Like other European and the US markets, Finnish capital markets have, after a considerable turndown at the beginning of the new millennium, enjoyed a moderate positive trend during the past few years. The Helsinki Stock Exchange (HEX) with some 140 listed companies is part of the largest integrated securities market in northern Europe, the OMX. OMX Exchanges, a division of the OMX, offers its customers access to the Nordic and Baltic securities markets and includes the stock exchanges in Copenhagen, Stockholm, Helsinki, Tallinn, Riga and Vilnius. In September 2006, OMX and Eignarhaldsfelagid Verdbrefathing hf (EV), the owner of the Iceland Stock Exchange (ICEX) and the Icelandic Securities Depository (ISD), announced the acquisition of EV by OMX. The acquisition was completed in December 2006.
2. LEGISLATIVE AND REGULATORY STRUCTURE
The main act regulating the capital markets is the Securities Market Act (495/1989, the SMA). The SMA contains provisions, inter alia, on the issuance of securities to the public, public tender offers, public trading in securities and the clearing and settlement of trades.
For purposes of implementing the EU Directive on Markets in Financial Instruments (MiFID), new provisions will need to be introduced to the SMA with respect to the organisation of multilateral trading facilities.
3. REGISTRATION OF THE ISSUER AND SECURITIES
In order for the securities of Finnish companies to be admitted to public trading, they must be issued by a public limited liability company. There are no specific local registration or licensing requirements for the offering of securities to the public by foreign issuers or the admission of securities issued by such issuers to regulated markets in Finland, nor are there requirements of formal presence or a local agent.
The book-entry securities system is centralised at the Finnish Central Securities Depository Ltd (the ‘FCSD’) which provides national clearing and registration services for securities. FCSD has securities links to the CSDs in Sweden, Germany, France, the Netherlands and Estonia. The book-entry system is also linked to Switzerland via the German CSD. The links enable the transfer and handling of both Finnish and foreign equities and debt instruments.
Registration in the Finnish book-entry securities system is mandatory for shares listed on the HEX. However, foreign issuers that intend to list securities on the HEX may use Finnish depositary receipts or direct links from securities depositories outside Finland. In practice listed debt securities are also registered in the Finnish book-entry securities system.
The FCSD’s clearing and settlement system HEXClear is a real-time settlement system that enables the settlement of trades on the trading date (T+0). The standard clearing time of exchange trades is three days (T+3). A trading platform called Saxess is used for share trading on the HEX.
4. SUPERVISORY AUTHORITIES
Generally, the Ministry of Finance (the Ministry) is responsible for ensuring that the legislative framework for financial markets is stable and efficient. The SMA authorises the Ministry to issue supporting regulations. For example, the contents of prospectuses are regulated by Ministry decrees. The Ministry must also approve stock exchange rules and amendments after having requested a statement from the Finnish Financial Supervision Authority (the FSA).
Supervision of the securities markets and the entities operating in such markets is solely within the authority of the FSA, while supplementary regulation is divided between the Ministry and the FSA. Unlike the Ministry, which is only authorised to issue supporting regulations, the FSA has a general authority to issue regulations. The regulations and guidelines issued by the FSA are not subject to the approval of other governmental authorities, even though the FSA operates in connection with the Bank of Finland. The main tasks of the FSA are to oversee financial market operations, to supervise and guide market participants and to maintain trust in the market.
5. OFFERING DOCUMENTS
The SMA, supplemented by Ministry Decree on Prospectuses (538/2005 and 452/2005), contains provisions on the obligation to publish a prospectus and the approval of the prospectus. The implementation of the EU Prospectus Directive (2003/71/EC) (PD) in Finland on 1 July 2005 resulted in moderate changes and adjustments in the regulation regarding offering documentation.
A prospectus shall be prepared and published when securities are offered to the public or when an application is made to admit securities to public trading.
When the securities offering does not involve the admission of securities to public trading, by operation of law the prospectus requirement does not apply, inter alia, in the following situations:
Upon application, the FSA may also grant a partial or complete exemption from the obligation to publish a prospectus in certain situations. For a particular reason, eg if the information is considered of minor importance, the FSA may agree to the omission of information generally required.
According to the SMA, a prospectus can be drawn up either as a single document or as separate documents consisting of a registration document, a securities note and a summary note. Information may be incorporated into the prospectus by reference to previously or simultaneously published documents approved by or filed with the competent authority of the home member state. An approved prospectus is valid for 12 months.
The issuer or offeror (the ‘issuer’) and the manager of the issue or the offering are responsible for the preparation and content of the prospectus. As required under recommendations of the HEX and the FSA, it is customary to conduct a business, financial and legal due diligence review of the issuer in connection with a public offering.
As a rule, a prospectus is prepared to comply with the minimum content requirements in the Commission’s regulation on prospectuses no 809/2004. Domestic regulations may be applied with respect to offerings limited in size. Further, in accordance with the PD, Finnish law recognises the concept of prospectus passporting.
6. DISTRIBUTION SYSTEM
The manager or arranger of a capital markets transaction or an international cross-border transaction with a Finnish dimension is typically a well recognised investment bank. Depending on the size and nature of a contemplated transaction, the bank chosen will usually be: (i) a local investment bank; (ii) a Nordic investment bank with a presence on the Finnish market; or (iii) an international investment bank.
Larger transactions usually involve more than one manager. A typical syndicate could include an internationally recognised investment bank together with a local bank that will be in charge of the retail tranche.
Most equity offerings executed in the past few years have included an institutional tranche, directed at selected domestic and international institutional investors, and a domestic retail tranche. Securities offered to investors within institutional tranches are typically offered on the basis of exemptions from the prospectus requirements in different jurisdictions. In offerings targeted at US investors, the Rule 144A exemption is mostly used. However, certain offerings have also been SEC registered. Finnish companies currently listed on the New York Stock Exchange are Nokia, Stora Enso, UPM-Kymmene and Metso.
7. LISTING
On 2 October 2006, the previous local list structures for the Finnish, Swedish and Danish exchanges were replaced by a joint Nordic List, where listed companies are first presented by market capitalisation and then by industry sector following the international Global Industry Classification Standard. The Nordic List is divided into three segments: Large Cap for companies with a market capitalisation of at least €1 billion; Mid Cap for companies with a market capitalisation of between €150 million and €1 billion; and Small Cap for companies with a market capitalisation of less than €150 million.
The Nordic List has resulted in harmonised listing requirements in Finland, Denmark and Sweden. The same listing requirements will therefore apply to all companies on the Nordic List.
In brief, the main listing criteria for the Nordic List include the following:
Decisions regarding the admission to listing and delisting of securities are made by the HEX Listing Committee. Supervision of compliance with the rules of the HEX is exercised by the HEX, which has certain disciplinary powers that are enforced by the HEX Disciplinary Board and its secretary. The HEX is supervised by the FSA.
The issuer will need to file a prospectus before listing. The legal advisers for the offering typically arrange for the filing of the prospectus with the FSA and are involved in related communication with the FSA during the review process. The fees payable to the FSA for approval of the prospectus depend on the type of securities in question.
Further, a listing application will need to be filed with the HEX. The application shall contain a description of the issuer’s corporate activities and financial position, and include:
Before filing the listing application, a company presentation will be given by the issuer (assisted by its advisers) to the Listing Committee of the HEX. An issuer must promptly disclose both its intent to apply for listing and the filing of the listing application. It will then be considered an applicant for listing and be under an obligation to adhere to the same disclosure requirements as listed companies.
The provisions of the SMA set forth the basis for civil liability for non-compliance with rules governing, inter alia, disclosure requirements in connection with securities offerings and listings of securities. Accordingly, any person who causes damage through actions violating the SMA or contravening regulations issued pursuant to the SMA shall be liable for the damage.
In principle, a subscription for or purchase of securities is irrevocable. However, Finnish courts are empowered to mitigate or nullify unreasonable contract terms, particularly in cases of stringent and/or unusual terms and conditions of standard contracts.
The courts of first instance for dispute settlement in Finland are the District Courts. The decisions of the District Courts may be appealed to the competent Court of Appeal. Appeals to the Supreme Court are permitted only if the Supreme Court grants the appellant leave, which it will do only where important reasons exist.
Both the issuer of securities and the manager may be fined for failure to comply with the SMA’s general disclosure requirement to make available sufficient information on factors that may have a material effect on the value of the securities, for failure to comply with the SMA requirement to publish a prospectus, or for using false or misleading information in the marketing of securities.
In addition to criminal sanctions, certain administrative sanctions, such as an administrative fine or a sanction fee, may be imposed under the Act on the FSA.
According to the general statute of limitations, the general limitation periods applicable to legal actions are (i) three years from the date when a payment has become due; or (ii) the earlier of three years from the date on which a non-breaching party has become or should have become aware of a breach of contract and ten years from the date of the breach. Each of the above periods can be interrupted. Upon interruption, a new limitation period of equal length commences.
The Finnish Securities Complaint Board offers advice regarding securities market regulations, the application of contractual terms, good commercial practices in securities trading and other issues related to securities practices. This service is free of charge and available to all non-professional investors who are customers of banks, investment firms or mutual fund companies. The Securities Complaint Board also issues recommendations in disputes relating to investment services and investment funds that involve providers of such services and non-professional investors.
Further, the Consumer Ombudsman has the authority to supervise the marketing of securities to consumers. Finally, the Market Court may order a person marketing, acquiring or trading in securities in breach of the SMA to cease or correct such operations.
In October 2005, the Finnish Ministry of Finance issued a report prepared by a working group appointed to reassess the current provisions governing prospectus liability (the ‘Report’). The Report concludes that such provisions are currently insufficient, mainly due to a certain lack of clarity, and that they need to be revised. Legislative reforms based on the proposals in the Report are not expected to enter into force until the fall of 2008 or the beginning of 2009.
In the Report, strict liability for misstatements or omissions in a prospectus has been rejected in favour of an approach based on negligence and a ‘business judgment’ rule which reverses the burden of proof: under the Report, issuers and underwriters would be liable for the accuracy of the information contained in the issuer’s prospectus, to the extent that the issuer and/or underwriter cannot prove that it had acted diligently when providing information in the prospectus. When preparing a prospectus in connection with a secondary sale of the issuer’s existing securities, the above prospectus liability would be imposed on the issuer for information regarding the issuer, its shares and any other securities it has issued to the extent that the issuer has participated in preparing the prospectus. The liability of the issuer’s management towards the issuer’s shareholders and investors would be based on negligence.
Regarding damages, the Report proposes that, as a general rule, damages should be calculated as follows: the difference between the amount paid for the securities and the amount that would have been paid in the absence of the misstatements or omissions in the prospectus should be the amount of damages. Essentially, the damages payable should put the investor financially in the same position he would have had in the absence of the misstatements or omissions. The Report proposes that the issuer would be liable for damages with all of its assets, without regard to eg, company law rules on capital maintenance.
In line with the general statute of limitations, the Report suggests the limitation period with respect to prospectus liability, in the absence of a criminal offence, should be three years from the time the respective damage and the liable party were discovered, provided that the claiming party has notified the liable party within a reasonable time period.
The proposals above also apply, inter alia, to tender offer documents published in connection with public takeovers.
8. CONTINUING REQUIREMENTS
The regular and continuing disclosure requirements for publicly listed companies are set forth in the SMA, complemented by Ministry Decrees, the FSA guidelines and the HEX rules and recommendations. This regulation is largely based on EU Directives, most importantly the EU Market Abuse Directive (2003/6/EC) (the MAD) and the EU Directive on the Admission of Securities to Official Stock Exchange Listing and on Information to be Published on those Securities (2001/34/EC).
The SMA sets forth requirements for publicly-traded companies to disclose to the market significant matters relating to their operations in an orderly and open manner. Under the SMA, information to be disclosed on a regular basis consists of interim reports, annual accounts and account statements. Further, all decisions and other information on the issuer and its operations which are likely to have a material effect on the value of the securities issued must be disclosed without undue delay. This disclosure obligation also applies to issuers whose securities are subject to a pending application for admission to public trading. The FSA guidelines give certain examples of decisions and information to be disclosed. The HEX rules also specify certain matters that need to be disclosed. According to the SMA, an issuer may, with acceptable grounds, postpone the disclosure of information if this does not endanger the investors’ position and the issuer is able to ensure the confidentiality of the information.
9. CORPORATE GOVERNANCE
Corporate governance in listed companies is mainly regulated by the Companies Act (624/2006, effective as of 1 September 2006), which includes provisions on the relationship between the board of directors (the ‘Board’), the managing director and the shareholders, and sets forth their respective rights and obligations. The duties of the company and the Board towards the market are regulated by the SMA and other securities market legislation, such as the guidelines and regulations issued by the FSA and the rules of the HEX. A company whose shares are listed on the HEX shall comply with the corporate governance code (the ‘Code’) of the HEX, on a ‘comply or explain’ basis, ie listed companies must either adhere to the rules of the Code or explain publicly the reasons for any possible deviations.
Companies can have either a one-tier or a two-tier board structure. The Board is the only mandatory corporate body elected by the shareholders’ meeting (or by the supervisory board if so designated in the articles of association), whereas the supervisory board is a special corporate body that may be elected if so determined in the articles of association. Supervisory boards mainly exist in state-owned companies, and the number of such boards is decreasing.
The Board is responsible for the management and proper organisation of the operations of the company. The Board elects the managing director and is responsible for the supervision of the book-keeping and in control of the company’s financial matters. The Code recommends that the Board adopt a written charter describing its work and working methods and disclose the main contents of such charter to the market.
According to the Code, the Board should consider establishing committees in order to enhance the effectiveness of its work. The Code addresses the roles of the audit, nomination and compensation committees. The committees are considered merely preparatory bodies of the Board with no independent decision-making power.
A member of the Board (or managing director) who wilfully or negligently breaches his duties under the Companies Act or provisions of the Companies Act or the articles of association may be held liable for compensation for any damage caused to the company. A member of the Board (and the managing director) may also be held liable directly towards a shareholder or another third party if such party has suffered damage through the member’s breach of the Companies Act or the articles of association. Breach of the SMA and the directors’ duties towards the market (eg, in fulfilling the company’s disclosure obligation) may also result in liability.
9.3 Matters requiring shareholder approval
Under the Companies Act, certain decisions must be made by the shareholders. The annual general meeting of shareholders decides, among other things, upon the adoption of the annual accounts and the measures to which the profit or loss of the adopted balance sheet may give cause. In addition, certain other decisions such as the amendment of the articles of association, the increase or decrease of share capital, a merger, demerger or the entering into liquidation shall be taken by the shareholders’ meeting.
The members of the Board are elected by the shareholders’ meeting. The Code recommends that a majority of the members of the Board shall be independent of the company, and at least two members of the Board independent of major shareholders. The shareholders’ meeting can at any time remove from office a member of the Board it has elected; said right cannot be limited. The shareholders’ meeting also determines the Board members’ remuneration. The Code recommends that non-executive directors do not participate in share-related compensation systems.
10. INSIDER TRADING
10.1 Legal framework
The SMA regulates on a general level the use of inside information, disclosure of holdings, and insider registers. These provisions are supplemented by the FSA regulations on declarations of inside information and insider registers, by the HEX insider guidelines on codes of conduct with respect to insiders and inside information and by various self-regulation guidelines regarding insiders, including securities dealers. The Penal Code and the Act on the FSA (587/2003) contain further sanctions.
The definitions of the SMA correspond to the definitions under the MAD. The implementation of the MAD extended the application of the insider regulations, imposed new obligations on registers and vested the FSA with more extensive powers to impose additional sanctions. The basic principle concerning the use of inside information is that inside information may not be used in any manner, directly or indirectly, in purchasing or selling of securities. Inside information cannot be disclosed to anyone unless the disclosure is part of the customary performance of the work, profession or assignment of the person disclosing the information. In addition, under certain circumstances the disclosure of inside information to the major shareholders of the company may be allowed (eg, when company management is contemplating a measure or transaction which later would require the shareholders’ approval).
10.2 Disclosure obligations
The ownership of shares and securities entitling the holder to shares of publicly traded companies shall be made public if the shareholder is a member of the company’s executive, administrative or supervisory body. Also, information on share ownership of certain persons related to the company management must be included in the public insider register. The company has an obligation to maintain a public register of such ownership information. In addition to such register, companies are obliged to maintain a non-public, company-specific insider register of persons who regularly receive inside information because of their positions or duties.
10.3 Sanctions
The SMA imposes sanctions for the misuse of inside information and other breaches of the provisions concerning insiders. Further, under the Penal Code a person who wilfully or through gross negligence breaches the prohibition to misuse inside information may be sentenced to fines or imprisonment for such misuse. In addition to such criminal sanctions, certain administrative sanctions, such as an administrative fine or a sanction fee, may be imposed under the Act on the FSA.
10.4 Trading restrictions
All publicly traded companies are subject to the HEX guidelines on insiders containing, inter alia, provisions on closed windows (minimum 14 days before interim quarterly or annual financial reports, or 21 days if only semi-annual and annual financial reports are prepared). Companies may impose stricter internal rules. In addition, self-regulation by securities dealers includes a prohibition on short-term trading.
11. MUTUAL FUNDS
Mutual funds are governed by the Act on Investment Funds (48/1999, the AIF). The AIF implements the UCITS directives I-III (1985/611/EC, 2001/107/EC and 2001/108/EC). The marketing and selling of units in non-Finnish mutual funds that qualify as AIF funds will, as a rule, be governed by and subject to AIF filing/licensing requirements. Should such foreign funds not qualify as funds under the AIF, they will only be subject to the general provisions governing securities contained in the SMA. EEA funds authorised in accordance with the UCITS directives are always governed by the AIF. However, if units in a non-UCITS fund are marketed solely to professional investors in Finland, the AIF does not apply.
A non-Finnish UCITS fund may be marketed to the public two months after filing the notification with the FSA, unless the FSA forbids marketing within that period. A non-Finnish mutual fund with a non-UCITS status must not be marketed in Finland without the authorisation of the FSA, if the fund is marketed (even partly) to non-professional investors. The authorisation can only be granted if the foreign legislation provides unit holders protection that is sufficiently comparable with that of the IFA. Further the fund shall, according to its home state regulations, be subject to supervision comparable to that set forth in the EU regulations, and sufficient cooperation between the supervising authority and the FSA must be ascertained.
The Finnish or Swedish language must be used in the marketing of units in a mutual fund to non-professional investors. However, if a UCITS fund publishes a simplified prospectus in connection with the marketing of the fund to investors in Finland, only the simplified prospectus will need to be translated into Finnish or Swedish.
Reporting requirements under the AIF correspond to those set forth in the UCITS directives.
Finnish mutual funds can either be UCITS funds or so called ‘special mutual funds’ (typically hedge funds). A special mutual fund differs from a UCITS fund eg in that a special mutual fund is not subject to the investment restrictions set forth for a UCITS fund under the AIF.
12. SECURITIES INSTITUTIONS
12.1 Regulatory framework
The offering and marketing of investment services to the public in Finland is subject to the Act on Investment Firms (579/1996, the IFA) and the Act on Foreign Investment Firms (580/1996, the FIFA).
Further, investment services can be offered by banks and credit institutions pursuant to the Credit Institutions Act (121/2007) and the Foreign Credit Institutions Act (1608/1993), both of which apply to the conduct of banking business on a professional basis.
The SMA includes code of conduct rules to be observed in the provision of investment services. Further, the IFA contains code of conduct rules concerning eg separation of assets, prevention of money laundering and confidentiality.
For purposes of implementing the MiFID by late 2007, a reform of the IFA is currently in process. The most important amendments concern the extension of the scope of regulated investment services to investment counselling and the organisation of multilateral trading. Further, certain amendments will be introduced, inter alia, to the regulations governing the organisation of investment service providers’ operations, eg regarding the prerequisites for outsourcing and the use of investment service agents.
12.2 EU investment firms
Under the FIFA, an EU/EEA investment firm that intends to provide investment services in Finland, on a cross-border basis or by establishing a branch office, shall notify the competent home state regulator of such intention. The home state regulator shall then notify the FSA thereof. The investment firm may commence the operations of a branch office in Finland in reliance on the EU passport within two months from the receipt of the home state regulator’s notification by the FSA. The FSA shall within that time period issue any provisions it deems necessary regarding the duty to disclose information relating to the supervision of the activities of the investment firm and regarding specific operational conditions necessary for the general good. Once the FSA has received the respective notification, cross-border operations conducted without establishing a branch office may be commenced immediately.
According to the FIFA, a foreign investment firm authorised in a state outside the EU/EEA may be granted an authorisation by the FSA to establish a branch office in Finland if the firm (i) is subject to sufficient supervision in its home state and (ii) has sufficient operating conditions and a management fulfilling the requirements for the provision of investment services. In order to offer cross-border investment services without establishing a branch office or subsidiary, a foreign non-EEA investment firm must apply to the FSA for authorisation.
13. NOTIFICATION OBLIGATIONS
Notification obligations are set forth in the SMA and complemented by a related Ministry Decision and by FSA regulations.
Under the SMA, a shareholder whose holding reaches, exceeds, or falls below the thresholds of 5, 10, 15, 20, 25, 30, 50 or 66.7 (2/3) per cent of the voting rights or the share capital in a company whose shares are subject to public trading within the EEA is obliged to disclose his holding to the target company and the FSA.
To determine the proportion of voting rights and share capital referred to above, the following are also to be regarded as shares held by a shareholder:
Disclosure is also required where a shareholder is a party to an agreement or other arrangement that, if enforced, will cause his holding to reach, exceed, or fall below one of the above thresholds.
The target company and the FSA must be notified without delay once the shareholder has or should have become aware of the change in his holding or on the day the agreement concerning such holding is entered into. The target company is obliged to publish the information without delay.
Additional disclosure requirements apply to holdings in Finnish credit institutions, investment firms and insurance companies as well as in companies within the defence industry. As regards credit institutions and insurance companies the relevant thresholds are 10, 20, 33 or 50 per cent and as regards investment firms 5, 10, 20, 33.33 or 50 per cent and the intended change in holdings must be filed prior to effecting the change. The relevant authority for filings in respect of credit institutions and investment firms is the FSA and in respect of insurance companies the Ministry of Health and Social Affairs.
14. PUBLIC TAKEOVERS
The acquisition of publicly traded shares (or other securities) through a public tender offer is largely governed by the SMA, revised to implement the Directive of the European Parliament and the Council on Takeover Bids (2004/25/EC). Friendly and hostile public tender offers are both largely subject to the same regulations. The provisions of the SMA set forth, inter alia, requirements on the information to be published in connection with a public tender offer and the main principles relating to the offer. Further, if an offeror builds a stake in the target company before launching an offer, it must comply with the regulations on disclosure of holdings and insider regulations. The Companies Act regulates the redemption of minority shareholdings (squeeze-out) and sets forth the rights and duties of the Board.
Public tender offers are also subject to self-regulation, ‘the Helsinki Takeover Code’, that was issued on 15 December 2006 by a new ‘takeover panel’, established on 1 September 2006, and operating in connection with the Finnish Central Chamber of Commerce. Although the Helsinki Takeover Code is not legally binding, the FSA has in its standard considered it to constitute the best practices and good conduct on the securities market in connection with public tender offers.
The threshold triggering a mandatory offer is reached when a shareholder’s holding in a Finnish listed company exceeds 30 per cent of the total voting rights in the target company, or where the offeror already holds more than 30 per cent of the votes, 50 per cent. Shareholder’s holding includes the voting rights held by any undertakings controlled by the shareholder, voting rights held by the shareholder together with a third party, as well as voting rights held by parties acting in concert with the shareholder to exercise control over the target company. Provided that the initial voluntary offer has been made for all securities that are entitled to voting rights in the target company, a voluntary offer does not have to be followed by a mandatory offer where the relevant threshold has been exceeded by means of voluntary offer. A shareholder who, in accordance with the above, is obliged to offer to acquire the remaining shares in the company must immediately make public this obligation and disclose it to the target company and the marketplace in which the shares are listed.
The articles of association of Finnish companies may also impose an obligation for a shareholder to acquire minority shareholdings in the company (the so-called ‘poison pill’). The threshold triggering such an obligation is typically one-third of the voting rights in the target company. Such obligation is considered to be supplementary to the obligations provided by the SMA (and the Companies Act).
The bidder must disclose its decision to launch a tender offer immediately after such a decision has been made. The disclosure shall include the main terms of the forthcoming offer, according to the SMA. Further, the bidder must publish an offer document in connection with the offer.
The bidder may quite freely decide on the terms and conditions of the offer, with the exception of the mandatory provisions mainly relating to the offer price, the duration of the offer period and the equal treatment of all holders of shares or securities that are tendered for.
According to the SMA, all shareholders must be treated equally in a tender offer, ie shareholders must be offered equal consideration on equal terms. In particular, the SMA also imposes a statutory top-up obligation, requiring the bidder to adjust the offer terms if target securities are acquired by the bidder for a higher price than the initial offer price after the announcement of the respective voluntary offer (or after triggering the obligation to launch a mandatory offer) and prior to the expiry of the offer period. The adjustment will need to reflect such higher price paid. A similar top-up obligation will apply if target securities are acquired by the bidder for a higher price than the initial offer price during a period of nine months from the end of the offer period.
The offer consideration shall, as a general rule, be the market price of the shares in question. In mandatory offers, the market price is defined as the highest price paid by the bidder during the six months preceding the date when the obligation to make a mandatory offer was triggered, or, in the absence of such purchases, at least the volume-weighted average price paid for the securities in question in public trading during the three months preceding said date. In voluntary offers for all shares and other securities entitling the holder to shares in the target company, the offer consideration must correspond to at least the highest price paid by the bidder during the six months immediately preceding the announcement of the offer.
It is possible to offer both cash and other forms of consideration in both voluntary and mandatory tender offers. In a mandatory offer cash must, however, always be offered at least as an alternative, whereas the bidder in voluntary offers may itself decide upon the form of consideration to be offered (except for certain situations in which it is required to offer cash consideration at least as an alternative).
The statutory minimum offer period is three weeks and maximum is ten weeks. The offer period may, on special grounds, exceed the ten-week maximum, provided that this does not impede the operations of the target company for an unreasonably long period. The FSA may extend the offer period for the target company to convene a general meeting of shareholders to consider the offer.
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