Supreme Administrative Court provides clarity in the area of ad hoc publicity for listed companies

The Austrian Supreme Administrative Court (VwGH) had recently to deal with the question, when a public company has to report information ad hoc. In the given context, it was so-called insider information that is, pursuant to the provisions of the Stock Exchange Act, subject to an ad hoc publicity. Accordingly, as defined in § 48d Stock Exchange Act, an issuer of financial instruments has to give insider information that affects him directly, immediately to the public.

The regulations applicable in Austria in regard to the illustrated ad hoc publicity were the implementation of the European Directive 2003/6/EC on insider dealing and market manipulation (market abuse) – Market Abuse Directive (MAD) – implemented in the Austrian legal system. Since the implementation in 2004, decisions of the Supreme Administrative Court, which dealt with the fact at what time there is a duty to publish an ad hoc report for listed companies, were issued for the first time.

As a preliminary point, the question of how to define so-called insider information arises. § 48a Austrian Stock Exchange Act regulates such as

“a not publicly known, accurate information that relates directly or indirectly to one or more issuers of financial instruments or to one or more financial instruments and which, if it were made public, would be likely to influence the prices of those financial instruments or on the price of related derivative financial instruments because they would be likely to use a reasonable investor as part of the basis of his investment decisions.”

The previous jurisdiction of the European Court[1] of Justice stated, in connection with the time of ad-hoc announcement, that in the case of a protracted process intended, over the course of a number of intermediate steps, to bring about a particular circumstance or to generate a particular event, only of whether that future circumstance or future event is to be regarded as precise information within the meaning of those provisions of the directives.

The latest rulings of the European Court of Justice, which is in particular also of great importance for the Austrian capital market, refers to those intermediate steps as relevant but is now an announcement in light of the ad hoc publicity meaning that it must be examined whether that future circumstance or future event may reasonably be expected to occur, or, in the case of a protracted process of this kind, can intermediate steps which already exist or have already occurred and which are connected with bringing about the future circumstance or event also constitute precise information within the meaning of the aforementioned provisions of the directives. The Administrative Court followed - in his verdict to 2012/17/0554 - the most recent view of the European Court of Justice.

In this regard, the terminology of “probability of occurrence”[2] is especially argued. Insider information must be measured against two criteria: on the one hand, there must be a reasonable probability of occurrence, on the other hand the insider information should be certifiably enough to estimate a possible suitability where prices are highly likely to be affected. These two criteria are minimum requirements, each of which must be accomplished before it can be considered from inside information. Under certain circumstances, a decision on the level of the Executive Board, provided that the consent of the other organs is sufficiently probable, the obligation to publicly disclose may occur.

For listed companies the question of when information – which qualify as inside information within the meaning of the Austrian Stock Exchange Act – has to be reported ad hoc report, arises repeatedly. Therefore it is important to weigh the differentiating interests of a reasonable investor on the one hand and those of the listed company on the other hand. Sometimes listed companies are obliged to report information in a very early phase of a project that may be carried out, the completion of the project could be jeopardized due to the publicity or the conclusion. For this purpose, the Supreme Administrative Court takes a stand and states that

“if adopting an obligation to publicly disclose information in a very early stage of internal considerations, a threat to the company”[3]

may occur. In so far as publishing information may hurt legitimate interests of the issuer as defined in § 48d section 2 of the Stock Exchange Act, there is the possibility of a postponement in the Stock Exchange Act in § 48d. Otherwise, the information shall be publicly disclosed immediately, i.e. within a few hours.

The latest verdict of the Supreme Administrative Court a rejection of the current practice, as for which every strategic decision (such as a decision of the Executive Board about a potential merger) had to be publicly disclosed – ad hoc – at the earliest possible stage.

As of now, information only has to be publicly disclosed as part of an ad hoc publicity, if the implementation of a specific project can actually be expected and if it is basically clear in what way the accomplishment is going to take place.