EUROPEAN UNION: ESAs issues consultation paper on the assessment of acquisitions and increases of qualifying holdings

Thursday July 9 2015

The European Supervisory Authorities (the ESAs) have issued a Joint Consultation Paper concerning draft Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector.

Proposals put forward in this paper include:

• The ESA makes recommendations as to a list of information required for the assessment of an acquisition of a qualifying holding. This is an extensive list of information to be provided by the proposed acquirer.
Concerning the proposed acquirer being a legal person, the recommended list includes documents certifying the business name and registered address of its head office, an up-to-date overview of entrepreneurial activities, a complete list of persons who effectively direct their business and the identity of all persons who may be considered to be beneficial owners of the legal person.
Concerning the proposed acquirer being a natural person, the recommended list includes any undertaking directed or controlled by this person over the previous 10 years, such as criminal records and disciplinary actions. The proposed acquirer also needs to disclose any dismissals from employment amongst other things. These proposals aim to create a harmonised list of information that proposed acquirers should include in their notifications to the competent supervisory authorities.

• Currently, the sectoral Directives and Regulations do not define what constitutes an indirect acquisition of 10% or more of the capital or of the voting rights in a target undertaking. The Member States largely rely on the concepts in their respective national laws to assess acquisitions carried out through cascading holdings. This leads to inconsistent treatments of similar situations rendering the framework for indirect acquisition in EU quite diverse amongst Member States.
On this point, a selection of options are proposed. First is the use of the control criterion, which would entail considering as proposed indirect acquirers all natural or legal persons (i) acquiring control over an existing holder of a qualifying holding in a target undertaking or (ii) who, directly or indirectly, control the proposed direct acquirer of a qualifying holding in a target undertaking. Second is the use of both the control criterion and the multiplication criterion. Pursuant to this, target supervisors should multiply the percentages of the holdings across the corporate chain and, if the result if 10% or more, a qualifying holding will be deemed to be acquired indirectly.

• Currently, the definitions of persons acting in concert, accompanied by examples provided by Member States, may be similar in wording across sectoral legislation but in practice there is no generally accepted definition of the notion of ‘acting in concert’. Other jurisdictions set out definitions in national law based on either exhaustive lists or presumptions of circumstances where persons are deemed to be acting in concert.
On this point, a selection of options are proposed. First is the notion of setting up an exhaustive list of circumstances in which people are deemed to act in concert. Second, setting up a non-exhaustive, indicative, list of factors which supervisors could examine to determine whether certain persons are acting in concert. Third, identification of activities which, by themselves, will not lead to a finding of persons acting in concert.

The ESAs invite comments on all proposals put forward in this paper. Comments are invited by way of clicking on the ‘send your comments’ button on the consultation page by 2 October 2015.

Click on the above link for further details.