The Market Abuse Regulation (MAR) will come into force
The Market Abuse Regulation (MAR) will be implemented in Norwegian law during 2020, and represents the most substantial change to the Norwegian capital markets regulations. The general rules of market conduct, such as the insider trading regulations and the rules on market manipulation will not change because of MAR, but certain new rules will be introduced and a number of existing provisions will change in respect of procedures, legal assessments and reporting obligations. An example is the procedure for deferred publication of inside information where the procedures for when to invoke deferred publication will change. Furthermore, a specific EU template for insider lists will be introduced, and there will be significant reporting obligation changes for trading by primary insiders/managers. We have summarized the key changes with regard to MAR on our website, which you can find here (in Norwegian).
- The most practical and immediate consequence of the implementation of MAR is that issuers have to update their internal guidelines and procedures for primary insiders. Feel free to reach out if you want to receive an offer for a review and update of the internal guidelines and procedures of your organization.
- There is great uncertainty related to an investor’s obligation to cancel or amend an order following the receipt of inside information. The challenge is that the current Norwegian rules are contrary to those in MAR and since an infringement of the obligation is a criminal act, it is important for issuers and investors to get a firm clarification from the authorities on this issue. We therefore expect that the authorities will provide further guidance on this subject prior to the introduction of MAR into Norwegian law. We will keep you updated.
The Continuing Obligations for listed companies were amended on 20 January 2020 – issuers are no longer obliged to publish an Information Memorandum
The Oslo Stock Exchange has published new continuing obligations for listed companies on Oslo Børs, Oslo Axess and Merkur Market where the obligation to publish a detailed announcement and to publish an Information Memorandum in connection with material transactions (exceeding certain given thresholds) has been removed.
Related-party transactions and acquisition financing – changes to sections 3-8 and 8-10 of the Public Limited Liability Companies Act
Section 3-8 of the Public Limited Liability Companies Act regarding related-party transactions was amended on 1 January 2020 with the result that this provision no longer applies to stock exchange-listed companies. Instead, listed companies need to adhere to a new set of (more) detailed rules for related-party transactions (chapter 3 part 5 of the Public Limited Liability Companies Act).
Section 8-10 of the Public Limited Liability Companies Act regarding restrictions on acquisition financing has been amended from the same date. Following the amendment, it will be easier for companies to provide financial assistance in connection with acquisition of shares in the company. For instance, a satisfactory guarantee for repayment of the financial assistance will no longer be required.
We have published a newsletter on the most important changes to the Public Limited Liability Companies Act section 3-8 and 8-10 here (in Norwegian).
Other expected changes
- New takeover rules: There is a proposal to amend the current take-over rules so that they harmonize better with the EU Takeover Directive (applies to both voluntary and mandatory offers). The threshold for when an obligation to raise a mandatory offer is triggered (by acquiring shares representing more than 1/3 of the votes in a company) remains unchanged, but one of the changes is, the proposed introduction of extensive additional disclosure obligations to the stock exchange notice announcing the offer. Furthermore, is proposed to extend the offering period in voluntary offers from two to four weeks. The proposal was first published on 23 January 2019 and has been distributed for comments. We are currently waiting for the publication of the formal draft legislation from the Ministry of Finance.
- New rules on shareholder rights are expected implemented: New rules on shareholder rights in accordance with the EU Directive on shareholder rights have been proposed implemented. The rules were implemented in the EU in June 2019, but it is currently unclear when the new rules will come into force in Norwegian law. The purpose of the new rules is to, among other things; protect shareholders who own shares through one or several nominee accounts. When the new rules come into force, issuers must identify nominee-registered shareholders and ensure that those shareholders are able to exercise the rights themselves or by giving a proxy instructions (by distributing information, etc.). It has also been proposed to require the identities of shareholders who own shares through one or several nominee accounts become publically available information.
- Domicile requirements for general managers and board members: It is currently a requirement under Norwegian law that the general manager and at least half of the board members in Norwegian private companies, public companies or financial undertakings have to be domiciled in Norway. However, this domicile requirement does not apply to board members who have citizenship and are domiciled in the EEA. It is proposed to change this rule so that it is sufficient that board members are domiciled in or a citizen of an EEA state. The reason behind the proposal is to fulfil Norway’s requirements under the EEA agreement.
Other observations and trends
- IPOs: In the US, last year’s collapse of the «unicorn» company WeWork was on everyone’s lips, and several IPOs planned for 2019 were postponed until 2020. In Oslo, 15 new companies were listed on the stock exchange in 2019. Even though this number was lower than in the three preceding years, 2019 still was a record year in terms of IPOs: the market value on last year’s IPO newcomers was the highest since 2001. As the biggest IPO in Oslo in 13 years, the listing of Adevinta strongly contributed to this statistic. Our capital markets team was so lucky as to advise Schibsted and Adevinta on the separation and subsequent listing of Adevinta on Oslo Børs. This was also the key contributor to Wiersholm being ranked number one in MergerMarkets list of IPOs in 2019. We are still at an early stage and it is difficult to predict how the IPO market will develop throughout 2020, but based on the activity and indications to date, we expect a very exiting year for IPOs.
- Share issues: Listed companies raised NOK 49.6 billion in 2019, and Wiersholm assisted on three of the biggest share issues on Oslo Børs in 2019 (based on value). Going forward, the new prospectus rules, which came into force on 21 July 2019, are expected to affect the size of share issues in listed companies. Pursuant to the new rules, issuers may carry out offers of shares of up to EUR 8 million without triggering the requirement to publish an EEA prospectus. For offers between EUR 1 million and EUR 8 million, a requirement to prepare a national prospectus will be triggered, unless another exemption from the prospectus requirement is applicable. A national prospectus must be registered in the Norwegian Register of Business Enterprises. Furthermore, the previous 10%-exemption in relation to listing prospectuses has been increased to 20%. This means that the requirement to publish a listing prospectus will first be triggered in relation to the admission to trading for shares that amount to 20% or more of already listed shares. You can read more about the new prospectus rules here (in Norwegian).
- Disclosure of net short positions: Lately, we have observed that the Norwegian Financial Supervisory Authority has increased its issuance of penalties for violation of the disclosure/reporting rules for net short positions. Several recent cases in which we have assisted show that the Financial Supervisory Authority does not consider the severity of the infringement of the disclosure rules when deciding, whether to issue a violation penalty, which has resulted in penalties being issued even for small misunderstandings.
- Brexit may have a significant impact on the capital markets. From a legal point of view, among other things, it will have an impact on the assessment of home state rules and the requirements for domicile and/or citizenship for general managers and board members. We note, however, that there is a regulation containing transitional provisions, which implies that the UK and Northern Ireland in this respect should be considered EEA states. The regulation expires on 1 January 2021, and this is therefore the deadline for all companies that have to adjust to the new domicile and/or citizenship rules. Alternatively, companies may apply for an exemption from the rules, but, naturally, it is difficult to say whether such applications will be successful. Brexit may also affect the ability to carry out parallel listings in Norway and in the UK because the prospectus passporting regime is expected to lapse. We have summarized the most important changes with respect to Brexit for the capital markets here (only in Norwegian).
- Sustainability: Sustainability finance is gaining increased attention in the Norwegian market and media. This years’ NHO conference (15 January 2020) had the green transformation and future capitalism as one on the main topics. All indicators show that sustainability and climate will continue to be key topics in 2020. Wiersholm’s ESG group consists of lawyers from several disciplines, and lawyers from our capital market team are strongly represented. Our most important observations are:
- 2019 was a record year for listings of green bonds on Oslo Børs, and we expect the ESG trend to continue in the bond market going forward. We expect that the number of green bonds will increase and that more issuers will start using green bonds for their projects. We think – and hope – that we also will see new products with a more overall focus on the issuer instead of a one-sided focus on the «use of proceeds». For example, we believe that sustainable bonds (bonds with a direct link to UN’s Sustainable Development Goals) will get a break-through in 2020. This will make the sustainable bond market more accessible to a larger number of issuers and to more loans than today. We have already seen several examples in the banking market of loans where the margin partly depends on the borrower’s fulfillment of sustainability goals such as reducing greenhouse gases.
- From a legal perspective, there are obvious challenges for issuers with respect to reporting sustainability and the issuer’s ESG risk. Today, a lot of issuers and investors are trying to maneuver through the CSR reporting requirements, sustainability analyzes and reporting guidelines, and we think – and hope – that 2020 will be the year when a common language and a common taxonomy for reporting and assessing sustainability are established.
As part of the EU’s Sustainable Finance action plan, new guidelines for reporting climate-related information were published in June 2019. EU’s Sustainable Finance expert group is also working to develop a common taxonomy for sustainable economic activities, a green EU bond standard, low carbon incentives and climate-related reporting requirements. The expert group’s mandate was recently extended to 30 September 2020, and we therefore expect news from the group during the third quarter of 2020, at the latest.
To summarize the importance of sustainability going forward, the following from the EU’s Capital Markets Union is a significant predictor of what lies ahead: EU’s Capital Markets Union has worked to implement a stronger common capital market in the EU. When their period ended in 2019, the group sent a wish list to the EU presidency with focus areas for the next working group. The wish list covers several points and topics, but a common thread is that the regulatory work in capital markets and finance should increase the focus on people, sustainability and digitalization, and it is therefore also proposed to change the name of the group from EU’s Capital Markets Union to «EU’s Savings and Sustainable Investment Union».
We are active speakers in both large and small forums. First off are the Annual Capital Markets days at the end of January, where Partner Kjersti Trøbråten and Managing Associate Anne Lise Ellingsen Gryte will be on the stage.
During the spring of 2020, we are planning a breakfast seminar about MAR. More information will be posted on our website.
We look forward to continuing our good cooperation in 2020!
Wiersholm’s Capital Markets team