Insights

The MFSA has published a circular outlining some amendments to the abovementioned chapters of the Capital Markets Rules (the “CMRs”) resulting from the:

• transposition of Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement (“SRD II”); and
• implementation of Regulation (EU) 2021/23 of 16 December 2020 on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132 (the “CCP Regulation”). The CPP Regulation establishes a recovery and resolution framework akin to that applicable to banks and to other financial institutions in terms of the relevant EU Legislation.

Below is a brief overview of the amendments to the CMRs:

1. Chapter 5: In terms of SRD II material related party transactions entered into in the ordinary course of business and concluded on normal market terms should not be subject to the transparency and approval requirements set out in Article 9c(2-4). Accordingly, the MFSA has introduced a new CMR 5.142A whereby such material related party transactions are exempt from adherence to the requirements of CMRs 5.141 to 5.142A.

Consequently, where a material related party transaction is entered into in the ordinary course of business and is concluded at arms-length, approval of such transaction is not required to be obtained from the audit committee and/or the Board of Directors of the Company and no company announcement thereon is required to be made. Neither is the Company required to prepare a circular to its shareholders containing the information required in terms of CMR 6.71 nor seek shareholder approval of said transaction, as would have been required where a material related party transaction was not approved by the audit committee but would have been approved by the Board of Directors of the company.

2. Chapter 11: The amendment to CMR11.2A of this Chapter of the CMRs on Takeover Bids serves to carve out Central Counterparties from the requirements of making a Mandatory Bid (as defined therein) where resolution tools, powers and mechanisms provided for in Title V of the CCPR are being used.
3. Chapter 12: Two amendments have been made to this Chapter of the CMRs, primarily the inclusion of a similar carveout as provided in Chapter 11, exempting Central Counterparties from the requirements of Chapter 12 on Shareholders’ Rights where resolution tools, powers and mechanisms provided for in Title V of the CCPR are being used.

The second amendment to this Chapter is to the definition of “Director” (for the purposes of said Chapter) contained in CMR 12.2A, where “(c) where so determined by a Member State, other persons who perform functions similar to those performed under point (a) or (b) above” has been replaced with “any other person who is in charge of operations or activities of the Issuer.” One can assume that this amendment is clarificatory in nature and alludes to persons holding senior managerial roles and members of the C-suite of a company. This means that such persons would also need to be considered in the preparation of the Issuer’s remuneration policy (which is to be approved by the Issuer’s general meeting) and details on their remuneration are to be included in the relative remuneration report, also required in terms of this Chapter of the CMRs.