The Transparency Requirements Law, Law 190(I)/2007 took effect on 1 January 2008. It transposes into domestic legislation the European Parliament and Council Directive 2004/109/EC on transparency requirements of listed transferable securities, and in part the European Commission Directive 2007/14/EC, which sets out detailed rules for the implementation of certain provisions of Directive 2004/109/EC.

The Law applies to issuers of transferable securities listed for trading on a regulated market having Cyprus as their Home Member State. It designates the Cyprus Securities and Exchange Commission ("CySEC") as the competent authority with responsibility for supervision and enforcement.

The Law applies to transferable securities that are traded in the stock exchange apart from instruments of payment and money market instruments. It does not apply to units issued by and traded in Undertakings of Collective Investments in Transferable Securities ("UCITS"), unless they are close-ended funds.

Issuers are required to publish accurate and concise information in relation to their business performance and their assets, including annual and half-year financial statements as well as quarterly financial reports. Issuers are also obliged to report on transactions in their securities on an ongoing basis. An issuer is obliged to report the total amounts of shareholdings in it as well as any notifications it receives from its significant shareholders (those holding more than 5% of the issued capital) in relation to their transactions. These must be reported as soon as possible and in any event no later than the end of the day after notification. Issuers are required to notify CySEC at the end of each calendar month of any changes in their capital or the total amount of the voting rights attached to their shares. They must also immediately inform CySEC of any change in the rights attaching to their shares and derivatives or any loan agreement they enter into. Finally, issuers are obliged to give CySEC prior notice of any proposed changes to their constitution.

The Law also imposes obligations on shareholders. A shareholder who acquires or disposes relevant securities to which voting rights are attached, must notify the issuer of the proportion of voting rights held by him or her as a result of the acquisition or disposal in the event that proportion reaches or exceeds 5% (being the minimum threshold). This notification requirement does not apply:

  • where shares are acquired for the sole purpose of clearing and settling within a maximum of three days from the date of the relevant transaction; or

  • to persons holding shares in a custodian capacity provided that such custodians cannot exercise the voting rights attached to such shares except under instructions given in writing or by electronic means; or

  • to financial instrument holders.

Special rules apply to management companies of UCITS as well as to investment firms in relation to their portfolio management activities.

An important aspect of the Law is that it obliges issuers to treat all share- and bondholders belonging to the same class of transferable securities equally, in terms of data protection, the provision of information and all other aspects of their relationship.

This article appears in the Summer 2008 edition of Cyprus Business Headlines, published by Andreas Neocleous. To view the newsletter in its entirety click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.