Q&A
Normally, the requirement for disclosing an interest in UK listed shares arises when a person acquires a 3% interest but the threshold is 5% when:
- An investment management subsidiary of an activist invests the assets of the activist investment fund).
- the listed company is a non-UK issuer.
Enhanced disclosure rules apply at 1% if the listed company is in an offer period for the purposes of the Takeover Code.
Although the principal disclosure requirements for disclosing an interest in UK listed shares is to disclose who controls the voting rights at or above the relevant thresholds, derivative interests are caught even if the holder does not control the voting rights. For more information on disclosing derivative interests, see my post here.
UK companies can serve notices on persons to seek information on beneficial ownership; and UK incorporated AIM companies have a legal requirement to seek and then disclose information on persons exercising ‘significant control’.
The principal rules for disclosing an interest in UK listed shares are the FCA’s DTR 5 (Vote Holder and Issuer Notification Rules)
- If the company is a UK issuer then under DTR 5.1.2R(1) the investor (and each person in the chain of control of voting rights) must disclose its aggregate interest in UK listed shares at 3% and each 1% threshold above 3% up to 100%.
- If the company is a non-UK issuer, then the investor (and each person in the chain of control of voting rights) must disclose its aggregate interest in UK listed shares at 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. However, if the issuer is incorporated in the USA, Japan, Israel and Switzerland, then the disclosure obligations are governed by the rules applicable in these jurisdictions (which are treated by the FCA as being equivalent to DTR 5 – see relevant FCA equivalence rules).
- DTR 5 is primarily concerned with disclosure of the person who controls the votes attaching to the shares rather than who the beneficial owner is. However, DTR 5.3.1R(1) provides that a holder of a derivative interest is treated the same way as person who holds the shares and controls the voting rights even though the investor only has an economic interest in the shares; and the counter-party (normally the prime broker at a bank) holds the shares and has the right to control the voting rights rather than the investor.
- There is an exemption under DTR 5.1.5R(1) for fund managers so holdings need only be disclosed at 5% or above (as opposed to 3%) and further notification only arises if holdings reach, exceed, or fall below 10%. At 10%, the exemption no longer applies so disclosures are required for every 1% increase or decrease above this threshold. This can be a useful exemption where the shareholder is an investment manager (e.g. the investment management subsidiary of an activist which invests the assets of the activist investment fund). Where a client has appointed a discretionary fund manager but has retained power to give instructions, the client will only have a separate notifiable interest upon exercise of that power.
- A voting rights agreement (which obliges the parties to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards the management of the target); a temporary transfer of voting rights; or a proxy giving voting discretion to the holder are all indirect disclosable interests under DTR 5.2.1R.
Enhanced rules for disclosure of an interest in UK listed shares apply if the listed company is in an offer period for the purposes of the Takeover Code
Under Rule 8 of the Code, when the target company is in an offer period, the threshold for disclosure of dealings is 1% for shareholders and dealings below this threshold must be made by an identified potential bidder.
Dealing disclosures for disclosure of an interest in UK listed shares must be made in the securities of the target and the bidder (unless the bidder has announced that the offer will be in cash only). Non-UK companies are not subject to the Takeover Code.
Disclosure of beneficial interests
Under s. 793 of the Companies Act 2006, a UK public company can investigate the identity of any person it knows, or suspects, is (or was at any time in the preceding three years) ‘interested’ in its shares by sending a notice requiring the person to confirm certain information, such as details of its interest in the shares; or any agreement between two or more persons that includes provision for the acquisition by any of them of interest in shares and the agreement contains mutual obligations or restrictions (esp. as to exercise of shareholder rights).
For more information on section 793 notices, see my post here.
An additional disclosure arises for AIM companies under the Companies Act 2006 to keep a register of persons with significant control (PSC), i.e. persons holding over 25%, 50% or 75% of the Company’s shares and for that information to be filed with Companies House.
Shareholders can be required to provide this information under s. 793 of the Companies Act 2006.
Published – 21/04/21
