a combination of such holdings) if the percentage of those voting rights:
- reaches, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% (or in the case of a non-UK incorporated issuer on the basis of thresholds at 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%) as a result of an acquisition or disposal of shares or financial instruments falling within;
- DTR 5.3.1 R; or (2) reaches, exceeds or falls below an applicable threshold in (1) as a result of events changing the breakdown of voting rights and on the basis of information disclosed by the issuer in accordance with DTR 5.6.1 R and DTR 5.6.1A R; and in the case of an issuer which is not incorporated in an EEA State a notification under (2) must be made on the basis of equivalent events and disclosed information.
Where a holder of a previously notified financial instrument acquires the underlying shares and a shares threshold is tripped but overall % held is unchanged, the change in nature of holding needs to be disclosed.
The disclosure rules apply only to holdings in (a) UK incorporated or non-UK incorporated issuers whose shares are admitted to trading on an EEA regulated market and whose home Member State is the UK and (b) UK incorporated issuers whose shares are admitted to trading on a UK prescribed market (for example, AIM).
Portfolio Company Disclosure
Articles 27 to 29 of the Directive require notifications and disclosures by an AIFM managing an AIF which acquires certain holdings/control of portfolio companies which have their registered office in the EU. The UK has implemented these rules through Regulations 38 to 40 and 42 of the UK Regulations.
Notification of the acquisition of major holdings and control of Non-Listed Companies
The AIFM must notify the competent authority of the voting rights of the Non-Listed Company held by the AIF it manages when the AIF acquires, disposes of or holds voting rights of a Non-Listed Company. The relevant trigger points are 10%, 20%, 30%, 50% and 75% and the notification must be made within ten working days of the trigger event.
The AIFM is also required to provide the following information to the Non-Listed Company, its shareholders and the competent authority within ten working days of acquiring control of a Non-Listed Company:
- the resulting situation in terms of voting rights;
- the conditions subject to which control was acquired, including information about the identity of the different shareholders involved, any natural person or legal entity entitled to exercise voting rights on their behalf (and the chain of undertakings through which voting rights are effectively held); and
- the date on which control was acquired.
In its notification to the Non-Listed Company, the AIFM must request that the board of directors inform the employee representatives (or where none, the employees) of the acquisition of control and the above- mentioned information. The AIFM must use its best efforts to ensure the directors do inform the employee reps/employees.
Disclosure in case of acquisition of control of an Issuer or Non-Listed Company
When an AIF acquires control of an Issuer or Non-Listed Company, the AIFM must make the following information available to the company, the shareholders and the competent authority:
- the identity of the AIFM(s) which manage the AIF(s) that have acquired control;
- the policy for preventing and managing conflicts of interest, in particular between the AIFM, the AIF and the company;
- its policy for external and internal communication relating to the company, in particular as regards employees; and
- for acquisitions of Non-Listed Companies only, the AIF’s intentions with regard to the future business of the Non-Listed Company and the likely repercussions on employment (including material changes to employment conditions). This information does not need to be provided to the competent authority.
Again, in its notification to the company, the AIFM must request that the board of directors inform the employee representatives (or where none, the employees) of the above mentioned information. The AIFM must use its best efforts to ensure the directors do inform the employee reps/employees.
Her Majesty’s Revenue and Customs (HMRC) and the UK Finance Act organise stamp duty, which is charged to the beneficial owner via the custodian (Citibank) and CBL.
Shareholders that do not disclose the identity and residence of the final beneficial owner cannot benefit from tax reductions for which they may be eligible.
Documentary evidence of details of all transactions and, where applicable, proof of relief from stamp duty must be retained for three years from the settlement date of each transaction and must be forwarded upon request from CBL or HMRC.
By holding UK equities in an account with CBL, customers will be deemed to have authorised the disclosure to HMRC upon request of all details of transactions relating to UK equities.
Takeovers and mergers
In accordance with the London Stock Exchange (LSE) Panel of Takeover and Mergers board (POTM) rules, an investor that acquires 3% of a UK company must, under the FSA’s Transparency Directive, disclose an interest within two business days of the transaction to the LSE and to the company and at each further 1% movement. In the case of an acquisition of 15% or more, an investor should disclose an interest by 12:00 one business day after the transaction date. Further disclosures should be made when the position moves through each whole percentage.
Non-compliance with the requirements may result in the shares being rejected by the company register or sanctions imposed by the LSE.
This is not a situation where a request could come to CBL; disclosure must be made on completion of a transaction on the LSE.
Shareholder identification as set out in the SRD II Law
The SRD II Law provides for the right for issuers to identify their shareholders.
Issuers can request intermediaries at each level of a custody chain to promptly provide relevant information to facilitate such identification.
In accordance with the SDR II Law as amended, an intermediary (in this case, CBL) shall, upon receipt of the shareholder identification disclosure request, transmit a similar request to the next intermediaries in the custody chain (that is, CBL 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 recipient's address defined in the request and without delay. CBL will generate the response as required, with information regarding shareholder's identity, limited to CBL books only.