The disclosure of accurate, comprehensive and timely information about issuers of public securities (i.e. securities that (i) have been placed through public offering and/or (ii) are admitted for trading to a stock exchange) is essential to allow an informed assessment of their business performance and assets and to build sustained investor confidence in capital markets.
Under the laws of Georgia issuers of public securities are obliged to disclose (subject to certain exemptions) the regulated information as well as to disseminate such information to the public.
The legal requirements concerning the disclosure of regulated information and its dissemination to the public are provided for by:
In general, the regulated information consists of:
(i) yearly and half-yearly financial information;
(ii) on-going information on major holdings of voting rights; and
(iii) ad hoc information disclosed with respect to insider dealing and market manipulation.
All above referred information is discussed in more detail below.
The Securities Market Law and the Decree No. 181/04 require an issuer of both public equity securities and public debt securities to publish periodic financial information on their income throughout the financial year. In particular, such issuers shall publish:
Major holdings of voting rights
In addition to the above, the Securities Market Law and the Decree No. 181/04 oblige an issuer of public equity securities to publish continuous information concerning the possession of significant percentages of voting rights.
For purposes of disclosure of significant percentages of voting rights the issuer of public equity securities is an issuer whose voting equity securities:
Furthermore, the above referred obligation of disclosure applies to holders of Issuer’s voting equity securities (the “Public Securities”).
For purposes of disclosure of information on major holdings of voting rights, the holder of a Public Security is a person who holds (directly or indirectly):
The Decree No. 181/04 requires the holder of the Public Securities to submit to both the regulator and the respective Issuer a notification (the “Notification Requirement”), should the proportion of voting rights attached to the Public Securities held by it reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Notification Requirement applies to the current as well as former holder of the Public Securities, in particular, when its share falls below any of the above-referred threshold.
The Notification Requirement shall also extend to:
Furthermore it should be stressed that the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% shall be calculated on the basis of all Public Securities to which voting rights are attached even if the exercise of the votes is suspended. However, the Pubic Securities, with respect to which the voting rights should be ignored, shall be disregarded.
The above information shall also be given in respect of all Public Securities which are in the same class and to which voting rights are attached.
It is noteworthy that the Decree No. 181/04 has extended the requirement to notify the threshold crossing to financial instruments which give entitlement or the ability to acquire the Public Securities with a comparable economic effect.
Broadening of the Notification Requirement to all financial instruments of similar economic effect to holdings of Public Securities and entitlements to acquire the Public Securities is another significant breakthrough to mention.
Moreover, to provide a sufficient level of transparency with regard to major holdings, holdings of financial instruments will be aggregated with holdings of Public Securities for the purpose of calculation of the thresholds that trigger the Notification Requirement.
However, to avoid any confusion as to the nature of holdings, the holder of Public Securities and financial instruments has to specify separately the amount of holdings of Public Securities and the amount of holdings of financial instruments in its notification.
In addition to the above, the Notification Requirement applies to:
(1) the holder of the Public Securities in the circumstances where any of the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% is reached, exceeded or fallen below:
(2) the issuer of the Public Securities, should the proportion of voting securities held by it reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
Furthermore, the Decree No. 181/04 clarifies that the Notification Requirement does not extend to:
In addition to disclosure of financial information an issuer of both public equity securities and public debt securities shall also disclose inside information.
The prompt public disclosure of inside information by an issuer is essential to avoid insider trading and ensure that investors are not mislead.
The Securities Market Law as well as the Decree No. 180/04 requires that (among others) issuers of public securities inform the public as soon as possible of inside information, such as, for instance, significant changes in the value of issuer’s assets, undertaking of new obligations, merger or division or any other type of reorganization, changes related to an issuer’s investment policy, etc. subject to meeting other criteria of inside information.
The Securities Market Law provides for a lengthy definition of inside information. However, the most important elements of such definition to mention are: (i) the precise nature of such information and (ii) the significance of its potential effect on the prices of the public securities.
For instance, the state of contract negotiations or the possibility of the placement of public securities may be relevant information for investors, however, such information is not sufficiently precise to qualify as inside information. In such cases, the prohibition against insider dealing should apply, but the obligation on the issuer to disclose the information should not.
Same time issuers are allowed to delay the public disclosure under specific conditions. Allowing for such a delay is especially significant for issuers who are systemic financial institutions not to damage the wider public interest of maintaining the stability of the financial system.
The Securities Market Law as well as the Decree No. 180/04 requires persons discharging managerial responsibilities as well as parties related thereto to notify the issuer of public securities and the regulator of transactions conducted on their own account relating to the securities of that issuer and/or to other financial instruments linked to them (the “Notification”)).
Persons discharging managerial responsibilities are defined as follows:
As for a related party, it is:
Issuers shall draw up a list of persons discharging managerial responsibilities and parties related thereto and shall inform persons discharging managerial responsibilities of the Notification requirement. Persons discharging managerial responsibilities shall, in their turn, inform the related parties of the same requirement.
It should be underlined that the Notification requirement shall apply to persons discharging managerial responsibilities as well as parties related thereto, should the total value of all transactions made by each of them over the period of a calendar year reach GEL 20,000 or its equivalent in a foreign currency.
The issuer shall publish the Notifications in a due course, however, no later than three business days from the day on which the transaction has been made.
It should also be stressed that transactions to be notified shall include:
It should be noted that transparency of transactions conducted by persons discharging managerial responsibilities at the issuer and thereto related persons, constitutes a preventive measure against market abuse.
The threshold of GEL 20,000 or its equivalent in a foreign currency (below which transactions shall not be notified) represents a reasonable balance between the level of transparency and the number of reports notified to the regulator and the public.
 Such disclosure should be made as of the last day of a calendar month and include: