BRIEFING S U M M A RY M AY 2 0 0 6

Implementation of the EU This briefing identifies some key EU

Transparency Directive issues for UK-
incorporated listed companies, relating to:

Transparency Directive periodic financial reporting, including

new requirements for quarterly reports
or management statements and for
KEY POINTS FOR UK ISSUERS responsibility statements; and
a new regime for disclosure of major
shareholdings (which will run in parallel
with, in effect, the current section 212
regime).

The EU Transparency Directive (TD) provides the Periodic financial reporting

framework for the new European transparency regime
for issuers of securities admitted to trading on a Quarterly reporting
regulated market within a member state (listed The TD aims to ensure that the financial information
companies). Member states must implement the TD by provided by listed companies is standardised and
20 January 2007. provided frequently and quickly. A key part of this
strategy is the requirement that an issuer of shares must
The Financial Services Authority (FSA) has published a
issue either quarterly reports or an interim management
consultation paper on implementation of the TD in the
statement that, broadly:
UK. We have not yet seen the final form of the
gives a general description of its financial position and
implementing measures to be adopted by the European
performance during the relevant period; and
Commission, and the FSA warns that it may have to
explains material events and transactions and their
consult again when these are settled.
impact on the financial position.
This briefing identifies some key TD issues for UK-
The FSA suggests that listed companies may be able to use
incorporated listed companies, relating to:
trading statements to satisfy this obligation if they
periodic financial reporting, including new
include the stated information. The FSA is not planning
requirements for quarterly reports or management
to issue any guidance for the time being to help listed
statements and for responsibility statements; and
companies to interpret these requirements, but has asked
a new regime for disclosure of major shareholdings
for comments on this approach. If you wish to respond,
(which will run in parallel with, in effect, the current
please let us know.
section 212 regime).
This is not a comprehensive list of relevant points; if you Responsibility statements
would like more information about the TD or the FSA’s The persons responsible within the listed company –
consultation, or would like to respond to the usually the directors – will be required to state publicly
consultation, please let us know. Comments must reach that:
the FSA by 30 June 2006. to the best of their knowledge, the annual financial
statements, prepared in accordance with the
The consultation paper and related documents are
applicable set of accounting standards, give a true and
available at www.fsa.gov.uk/pages/Library/Policy/CP/
fair view of the company’s consolidated assets,
2006/06_04.shtml and the TD is available at http://
liabilities, financial position and profit or loss;
europa.eu.int/comm/internal_market/securities/
transparency/index_en.htm.

Implementation of the EU Transparency Directive

1 Freshfields Bruckhaus Deringer, May 2006
 This material is for general information only and is not intended to provide
legal advice.

© Freshfields Bruckhaus Deringer 2006

www.freshfields.com

the annual management report includes a fair review
of the development and performance of the business
and the company’s position, with a description of the
principal risks and uncertainties that it faces (the
same wording as used in the new directors’ report
business review requirements in the Companies Act
1985); and
the half-year management report includes a fair
review of the important events that have occurred in
the first six months of the financial year and their
impact on the financial statements, with a description
of the principal risks and uncertainties for the
remaining six months (there are additional
requirements relating to related parties’ transactions).
Implementation dates
The FSA proposes that the TD’s financial reporting rules
should apply for reporting periods starting on or after
20 January 2007. It is not yet clear how this will work in
practice and in particular when the obligation to produce
quarterly reports/interim management statements takes
effect. We are taking this up with the FSA.
provisions but also to retain some aspects of the current
regime. The changes for listed companies may not be that
dramatic, but there will be cases where interests not
currently caught will be caught in future.
The TD does not affect existing Companies Act rules
giving a listed company powers to make enquiry of those
it believes to have an interest in its shares using a section
212 notice. These investigation provisions are repealed
and restated, with no significant amendments, by the
Company Law Reform Bill.
The new notification obligations on shareholders under
the FSA’s transparency rules will be different in several
ways from their obligations to disclose information in
response to a section 212 notice. There are no plans to
align these regimes, so listed companies may have to
adapt their procedures accordingly.
For further information please contact Vanessa Knapp
T + 44 20 7832 7030
E vanessa.knapp@freshfields.com
Stephen Revell
T + 44 20 7832 7217

Increased liability for accuracy of reports E stephen.revell@freshfields.com

The new TD requirements may increase the liability of a Martin Nelson-Jones

T + 44 20 7832 7307
listed company and its directors and auditors for the
E martin.nelson-jones@freshfields.com
accuracy of financial reports. It is arguable that liability
might extend beyond existing shareholders to all Stephen Hewes
T + 44 20 7832 7323
potential investors, and might also arise under the laws of E stephen.hewes@freshfields.com
each of the 25 member states. Companies should give
some thought to whether or not the processes and
procedures they follow for producing and verifying the
accuracy of their periodic financial reports should
change to reflect the possibility of increased liability. If
you need specific advice, please let us know.

Major shareholdings – disclosure and

investigation – dual regime
The TD contains new requirements for the notification of
major shareholdings. These will be implemented in the
UK through the FSA’s proposed transparency rules and
the repeal of existing Companies Act provisions by the
Company Law Reform Bill. Existing Companies Act
requirements are structurally different and in some
respects more stringent and extensive than the TD
provisions. The FSA is proposing to adopt the TD

Implementation of the EU Transparency Directive

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2 Freshfields Bruckhaus Deringer, May 2006