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Nordic Market Newsletter

8 June 2011


Periodical financial reporting

The Finnish Financial Supervision Authority (FFSA) gave new directions regarding the disclosure of interim reports, in November 2010. As of 1 January 2011 it has been sufficient that only information which is likely to have a material effect on the value of the security, is published as a stock exchange release. In addition, the release shall state that the full periodic financial report has been published and the release shall further state where the complete report may be found. The release submitted to the stock exchange and to the release archive must also include the complete interim report, interim management statement or financial statement release as an annex.

The issuers may still disclose the interim information and the reports complete and unedited as per the previous practice. However, if a company chooses to comply with the new directions and short form stock exchange release, it should inform investors and the media thereof, for example in the first release that has been published in accordance with the new standards. The chosen disclosure practice should be followed consistently.

The issuer itself shall determine which facts that are likely to have a material effect on the value of the security. FFSA’s standard 5.2b suggests that such facts include a summary of key information on the issuer’s financial position and earnings as well as their development during the report period, including key performance measures and an assessment of expected future development during the current financial period. However, as the facts are issuer-specific, the contents and scope of the release may vary between different issuers. The FFSA underlines, nevertheless, that future prospects often are facts having material effect on the value of the security, and therefore, they should always be presented in the stock exchange releases in question.

As the new directions entered into force on 1 January this year, the Finnish listed companies could disclose their financial statement releases for 2010 in accordance with the new directions. According to the FFSA, only some 20 per cent of the Finnish listed companies published their financial statement releases for 2010 in accordance with the new directions. The companies’ interpretations of the new directions varied somewhat, but the FFSA found a good practice be the companies explaining the development of the financial performance and operating environment of the company more profoundly than by only presenting the key figures, so that the investors may form an understanding of the most significant matters having an effect on the company’s operations during the reference period already on the basis of the stock exchange release.

Finnish tax administration to forward financial statements to the public trade register

The Finnish Tax Administration shall in the future forward the annual accounts of the Finnish limited liability companies that give the income tax return, to the Finnish trade register. Previously the companies have had the duty to file the annual accounts to the trade register and many companies have not complied with the obligation. In future the tax administration will forward the annual accounts for the public register automatically starting from the current fiscal year.

The annual accounts of the entities which are not required to register their financial statements at the trade register or which otherwise have a limited registration obligation (for instance branch offices or permanent establishments of foreign entities) will not be forwarded to the trade register by the Tax Administration. If such entities shall register their annual accounts, they are required to submit the documents to the register as previously.

The annual accounts can be reported in connection with the electronic income tax return or in paper format.

It should be noted, that also other documents attached to the financial statements, such as the minutes of the annual general meeting, become public documents along with the financial statements after the registration in the trade register.


Government bill regarding investment funds

The Swedish Government has submitted a proposal regarding amendments to the Investment Funds Act in order to implement the UCITS IV (2009/65/EC). The proposal contains changes which open doors for foreign fund managers to manage Swedish investment funds and for Swedish fund managers to manage foreign investment funds. In addition, new cross-boarder rules regarding the merger of investment funds are proposed and the marketing process in other EEA countries is being made more user friendly and new investment rules allowing the fund manager to invest all assets in one single fund are proposed. Furthermore, the information to investors is to be harmonized. The amendments are proposed to enter into force on 1 August 2011.

Amendments in the Market Abuse Penalty Act

According to the parliament’s resolution, Section 4 of the Market Abuse Act shall be amended. The amendment concerns that also preparation for gross insider offence shall be made a criminal offence. Example of preparation could according to the preparatory work be that money have been received and handed over as payment of costs that could be connected with the performance of such measures that are penalized by the provision of gross insider offence. The amendment of the law is a result of the Council Framework Decision on the fight against organized crime and will come into effect 1 July 2011.

Revised proposal for amendments to investment funds regulations

The Swedish Financial Supervisory Authority has, in consequence of the Swedish Government’s proposal regarding amendments to the on Investment Funds Act, written a new proposal on amendments to the regulations regarding investment funds (FFFS 2008:11) and the regulations and the general code of conduct (FFFS 2005:11) on insurance mediation. The proposal contains stricter rules for the organization of investment companies, especially risk management, administration and the internal control. Furthermore, rules pertaining to information are proposed. The amendments are proposed to enter into force on 1 August 2011.

Changes in Regulations regarding capital adequacy and large exposures

The Swedish Financial Supervising Authority is proposing amendments of Regulations and General Guidelines governing capital adequacy and large exposures as well as regarding public disclosure of information concerning capital adequacy and risk management. The regulations apply for credit institutions, investments firms, payment institutions and certain fund managers.

The Disciplinary Committee at NASDAQ OMX Stockholm fines HQ

The Disciplinary Committee of NASDAQ OMX Stockholm found that the former listed company HQ AB contravened the exchange’s rules and regulations for issuers and the decision is primarily based upon HQ’s annual accounts for 2009.

The Swedish Securities Council

  • Statement 2010:37 (Wallenstam). The dominant principal owner, together with related parties, already owned more than 30 percent of the shares in Wallenstam when the Takeover Act came into effect. The Securities Council found that this, in accordance with the law’s preparatory work, meant that the transfer to the owner of additional shares did not give rise to a mandatory bid obligation. Even the children under his care and who were related in accordance with the Act on Public Takeover Offers on the Stock Market had that opportunity. The Securities Council stated that the transfer, which in this case would be made in favour of the dominant principal owner’s wholly owned companies, did not imply a change of control. Accordingly, the wholly owned companies, as the dominant principal owner, had the right to acquire additional shares in the company.
  • In statement 2011:06 (FinnvedenBulten). The Securities Council granted an exemption from the mandatory bid obligation because the dominant principal owner’s share of votes in FinnvedenBulten, as a consequence of an overallotment option and stabilization measures in connection with the listing of the company’s shares on NASDAQ OMQ Stockholm, could dip below the mandatory bid threshold.
  • Statement 2011:15 (Strict). The Securities Council found that it was obvious that a consultant agreement requiring the payment of a separate additional purchase price affects the consideration which must be offeredin a takeover offer. Though, such an agreement could not be proven in the current case.
  • Statement 2011:16 (Strict II). The Securities Council found that NBK’s takeover rules do not require the fact that a petition has been made to the Securities Council to be made public. If a petition is price-sensitive it can follow from the exchange and the multilateral trading facilities’ rules that it must be made public, but interpretation and enforcement of these rules are not within the remit of the Securities Council.
  • In statement 2011:17 (360 Holding) and 2011:18 (Svenska Capital Oil) the Securities Council granted exemptions from the mandatory bid obligation which otherwise would arise if certain shareholders subscribed for shares in a planed issue in kind. The exemptions were subject to the conditions that the shareholders, before the shareholders meetings, were informed of how large share of equity and votes, respectively, the shareholders subject to the mandatory bid obligation could obtain at the most by acquiring the relevant shares, and the resolution of issue has to be supported by two thirds majority, disregarded the shares held by the shareholders subject to the mandatory bid obligation. If these shareholders later on would acquire additional shares in the companies and thereof increase their share of votes the mandatory bid obligation would arise.


New Directive on European Work Councils

A new amendment to the Danish Act on European work councils became effective as of 5 June 2011. The amendment implements the Directive 2009/38/EC on establishment of European work councils. The Directive provides for a number of important new concepts and definitions generally meant to strengthen the information and consultation procedure. Among other things, the Directive provides for more comprehensive definitions of “information”, “consultation” as well as “transnational” that are core concepts in defining the scope of application of the Directive. The rules apply to multinational companies with at least 1000 employees and with at least 150 employees in two member states. The establishment of a European work council is not mandatory but if an agreement on the establishment of the European work council is entered into, the rules of the Directive will apply subject to certain transition rules whereby e.g. agreements entered into before 1994 may be exempted from the scope of application of the Directive.

Dupont, Danisco and Danish Takeover Rules

On 21 January 2011 the American science group DuPont publicly offered to acquire all shares in Danish food products and enzyme company Danisco at a price of DKK 665 per share on the condition that DuPont acquired a minimum of 90 % of the shares in Danisco.

On 18 Mars 2011 - in the wake of DuPont’s takeover bid for Danisco - the Danish Securities Council (the DSC) released an interpretation on the maximum bid periods of 10 weeks or 4 months (if competition clearance required) permissible under Danish law. The interpretation clarifies that an offer may be extended by two weeks up to a period of no more than 12 weeks, and that an offer which is subject to authorisation may be extended by two weeks up to a period of no more than 4 months and 2 weeks.

In the time following the initial bid it became clear that DuPont would not be able to acquire a 90 % interest in Danisco. One day prior to the expiry of the offer period the CFO of DuPont announced that the bid was indeed final, and that DuPont would not raise the offer. However, the following day, on 29 April 2011, DuPont published an improved offer raising the share price to DKK 700 per share and reducing the ownership threshold condition to 80 %. The quick shift in statements by Dupont raised a public debate in certain Danish newspapers regarding acceptable statements and price manipulation, although to our knowledge the Danish FSA did not pursue the issue with DuPont.

Following the expiration of the extended bid 13 may 2011 DuPont announced that they have acquired 92,3 % of the shares in Danisco and that they will initiate a compulsory redemption of all remaining Danisco shares.

Contrary to the rules in some European countries Danish rules do not preclude the bidder - after the expiration of the bid period - from buying remaining shares at a higher price than was offered in the bid. The Danish rules only mean that the bidder may not exercise differential treatment of the shareholders during the bid period. Accordingly, during the bid period there was wide public speculation as to whether an American hedge fund, holding approximately 10,2 % of the shares, could potentially obtain a premium after the bid period in the event that DuPont only managed to secure between 80 and 90 % of the shares in the bid.


Amendments in the stock exchange’s rules

Oslo Børs is producing additions and amendments to the stock exchange’s rules for issuers, which mainly consist of the admission rules applicable for a listing, and the day-to-day obligations, which the companies shall comply with when they are listed on Oslo Børs or Oslo Axess. The new rules are likely to come into force on 15 July 2011.

New finance legislation

On 27 May 2011 the Ministry of Finance received the Banking Legislation Commission’s investigation no 24 about the finance legislation. The Commission has gone through the legislation of finance institutions and granting of credit with the aim of modernization, coordination and revision, and has prepared draft consolidated legislation for financing companies and groups.