On June 28, 2006, the German government issued draft legislation for the implementation of Directive 2004/109/EC ("Directive") of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market in Germany. The draft legislation is still subject to approval by the German parliament and is expected to be enacted as of January 20, 2007.
New minimum threshold. Pursuant to the draft, a shareholder acquiring more than 3% of the voting rights of an issuer publicly traded in Germany must publicly disclose if it exceeds or falls below this threshold. The 3% threshold follows the applicable minimum threshold in the United Kingdom whereas the current minimum disclosure threshold in Germany is 5%. Pursuant to the draft, a shareholder must publicly disclose an acquisition or disposal of voting rights whereby the proportion of voting rights held by such shareholder reaches, exceeds or falls below the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
Inclusion of stock options. For purposes of calculating such percentage, also stock options which can be exercised and transferred into voting stock unilaterally by the holder of such option (dinglich ausgestaltete Optionen) count as voting rights. The acquirer must notify the issuer, the German Supervisory Authority for Financial Services (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin) and the public by disseminating such information to the media Europe-wide. The new 3% threshold goes beyond the standard required by the Directive and, together with the inclusion of stock options, is expected to create more transparency and to make it more difficult to covertly acquire major holdings in the voting rights of a public company.
European-wide publication. In the future, insider information, information on directors’ dealings, financial reports and other information that must be publicly disclosed, may be required to be disseminated by the issuer to a European-wide audience rather than only within Germany, depending on who the shareholders of such issuer are and where they are located.
Federal Legislation. The disclosure requirements for publicly traded issuers will no longer be stipulated on a state level in the applicable stock exchange rules but in the future will be included in the federal Wertpapierhandelsgesetz (the German Securities Trade Act). Accordingly, in the future the BaFin rather than the exchange authorities on the state level will be responsible for overseeing that such disclosure requirements are met.
Reporting requirements. The draft provides for an obligation of publicly traded issuers to publish annual and semi-annual financial reports and in addition an interim report by management. If an issuer publishes quarterly reports, no interim report by management is required. The publication of quarterly reports is currently already mandatory for issuers listed on the Frankfurt Stock Exchange ("FSE") under the FSE listing rules.
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A version of this article previously appeared in World Securities Law Report in July 2006.
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