Substantial Shareholder Disclosure - DTR 5

Question 1

What is the obligation?

Answer 1

DTR 5.1.2R(1) - a person must notify the company they hold shares in if they acquire or dispose of shares in the company to which voting rights are attached and if, as a result of that acquisition or disposal, the percentage of voting rights they hold

i) reaches, exceeds or falls below 3%;
ii) and/or every whole 1% change upwards or downwards between 3% and 100%.

Question 2

Definition of SH

Answer 2

• Definition of shareholder in DTR 5.1.2R includes a person’s direct and indirect shareholding. A person is indirect holder of shares in any of the situations set out in DTR 5.2.1R, including:
  • where parties agree to exercise their voting rights in relation to shares in accordance with a lasting common policy towards the management of the issuer (DTR 5.2.1R(a));
  • voting rights which are held or may be exercised by an undertaking controlled by that person (DTR 5.2.1R(e)) (NB HOLDINGS OF PARENT COMPANIES AND CONTROLLED UNDERTAKINGS (SUBSIDIARY UNDERTAKINGS) MUST BE AGGREGATED (DTR 5.2.2G(1)); and
  • voting rights which a person may exercise as a proxy where that person can exercise the voting rights at his discretion in the absence of specific instructions from the shareholders (DTR 5.2.1R(h)).
  • EXAM NOTE: if, for example, a company in which a person has majority SH in, triggers the notification requirements, the majority SH will also have to notify bc they are taken to be interested in the shares as well/deemed to be indirect holder. Note that, under DTR 5.8.4R(4), the SH and the indirect SH’s obligations to make a notification to Ritchisons can be discharged by way of a single common notification.

Question 3

• Notifications triggered by increases/decreases in the company’s share capital

Answer 3

• Shareholders should be aware that any increase or decrease in a company’s total number of issued voting shares (due to e.g. a share buyback or secondary share issue) may trigger a disclosure obligation for individual shareholders, even if they have not personally acquired or disposed of shares.
• To assist SHs…
• DTR 5.6.1R at the end of each month during which such an increase or decrease in its issued voting share capital occurs, a company must announce the total number of voting shares and capital in respect of each class of its shares.
• DTR 5.6.1AR and 5.6.1BG - a “material” change in issued voting share capital (1% or more) will also need to be announced by a company as soon as possible and by no later than the end of the business day following which the increase/decrease occurs

Question 4

Rounding up/down

Answer 4

• DTR 5.1.1(6) - for the purposes of calculating whether notification required, the proportion of voting rights held should be rounded down to the next whole number

Question 5

Timing

Answer 5

• Notification must be made as soon as possible and not later than two trading days after the date on which the shareholder learnt of the transaction.
• DTR 5.8.3R - Where the shareholder was party to or instructed the transaction, they are deemed to have learnt of the transaction no later than two trading days following the transaction – practical effect = SH generally has max of four trading days in which to notify the company

Question 6

Content

Answer 6

• DTR 5.8.1R – sets out information that must be included in a notification given in accordance with DTR 5.1.2R, including identity of SH, details of new SH and the date on which relevant threshold crossed.
• DTR 5.8.10R - Notification must be made using FCA form “TR1”
• DTR 5.9.1R – copy of notification must be filed with the FCA
See also 5.7.1

Question 7

• Power of company to investigate shareholdings

Answer 7

• s.793 CA 2006 - a public company is entitled to ascertain the identity of the beneficial owners of its shares by serving notice
• s.795 CA 2006 - Failure to comply with s.793 CA 2006 notice may lead to imprisonment, a fine or both

Question 8

Obligation of Issuer

Answer 8

After receiving a notification under DTR 5.1.2R, a company must notify an RIS of that fact as soon as possible and by not later than the end of the following trading day

Question 9

Sanctions for non-compliance with DTR 5

Answer 9

• No criminal sanctions for non-compliance by shareholders under DTR 5
• s.89NA FSMA - FCA may apply to the courts to suspend the voting rights of a shareholder that has breached the provisions of DTR 5, provided such breach is sufficiently serious to make it appropriate for the order to be made
• ss.91(1B), 91(2) and 91(2A) FSMA allow the FCA to impose a penalty on an issuer and/or a person and/or a relevant officer of an issuer (of such amount as it considers appropriate) for contravening a provision of DTR 5
• S.89K FSMA includes the power of public censure of the issuer.
  s. 89L FSMA the power to suspend or prohibit trading of an issuer’s securities generally.