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Nordic Market Newsletter 6/2012

6 July 2012


European Court of Justice

Can intermediate steps in a protracted process constitute insider information?

In a preliminary ruling on 28 June 2012 in case C-19/11, concerning questions referred by the German Bundesgerichthof, the ECJ ruled that “specific information” in Directive 2003/6/EC on insider dealing and market manipulation (market abuse) and Directive 2003/124/EC implementing Directive 2003/6/EC can also mean information concerning intermediate steps in a protracted process – such as a decision process – and not merely information concerning the end result of the process – such as the decision. Such information can therefore constitute insider information.

The Court also ruled that it is not necessary that the probability of an event is predominant or high in order to conclude that the event “may reasonably be expected”, and that the probability required for an event to be reasonably expected does not vary depending on the magnitude of the effect of the event on the prices of the financial instruments concerned.


Helsinki Stock Exchange Issues Sanctions for Breach of CG Code

The Helsinki Stock Exchange, i.e. NASDAQ OMX Helsinki, has issued the first sanction for a breach of the Helsinki Corporate Governance Code. Pursuant to the stock exchange rules, the code as such is applicable to listed companies. However, the Code is a non-statutory recommendation based on the “comply or explain” –principle, and companies can choose not to apply specific recommendations as long as they formally provide an explanation for doing so. It is not possible to depart from all recommendations of the Code since many of them are based on legislation or other regulation. The stock exchange found that a company (Finnair Plc) had not made sufficient disclosures regarding the remuneration of the managing director and other executives of the company. The disclosure obligations were based on the Code and the company had not provided an explicit explanation of not applying the disclosure rules in its annual corporate governance statement, as required by the Code.

The Disciplinary Committee of the Helsinki Stock Exchange stated in its decision that Finnair had not complied with the recommendations of the Code when it did not announce the principles and decision related to the special remuneration paid to management during the years 2009-2011. In addition, Finnair had not complied with its reporting obligations when it had not informed of an additional recruitment fee of EUR 180,000 paid to the current managing director before his appointment in 2009. When considering its decision the Disciplinary Committee had given significance to the fact that the remunerations in question were substantial. The disclosure deficiencies of the company were subject to some media attention and noted by the stock exchange as well.

For non-compliance with the Code, the stock exchange may impose a warning and a fine in the range of EUR 10,000 – 500,000 to the breaching party. In case the breach is particularly serious even delisting of securities of the breaching party may be proposed. In case the stock exchange considers that the breach is minor, the matter may be handled directly by the stock exchange without a process with the disciplinary committee.


Submission to the Swedish Law Council

On 7 June 2012, the Swedish Government submitted to the Law Council a proposal for supplementary provisions to regulation (EU) 236/2012 on short selling and certain aspects of credit default swaps. The proposed law, among other things, designates the Swedish Financial Supervisory Authority (FI) as the relevant competent authority and gives FI powers to exercise supervision in accordance with the regulation.

The regulation itself mandates notification and disclosure of certain short positions in shares and restricts naked short selling of shares. It will enter into force 1 November 2012.

The Swedish Securities Council

The Swedish Securities Council has issued the following statement concerning mandatory bids and exemptions from takeover rules.
In statement 2012:16 Amarant Mining Ltd intended to subscribe for shares in a non-cash issue of shares in Mineral Invest International MII AB (in essence a sale of assets in exchange for shares), which would put Amarant over the threshold that triggers the mandatory bid obligation. However, in accordance with previous practice regarding non-cash issues, the Council exempted Amarant from the mandatory bid obligation, under the conditions that (i) the shareholders in MII AB be informed of the percentage of votes and capital that Amarant will obtain after the share issue and (ii) the share issue resolution is supported by two thirds of the shares and votes represented at the general meeting.

Nordic Market Growth NGM AB changes its rule book for issuers to reflect previous changes on NASDAQ OMX Stockholm

Removal of the rules regarding board member independence

From 1 July 2012, NGM rules will no longer require board member independence, since these requirements already apply to all companies on the Swedish stock market through the Swedish Corporate Governance Code.

Removal of the rules regarding transactions with affiliates

In order to comply with a statement by the Swedish Securities Council, NGM will delete rules on the decision-making process when a company decides on a transaction with an affiliate. Statements by the Swedish Securities Council are considered good practice in the Swedish stock market; hence all listed companies should already comply with such recommendations. The statement can be found on the website of the Swedish Securities Council, www.aktiemarknadsnamnden.se


The Danish Parliament adopts new rules regarding refund of Danish withholding tax

On 13 June 2012, the Danish parliament adopted bill no L 173 and bill no L 192 introducing certain changes to Danish tax legislation. Generally, the scope of the bill is to increase taxation of multinational groups which claim to have no taxable income in Denmark.

Surprisingly, the bill (L 173) in its final form introduces new rules regarding refund of Danish withholding tax with respect to outbound payments of dividends, royalty and interest. The new rules were not included in the original bill but were introduced only one day prior to the final adoption of the bill.

Under Danish law, the gross amount of withholding tax is generally withheld at source at rates of 25-27% and any tax payer who wishes to rely on a lower rate provided for in a tax treaty must claim a refund from the Danish tax authorities.

The new rules regarding claim for refund of Danish withholding tax have the following, notable consequences:

  • The Danish tax authorities now have 6 months to process a claim for refund of withholding taxes before interest accrues on the claim. In the former reclaim regime, interest accrued on the claim for refund 30 days after the claim had been submitted to the Danish tax authorities;
  • The Danish tax authorities may now suspend the 6 month deadline referred to above if a refund claimant have failed providing the necessary information and documentation needed by the authorities to test whether or not the requirements for refund of have been met by the refund claimant;
  • Interest on claims for refund of withholding tax now accrues at an interest rate of 0.4 % per commenced month plus a supplement calculated by NASDAQ OMX Nordic (Copenhagen) based on the redemption yield of certain bonds (2012: 0.1 % per commenced month). In the former regime, interest accrued at an interest rate of 7 % p.a. plus a supplement of the Danish Central Bank’s lending rate (first half of 2012: 0.7 % p.a.) 7.75% in total; and
  • If a dispute arises regarding a claim for refund of withholding tax, the Danish tax authorities may now demand that the refund claimant posts security before the authorities settle the refund claim of the authorities suspect that there is an obvious risk that the paid out amount will not be repaid be the claimant in the event that it is established that the claimant was not entitled to refund of the Danish withholding tax withheld.

In summary, the new rules regarding claims for refund of Danish withholding tax make the Danish regime more burdensome to foreign recipients of dividend, interest or royalty payments to the extend such recipients rely on exemptions to Danish withholding tax which are obtained through refund of Danish withholding tax withheld (e.g. exemptions in an applicable double tax treaty).

It remains to be seen how the new rules will affect the reclaim procedure in practice. However, the new rules will likely entail that the average turn-around period with the Danish tax authorities of a claim for refund is extended, possibly by months.

The new rules apply to all refund claims which have not been processed conclusively by the Danish tax authorities by 30 June 2012, irrespective of whether or not the withholding has been made before 1 July 2012.

In addition to the new rules regarding claim for refund of Danish withholding tax, the bill adopts previously suggested changes (described in Nordic Market Newsletter 4/2012), including:

  • Adjustments of the transfer pricing rules. The penalty for insufficient transfer pricing documentation can be calculated on different objective criteria and on the potential tax advantage. A fixed penalty of DKK 250,000 is introduced (basic amount) plus 10 pct. of the increased income for failure to submit documentation or if the submitted transfer pricing documentation was insufficient.
  • Limitation on a Company’s access to offset losses. A loss of DKK 7.5 million (2010 figures being adjusted annually) can always be offset against positive income, and the remaining loss can at most reduce the remaining income by 60 pct.
  • Joint liability for tax consolidated companies´ payment of taxes in Denmark.

The other adopted bill (bill no L 192) introduces increased tax depreciations for companies investing in the remainder of 2012 and 2013. It is possible to depreciate 115% of the purchase price of equipment acquired in the period from 30 May 2012 to 31 December 2013.

2012 Tax reform

On 22 June 2012, the Danish Government and the opposition agreed on a comprehensive settlement regarding the proposed tax reform. Some adjustments were made in the government's proposal of May 2012 including:

  • The suggested reduction of the interest relief starting in 2017 is deleted.
  • Pensioners will receive the same increase in the top tax-bracket as other taxpayers.
  • Savings of 2.7 billion DKK (defence system) and 1 billion DKK (EU contribution) are included as part of the financing of the reform.

The main elements of the tax reform affecting the corporate sector are expected to be implemented as in the Government's original proposal (described in Nordic Market Newsletter 5/2012), which included:

  • Increased taxes on the financial sector, affecting banks, pension funds and insurance companies, among others.
  • Improvement of the participation exemption.

Specific details of the signed tax settlement are not yet revealed.


Changes to the Oslo Stock Exchange Issuer Rules for issuers of shares and equity certificates

New Fast-Track Listing possibility

The process for admission to listing of shares and equity certificates on Oslo Børs and Oslo Axess, previously solely regulated by a pre-determined time table, is amended by a fast-track listing process, which will allow the timetable and deadlines for key steps in the process to be adapted to the project in question.

Changes to Continuing Obligations

The deadline for the publication of the information document is extended due to concerns from issuers. Instead of the previous deadline of 20 trading days, publication shall be completed before the start of stock exchange trading on the 30th trading day after the relevant transaction date.
Furthermore, in order to facilitate for private individuals and less sophisticated investors to correctly price listed shares in connection with complex corporate actions, the Oslo Børs is given authority to require that an issuer publishes the theoretical opening share price in connection with such action, within such deadline as Oslo Børs may stipulate.