The City of London Law Society and Law Society Company Law Committees' Joint Working Parties on Market Abuse, Share Plans and Takeovers Code have published a new version of the Market Abuse Regulation (MAR) Q&A which includes a new section relating to contractual arrangements involving a subscription for shares.
The new section of the existing Q&A (Part C) sets out three additional questions which provide guidance in circumstances where parties are negotiating contractual arrangements in relation to a transaction and those arrangements involve a subscription of shares (for example, an issue of consideration shares in connection with an acquisition or an undertaking to subscribe for shares under a firm placing). The additional questions as follows:
(a) is the issuer able to selectively disclose inside information to the counterpart(ies) in connection with such arrangements;
(b) if so, is the issuer able to delay disclosure of the inside information to the market, notwithstanding its disclosure to the counterpart(ies); and
(c) if so, is there a requirement for the inside information to be announced before the relevant contractual arrangements can be entered into with the counterpart(ies)?
The answers to each question note that the facts must be considered on a case by case basis but state the following:
(a) the expectation would be that the issuer is permitted to selectively disclose inside information to the counterparty in connection with such arrangements in accordance with Articles 10 and 14 of MAR;
(b) in the circumstances outlined, the issuer would be able to delay disclosure of such inside information to the market provided that each of the three conditions in Article 17(4) of MAR is satisfied;
(c) the expectation would be that the issuer is not required to disclose the inside information to the market before entering into the relevant contractual arrangements with the counterparty.
The answer to the third question is particularly useful in the context of placings as there has been debate in the market as to whether disclosure of the inside information to the market via a regulatory news service is in fact required prior to a potential placee who has been given the inside information entering into the relevant commitment. The reasoning given by the Joint Working Parties is that "structuring of transactions in this manner is consistent with market practice and does not constitute misuse of the inside information or undermine the integrity of the financial markets but rather is legitimate and useful of the proper and orderly functioning of the financial markets".
Please speak to one of the Ashurst contacts below or any Ashurst corporate partner if you wish to discuss this update.
