Issuers of securities – more transparent information

SUMMARY OF:

Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market

WHAT IS THE AIM OF THE DIRECTIVE?

Known as the transparency directive, it aims to improve the information supplied to investors about issuers of securities admitted to trading on a regulated market, located or operating in European Union (EU) Member States.
It requires Member States to publish periodic financial information on issuers’ activities throughout the financial year, in addition to ongoing information concerning the possession of significant percentages of voting rights.
It has been amended several times, most recently by Directive (EU) 2022/2464 as regards rules on corporate sustainability reporting.

KEY POINTS

Periodic financial and sustainability-related information

The periodic information relates to the financial situation of the issuer of securities and that of the enterprises it controls, along with the company’s impact on sustainability matters and the information necessary to understand how sustainability aspects affect the company’s development, performance and position.
Issuers of securities must divulge annual financial reports (composed of the financial statements, the management report and the responsibility statements) and interim financial reports (interim management statements). Whereas the directive does not support more frequent periodic reporting (e.g. quarterly financial reports), these are nevertheless allowed if the additional reporting is proportionate.
The financial report must remain available to the public for at least 10 years.
For financial years beginning on or after 1 January 2020, all annual financial reports must be prepared in a single electronic reporting format based on technical specifications drawn up by the European Securities and Markets Authority (ESMA) and adopted by Delegated Regulation (EU) 2018/815.
Rules introduced by amending Directive (EU) 2022/2464 on corporate sustainability reporting require all companies listed on the EU-regulated markets to include in their management report information relating to the company’s impact on sustainability matters (such as environmental rights, social rights, human rights and governance factors) and information necessary to understand how sustainability aspects affect its development, performance and position. The application of these rules will be phased in (see below).

Notification of holdings of significant voting rights

Where shareholders acquire or dispose of the shares of an issuer whose shares are admitted for trading on a regulated market and which carry voting rights, they must notify the issuer of the percentage of voting rights that they hold as a result of the operation. This rule applies if the percentage owned reaches certain thresholds (5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%) or goes above or below those thresholds. This is also true in other cases where a natural or legal person has the right to acquire, yield or exercise voting rights.
Notification to the issuer, which must be given by the shareholder within 4 trading days, must provide information about the new distribution of voting rights, the shareholder’s identity, the date of change and the threshold of votes reached.
Issuers must make public the information contained in the notifications of major holdings they receive no later than 3 trading days thereafter.
The ‘Practical guide – National rules on notifications of major holdings under the transparency directive’ has been issued by ESMA.

Report on payments made to governments

The directive requires listed companies which are active in extractive (oil, gas and minerals) and primary forest industries to declare payments made to governments in the Member States where they conduct their activities, in a separate report compiled annually.

Disclosure of additional information

As soon as possible, and no later than 4 trading days after the acquisition or disposal of own shares where the proportion reaches, exceeds or falls below 5% or 10% of the voting rights, the issuer must make public the proportion of own shares.
At the end of each calendar month, issuers must make public the total number of voting rights and capital.
Without any delay, an issuer must make public any change in the rights attached to the various classes of shares.

Dissemination, storage and access to regulated information

Member States must ensure that the issuer, or the person who has applied for admission to trading on a regulated market without the issuer’s consent, discloses regulated information in a manner ensuring fast access to such information on a non-discriminatory basis and makes it available to the officially appointed mechanism.
In addition, each Member State must ensure that there is at least one officially appointed mechanism to store the information disclosed by companies and make it accessible to the public for 10 years.
Finally, ESMA has been tasked with building a European single access point that will include and make accessible the above information by mid 2027.

Non-EU countries

Where the registered office of an issuer is situated in a non-EU country, it may choose from amongst the Member States where its securities are admitted to trading on a regulated market. The competent authority of the Member State it chooses may allow that issuer to follow its national rules (such as rules regarding periodic information and other information to be disclosed) provided that the law of the non-EU country in question lays down requirements equivalent to those in the EU. The competent authority must then inform ESMA of any exemptions granted.

Supervision of sustainability reporting

ESMA must issue guidelines on the supervision of sustainability reporting by national competent authorities, having consulted the European Environment Agency and the European Union Agency for Fundamental Rights.

Implementing and delegated acts

The European Commission has adopted several implementing acts and delegated acts in relation to Directive 2004/109/EC.

Directive 2007/14/EC and its amending directives set out detailed rules on matters such as:
- procedural arrangements for the choice of the home Member State;
- minimum content of half-yearly non-consolidated financial statements;
- control mechanisms by competent authorities as regards market makers.
Regulation (EC) No 1569/2007 and its amendments establish a mechanism to determine the equivalence of accounting standards applied by non-EU country issuers of securities.
Regulation (EU) 2015/761 concerns certain regulatory technical standards on major holdings.
Regulation (EU) 2016/1437 concerns regulatory technical standards on access to regulated information at the EU level.
Regulation (EU) 2019/815 concerns regulatory technical standards specifying a single electronic reporting format, including subsequent updates or amendments.

FROM WHEN DO THE RULES APPLY?

This directive had to be transposed into national law by 20 January 2007.

Directive 2004/109/EC was last amended by Directive (EU) 2022/2464, which has to be transposed by 6 July 2024.

Its application will be in three phases:

Financial year 2024 for large companies with more than 500 employees and parent companies of large groups with more than 500 employees at consolidated level;
Financial year 2025 for all other large companies;
Financial year 2026 for small and medium-sized enterprises, small and non-complex credit institutions and captive insurance undertakings.

BACKGROUND

For further information, see:

Transparency requirements for listed companies (European Commission)
Questions and answers – Transparency directive (2004/109/EC) (European Securities and Markets Authority).

MAIN DOCUMENT

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 (OJ L 390, 31.12.2004, pp. 38–57).

Successive amendments to Directive 2004/109/EC have been incorporated into the basic text. This consolidated version is of documentary value only.