European Union: Governance & Securities Law Focus: Europe Edition - July 2015

In this newsletter, we provide a snapshot of the principal European, US and selected international governance and securities law developments of interest to European corporates.


Financial Reporting: Commission Delegated Regulations on Equivalence of Certain Third Country National GAAPs to IFRS

On 15 June 2015, the European Commission published the text of a draft delegated regulation to amend the Prospectus Regulation (809/2004). The objective of the delegated regulation is to deal with the expiry on 31 December 2014 of the transitional period during which the Commission allowed issuers to use financial statements prepared in accordance with Indian GAAP under the Transparency Directive. In order to allow India to complete the convergence of Indian GAAP with IFRS, the delegated regulation retrospectively extends this transitional equivalence period to 1 April 2016.

The full text of the regulation is available here:

On 15 June 2015, the European Commission also published the text of a further delegated regulation to amend Regulation (EC) No 1569/2007 establishing a mechanism for the determination of equivalence of accounting standards applied by third country issuers, in order to give countries that are still working to converge towards or adopt IFRS in their national systems more time. This further delegated regulation therefore extends the period for accepting relevant third country accounting standards until 31 March 2016.

The full text of the regulation is available here:

Proxy Advisers: ESMA Consultation on Best Practise Principles for Voting Research 2014

On 8 June 2015, the European Securities and Markets Authority ("ESMA") published a call for evidence to gather information on how stakeholders perceive the most recent proxy seasons (following the Best Practise Principles for Shareholder Voting Research 2014 ("BPPs")) to have evolved and to assess the extent to which new trends or changes in proxy advisors' approaches have developed.

ESMA's review will examine both how many proxy advisers have signed up to the BPPs and the extent of changes brought about by the BPPs since they were introduced. The extent of changes will be assessed by reference to:

  • how far the BPPs address the issues identified by ESMA as needing change;
  • the extent to which compliance statements published by signatories to the BPPs comply with ESMA's 2013 report on the role of the proxy advisory industry; and
  • the actual practise of signatories following implementation of the BPPs.

The call for evidence sets out a number of questions relevant to all stakeholders, with ensuing sections containing questions for specific groups of shareholders.

The full text of ESMA's call for evidence is available here:

Fourth Money Laundering Directive: Publication in Official Journal (Corporate Aspects)

On 5 June 2015, the Fourth Money Laundering Directive was published in the Official Journal. The published text of the directive is in substantially the same form as the text adopted by the European Parliament at the second reading on 20 May 2015.

Under the text, member states must ensure that they adhere to the following in respect of central registers of information on the ultimate beneficial owners:

  • Member states must ensure that corporate and other legal entities incorporated within their territory are required to obtain and hold adequate, accurate and current information on their beneficial ownership, including the details of the beneficial interests held.
  • The information must be held in a central register in each member state or a public register.
  • The information must be available to: (a) competent authorities and financial intelligence units, without any restriction; (b) obliged entities that must do customer due diligence under the directive; and (c) any person or organisation that can demonstrate a legitimate interest.

The directive came into force on 25 June 2015, and must be implemented by member states by 26 June 2017.

The full text of Directive (EU) 2015/849 is available here:

Single-Member Companies: Council Agrees a General Approach on Replacement Directive

On 28 May 2015, the Competitiveness Council agreed a general approach on a proposal for a new Directive on EU-member private limited liability companies.

The proposed Directive will require member states to provide in their national company law for a form of single-member limited liability company to be established, which will be known as a Societas Unius Personae ("SUP").

The key elements of the proposal include:

  • Online registration: the SUP can be registered on-line using templates provided by member states. Online registration is to be as secure and compliant with existing national rules as possible.
  • Minimum capital requirement of € 1. Furthermore, in order to ensure adequate protection of creditors and other stakeholders, member states will have to ensure that their national laws provide mechanisms intended to guard against SUPs from being unable to pay their debts.
  • Transfer of seat to another member state: provisions relating to the separation of the company's seat from the member state in which the SUP was registered have been removed from the original Commission proposal to respect member states' competences and traditions. Similarly, aspects of labour law will remain covered by existing national laws.

The European Parliament is scheduled to adopt its first-reading position on the proposal on 15 December 2015.

The full text of the proposal is available to download here:

EU Related Party Transaction Rules: The Latest Position

The European Parliament's Legal Affairs Committee has voted to adopt the proposal for a new European Directive on related party transactions at an EU-level which will amend the Shareholder Rights Directive 2007/36/EC. The proposal, as adopted at this stage, contains exemptions for intra-group transactions and ordinary course transactions. There is also a great deal of flexibility for Member States to set the parameters for when related party transactions have to be approved or announced and whether they have to be approved by the shareholders or just the board.

Now both co-legislators (European Parliament and Council) have finalised their negotiation positions, the trilogues (informal negotiations between the European Parliament and the Council, during which the European Commission has a mediation and facilitation role) will start.

Conflict Minerals: The European Parliament Aims to Introduce an EU Mandatory Regime

On 20 May 2015, in a plenary meeting, the European Parliament proposed a mandatory reporting regime for "all Union importers" (downstream companies) of conflict minerals from conflict zones in the world.

The European Parliament's approach therefore substantially departs from the Commission's proposal for a voluntary "self-certification" regime, as well as the text adopted by the Parliament's International Trade committee ("INTA") in April, which included a mandatory certification only at the level of smelters and refiners.

Ultimately, however, the proposed regulations will have to be adopted in co-decision by the Parliament and the Council and the informal negotiation between the two institutions and the European Commission; it is possible, therefore, that a compromise position may be reached.

The press release and adopted text is available here:

Transparency Directive: Delegated Regulation on Regulatory Technical Standards on Major Holdings Published in Official Journal

On 13 May 2015, the European Commission's delegated regulation setting out regulatory technical standards on major holdings under the amended Transparency Directive was published in the Official Journal.

The delegated regulation is largely concerned with the calculation of voting rights in connection with the operation of market maker and trading book exemptions, for the purposes of major holdings disclosures as well as the calculation of voting rights in relation to certain derivatives.

The regulation will enter into force on 2 June (being 20 days after publication in the Official Journal) and shall apply from 26 November 2015 which is the date prescribed for the transposition of the directive amending the Transparency Directive.

The full text of Commission Delegated Regulation (EU) 2015/761 is available here:


Final Implementation of EU Directive 2011/61/EU on Alternative Investment Fund Managers

On 8 January 2015 the Italian securities and exchange commission (Commissione Nazionale per le Società e la Borsa, "CONSOB") issued resolution no. 19094 (the "Resolution"), which implemented in Italy the EU Directive 2011/61/EU on Alternative Investment Fund Managers (the "AIFMD") and the relevant provisions of Italian Legislative Decree no. 58 of 24 February 1998 ("Italian Securities Act"). Such Resolution became effective starting from 3 April 2015.

The Resolution introduced several changes to CONSOB regulation no. 11971 of 14 May 1999, as amended (the "Regulation on Issuers"), aimed at regulating (i) the marketing in Italy or in another state of the EU, both to institutional investors and to retail investors, of units of alternative investments funds ("AIF"), both closed-end and open, managed by Italian managers, società di investimento a capitale fisso ("SICAF") or società di investimento acapitale variabile ("SICAV"), EU managers or managers that are non-EU, as well as (ii) the authorisation to be provided by CONSOB and Bank of Italy with respect to such marketing. The new rules also set forth the pass-porting regime to which the marketing of units of an EU-AIF must be subject to, in order to be exempted from the CONSOB and Bank of Italy authorisation procedure.

There is currently an ongoing debate in Italy on the new regime set forth by the Resolution and through the Regulation on Issuers, as well as on the integration of such new regime with the public offerings regime, the consequences and effects of which are, therefore, still uncertain.


Listing Rules: Financial Conduct Authority Final Notice for Breaches of LR and DTR

On 17 June 2015, the Financial Conduct Authority ("FCA") published a final notice imposing a fine of £4,651,200 on Asia Resource Minerals plc ("ARM") (formerly Bumi plc). The FCA found that between 28 June 2011 and 19 July 2013, ARM had inadequate systems and controls to comply with its obligations as a listed company in breach of Listing Principle 2 (requirement to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations). The FCA also found that during the same period ARM had also committed serious breaches of three Listing Rules concerned with related party transactions:

The discovery of the related party transactions, together with other financial irregularities, meant the company could not publish its annual financial report for 2012 within four months of the financial year end (as required by the UK Listing Authority's Disclosure and Transparency Rules), consequently leading to a suspension of the company's shares.

The penalty is required to be paid in full by ARM to the FCA by 26 June 2015 (14 days from the date of the final notice).

A copy of the report is available here:

Market Abuse: Publication of Fair and Effective Markets Review (Corporate Aspects)

On 10 June 2015, the Fair and Effective Markets Review (set up last year by HM Treasury, the Bank of England and the FCA) published its final report. The majority of the report concerns the fixed income, currency and commodities markets. The report also includes a recommendation that HM Treasury should extend the maximum prison sentence for criminal market abuse from seven to ten years, to align the penalties with those for comparable economic crimes such as fraud.

The report considers that extending the maximum sentence will allow greater headroom for judges to take account of a large number of aggravating factors and to send a message of deterrence; this is despite the fact that no case has, to date, resulted in the maximum seven year sentence being imposed for market abuse.

The chairs of the Review will provide a full implementation report to the Government and to the Bank of England by June 2016.

The Fair and Effective Markets Review is available here:

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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.

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