The Transparency Directive, Transparency Obligations Directive or Directive 2004/109/EC is an EU Directive issued in 2004, revising an earlier Directive 2001/34/EC. The Transparency Directive was amended in 2013 by the Transparency Directive Amending Directive (Directive 2013/50/EU). The Transparency Directive improves the harmonisation of information duties of issuers, whose

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

are listed at a regulated market at a

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for ...

within the European Union, and further market participants. The aims of these amendments are to establish minimum requirements regarding the financial information distribution all over the European Union and an increase in transparency at the

capital market A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers ...

s and in investor protection to meet information deficits in a developing financial market environment.Gutzy, Jochen/Märzheuser, Michael (2007): Praxishandbuch Ad-hoc-Publizität, p. 49 The term ''Transparency Obligations Directive'' is used in the UK

Companies Act 2006 The Companies Act 2006 (c. 46) is an act of the Parliament of the United Kingdom which forms the primary source of UK company law. The act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largel ...

, which implemented the Directive within

United Kingdom company law British company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to ...

History

The Transparency Directive of 2004

The process, which resulted in the 2004 version of the EU Transparency Directive, passed several years, consultations and revisions. The first step towards the EU Transparency Directive of 2004 took place in July 2001 when the

commission In-Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of anot ...

of the European Union announced the first consultation regarding the transparency on publicly traded companies. This first consultation period lasted from 17 July 2001 until 30 September 2001. During that time interested parties were able to contribute comments on the proposals, which the commission drafted in its own consultation paper, regarding the new regime on disclosure requirements. Interested parties could be the issuers themselves, national agencies and associations, state authorities and European authorities, such as CESR. The consultation paper of the commission suggested a division of disclosure duties, in periodic and ongoing obligations, for example for financial reports (periodical) and ad hoc notifications (ongoing), and a focus on the publications of those information through a medium on a Europe-wide basis as well as the control of these duties by the national supervisory authorities. Until the end of the consultation period the commission received 90 contributions from market participants all over Europe, whereas most of the answers came from British and German interest groups. Mostly these answers complied with the suggestions, which were made up by the commission. However, there have also been some amendments: * Reducing the lowest threshold regarding notifications of major voting rights * Introducing International Accounting Standards into financial reports * Publication of information via newspaper and internet * Responsibility of state authorities for supervision (in cooperation with

stock exchanges A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and sell security (finance), securities, such as share (finance), shares of stock, Bond (finance) ...

) After the first consultation the

Commission In-Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of anot ...

revised its consultation paper to present it to the public another time. In May 2002 the

launched a second and final consultation period, which lasted from 8 May 2002 until 5 July 2002. The

specified the information requirements regarding issuers, listed in a regulated market at a

, especially in terms of financial reporting, voting rights, directors' dealing, stock options, employee shares schemes and equal treatment of shareholders. In detail, those suggestions were: * Financial reporting requirements based on the annual turnover * Equal treatment of

shareholders A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

by admitting proxy voting rights and electronic voting * Lower initial threshold for notifications of voting rights at 5% * Introducing further thresholds at 15% and 30% * Time limit for filing such notification: 5 calendar days * Publication of such notifications on the issuer's homepage, in a newspaper and further information/news providers These suggestions were basically confirmed by the interested parties. On 26 May 2003 the

proposed its draft for the Directive to the

European Parliament The European Parliament (EP) is one of the two legislative bodies of the European Union and one of its seven institutions. Together with the Council of the European Union (known as the Council and informally as the Council of Ministers), it ...

and to the

Council of the European Union The Council of the European Union, often referred to in the treaties and other official documents simply as the Council, and less formally known as the Council of Ministers, is the third of the seven institutions of the European Union (EU) a ...

. About one year later, on 30 March 2004, the

approved the Directive, whereby the unofficial version of the Directive was published on 11 May 2004. This unofficial version covered all of the topics discussed in the former consultation process, such as periodical financial reporting, transparency in shareholder structure and publication of information. The final version of the Directive 2004/109/EC of the

and of the

Council A council is a group of people who come together to consult, deliberate, or make decisions. A council may function as a legislature, especially at a town, city or county/shire level, but most legislative bodies at the state/provincial or natio ...

on the harmonisation of transparency requirements in relation to information about issuers whose

are admitted to trading on a regulated market was adopted on 17 December 2004. After the announcement of the Directive in the

Official Journal of the European Union The ''Official Journal of the European Union'' (the ''OJEU'') is the official gazette of record for the European Union (EU). It is published every working day in all of the official languages of the member states of the EU. Only legal acts p ...

the

Member State A member state is a state that is a member of an international organization or of a federation or confederation. Since the World Trade Organization (WTO) and the International Monetary Fund (IMF) include some members that are not sovereign states ...

should transform the regulations, agreed on in the Directive, into national law within the next two years, not later that 20 January 2007.

The Transparency Directive Amending Directive of 2013

The Transparency Directive was amended in 2013 by the Transparency Directive Amending Directive (TDAD), Directive 2013/50/EU. The final date for member states to implement the TDAD was 26 November 2015. The TDAD contains these elements: * Issuers are no longer obliged to publish interim reports (unless a Member State chooses to still impose it as an obligation) * Issuers who have activities in the extractive or logging of primary forest industries should disclose in a separate report, on an annual basis, payments made to governments in the countries in which they operate * Notification of major holdings of voting rights should include cash-settlement financial instruments with similar economic effect to holding shares and entitlements to acquire shares * Issuers should prepare their annual financial reports in the European single electronic reporting format (ESEF) (from 1 January 2020 on) * ESMA should develop and operate a web portal serving as a European electronic access point (EEAP) for regulated information

Regulations

The Directive specifies a range of regulations which have to be transformed into national law by the

, whereas the Directive only sets minimum standards.

have the possibility to set up stricter rules.

Scope

This Directive is directed to issuers whose

are admitted to trading on a regulated market situated or operating within a

and regulates requirements regarding the disclosure of periodic and ongoing information.

Definitions

The Directive defines several terms, which are used in the new regulations, either by referring to other Directives or by its own definition.

Periodic information

Annual financial reports

The issuer has to publish its annual financial report not later than four monthsHutter, Dr. Stephan/Kaulamo, Dr. Katja (2007): Das Transparenzrichtlinie-Umsetzungsgesetz: Änderungen der Regelpublizität und das neue Veröffentlichungsregime für Kapitalmarktinformationen, in: NJW 2007, p. 551 after the end of the

fiscal year A fiscal year (also known as a financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. La ...

and has to ensure that this report is accessible for at least five years. The annual financial report has to include the audited financial statements, a management report and a statement by officials that the financial statements were set up in compliance with the applicable accounting standards. In addition to the annual financial report the audit report should be published, as well.

Half-yearly financial reports

The issuer has to publish a financial report covering the first half of the

after the end of this relevant period. This report has to include the financial statements for the first half of the

, an interim management report (including major events in the first half-year, a forecast for the next half-year and their possible impacts and further financial statements) and a statement by officials that the financial statements were set up in compliance with the applicable accounting standards. In case this half-yearly report gets audited, the audit report has to be published as well.

Ongoing information

Major Holdings of voting rights

shareholder A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...

, acquiring or selling

shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

, has to notify the issuer of such transactions, as soon as the acquisition or disposal of shares results in an amount of voting rights, that exceeds, falls below or reaches the threshold of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of the total amount of voting rights issued. This notification requirement can also be based on the following cases: * Acting in concert with other

* Voting rights are held by a third party and will be transferred temporarily to a different

Shares In financial markets, a share (sometimes referred to as stock or equity) is a unit of equity ownership in the capital stock of a corporation. It can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Sha ...

are lodged as collateral * Life interest * Voting rights being held by a controlled undertaking * Voting rights be deposited with a third person (whereas the third person is allowed to exercise the voting rights on its own discretion) * Holding voting rights in behalf of the legal owner * Exercising voting rights as proxy This notification has to include the amount of voting rights held after acquisition/disposal, the day on which the event took place, the chain of controlled undertakings or the name of the (directly invested)

from which the notifying party gets attributed the voting rights. Furthermore, a notification is required when a natural person or legal entity holds

financial instruments Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...

, which result in the entitlement to acquire voting rights, whereas the acquisition is based on the holder's initiative. These regulations should not apply for

, holding the

market makers A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the '' bid–ask spread'' or ''turn.'' Th ...

, for clearing and settlement purposes and credit institutions, holding the

in their trading book, and holding less than 10% of the total amount of voting rights issued.

Information requirements for issuers

Issuers are obliged to treat those

equally, which are in the same position. Furthermore issuers have to make all available all kinds of information that are necessary for the

to ensure the exercise of their rights.Hutter, Dr. Stephan/Kaulamo, Dr. Katja (2007): Das Transparenzrichtlinie-Umsetzungsgesetz: Änderungen der anlassabhängigen Publizität, in: NJW 2007, p. 477 person to exercise their voting and/or financial rights, either in paper or electronic form. After the

annual general meeting An annual general meeting (AGM, also known as the annual meeting) is a meeting of the general membership of an organization. These organizations include membership associations and companies with shareholders. These meetings may be required ...

the issuer has to publish decisions made at the

, if applicable, which are: payment of

dividends A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

and issue of new

, including allotment-, subscription-, cancellation- and conversion rights of the new

General obligations

As long as

or issuers have to provide information to each other, e.g. disclose the holding of voting rights, this information has to be filed with the state authority at the same time as well. The same applies for issuers, who propose the annual meeting to change their articles of incorporation.

Competent authorities and their power

Each

of the

European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

has to designate a state authority, which should be responsible for carrying out the obligations regarding

and issuers. Therefore, the

Member States A member state is a state that is a member of an international organization or of a federation or confederation. Since the World Trade Organization (WTO) and the International Monetary Fund (IMF) include some members that are not sovereign states ...

have to empower the authorities to achieve the aims of the Directive. Especially the authorities should be able to require involved parties to provide them with information and documents regarding each single case or require the issuers and

to disclose such information, which is necessary to fulfill their requirements. Additionally the authorities shall be empowered to carry out on-site inspection, to verify compliance with the statutory requirements.

References

External links

* {{CELEX, 32004L0109, text=Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC
European Commission – Transparency requirements for listed companies
European Union directives European Union financial market policy Corporate governance