Norway implements EU-harmonised rules on disclosure of large shareholdings

The new rules will be found in Chapter 4 of the Securities Trading Act and Chapter 4 of the Securities Trading Regulation, implementing the amendments in EU's Transparency Directive (2004/109/EC) adopted by Directive 2013/50/EU, as well as supplementary provisions in Regulation (EU) 2015/761. The latter entered into force in the EU on 26 November 2015. Most of the rules are full harmonization regulations, and with a few exemptions rules on disclosure of large shareholdings will from 1 September 2022 be the same in Norway as in other EU/EEA states.

The thresholds for disclosure of large shareholdings remain unchanged (i.e. 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 and 90%). The main elements of the amendments are:

• The disclosure of large shareholdings for rights attached to shares that have not been issued, i.e. preferential rights, other subscription rights and ordinary convertible bonds etc., are repealed.
• It is implemented disclosure of shareholdings for instruments with cash settlement, typically financial settled options, forwards etc. For instruments which exclusive cash settlement, one shall in the calculation of the disclosure of large shareholdings multiply the notional amount of underlying shares by the delta of the instrument. The purpose is to ensure that the calculation of disclosure of large shareholdings is as close to the investor's economic exposure in the shares as possible, by quantifying the ratio between changes in the shares value and changes in the instrument's value, as well as the probability of exercise. When the instrument has identical or nearly identical return as the share ("linear symmetric pay-off profile"), the delta value is equal to 1. In other cases, the investor shall make a calculation based on generally accepted standard pricing models. All instruments relating to the same underlying issuer shall be included in the calculation; however, long positions shall not be netted with short positions.
  
• The disclosure of large shareholdings shall continue to be calculated both on the basis of the investors portion of the share capital and by the portion of voting rights, and consequently ownership of non-voting shares could trigger disclosure obligation. The latter is a deviation from the Transparency Directive, but according to the preparatory works the same principle applies in Sweden, Denmark and Finland. Rights to acquire non-voting shares will on the other hand not trigger a disclosure obligation.
• The scope of the rules in case of borrowing of shares is expanded, so that both parties will be subject to large shareholding disclosure obligation both when shares are borrowed and returned, regardless of whether the borrowing may be classified as a real acquisition of the shares.
  
• Instruments with an index as underlying, shall be included proportionally in the calculation of disclosure of large shareholdings if the index represents more than 1 % of the voting rights in the applicable issuer or the shares of the applicable issuer represents minimum 20 % of the value of the index.
• Consolidation with spouse, children etc. is repealed. Only natural and legal persons which have committed to a long-term joint strategy with regard to exercise of voting rights or which is controlled by investor in accordance with criteria as further defined shall be consolidated.
• Applicable exemptions from disclosure of large shareholdings/consolidation are adjusted. The exemptions comprise among others acquisition solely to ensure completion of settlement within two trading days, crossing of the 5% threshold in connection with market making or for exposures in investment firm's / credit institution's trading portfolio, shares acquired for stabilisation purposes and nominee registered shares. These exemptions are generally conditional that no voting or other influence are being exercised in the issuer. It is also made exemption for aggregation of shares held by parent companies to fund managers and active portfolio managers, conditional upon advance notification to the Norwegian Financial Supervisory Authority ( Finanstilsynet). A similar advance notification requirement applies to the above-mentioned exemption for market makers. Notifications that have previously been submitted remain valid provided that they comply with requirements set out in the new rules, cf. Regulation on Transition Rules of 27 June 2022.
• The disclosure notification shall be submitted promptly, however not in any case later than within opening of the regulated market the second trading day after agreement was entered into or the shareholder becomes aware of or should have become aware of other circumstances that trigger a disclosure obligation (share capital increases etc.). According to the preparatory works, the deadline for submission refers to the time it takes to draft the announcement, but at the same time it opens for discretion within the two day limit based on specific circumstances such as different time zones, consolidation of ownership etc.
• The notification for disclosure of large shareholding shall as before be notified to the issuer and an authority designated by the Norwegian Financial Supervisory Authority (Oslo Børs), and we assume that Oslo Børs will continue its practice where notification for disclosure of large shareholdings may be submitted to the exchange for announcement within 17:30 hours every trading day.
• The content requirement of the notification for disclosure of large shareholdings will essentially continue unchanged, including the principle that several notifiable persons may provide a joint disclosure. It should be distinguished between shares held by the shareholder with related parties, rights with physical settlement and rights with cash settlement, and provided a description of the rights with terms and maturity dates. We assume that it will be adopted a standardized form for notification for disclosure of large shareholdings.
• In case of breach of the rules on disclosure of large shareholdings, the Norwegian Financial Supervisory Authority may impose violation charges to legal or natural persons, as well as suspend voting rights for shares that exceed the relevant threshold for disclosure of large shareholdings.