532 19 A Listed Company as the Target
functions within the issuer gain access to inside information; and take the neces-
sary measures to ensure that any person with access to inside information informa-
tion acknowledges the legal and regulatory duties entailed and is aware of the
sanctions attaching to the abuse or improper circulation of such information.^75
The confidentiality requirement is complemented by the legitimate interest re-
quirement. The issuer can have a legitimate interest for delaying public disclosure
although information is disclosed internally. For example, the reason can be the
separation of decision management and decision control. The issuer can have a
two-tier board structure and the decision of a management body may have to be
ratified by the supervisory body.^76 – This can be contrasted with the decision
rights of the general meeting which do not give a legitimate interest for delaying
public disclosure. A proposal submitted to the general meeting cannot be held
confidential because it must be made available to a large number of shareholders.
Confidentiality obligations. The Directive on market abuse does not regulate
confidentiality obligations as such apart from the duties of primary or secondary
insiders.^77 Confidentiality obligations are therefore based on Member States’ laws
and can vary depending on the firm and the governing law.
In Germany, mimimum confidentiality obligations based on the Directive^78 are comple-
mented by a broader requirement of secrecy which follows from general company law pro-
visions (duty of care, secrecy)^79 and the general provisions of the law of obligations for
members of the two boards and the advisers to whom they pass on information.^80 When the
management board of a German AG discloses information about a bid to the supervisory
board as part of its duties,^81 members of the supervisory board receive it in the normal
course of the exercise of their own duties.^82 The duty of confidentiality owed by the mem-
bers of the supervisory board to the company^83 is enough not to trigger mandatory disclo-
sure under the Directive on market abuse.
In England, personal and disclosure-delaying confidentiality obligations can exist on a
number of grounds.^84 A person can owe fiduciary duties based on the general law which re-
lies on civil remedies.^85 However, the City Code, which regulates takeover bids and certain
other transactions, requires secrecy before the announcement of the bid.^86 Even rumours
may trigger a duty to make an announcement under the City Code.^87 The City Code re-
(^75) Article 3(2) of Directive 2003/124/EC.
(^76) Article 3(1) of Directive 2003/124/EC. See also DTR 2.5.3 R.
(^77) Articles 2, 3 and 4 of Directive 2003/6/EC (Directive on market abuse).
(^78) § 14 WpHG.
(^79) § 93(1) and § 116 AktG.
(^80) See Hopt KJ,Takeovers, Secrecy, and Conflicts of Interest: Problems for Boards and
Banks (October 2002). ECGI - Law Working Paper No. 03/2002. Available at SSRN.
(^81) § 90 AktG.
(^82) § 111(1) AktG.
(^83) § 116 AktG.
(^84) See also DTR 2.5.1 Rule.
(^85) Percival v Wright [1902] 2 Ch 421; Schering Chemicals Ltd v Falkman Ltd [1982] QB
- This can be contrasted with the Criminal Justice Act 1993 which makes insider deal-
ing a criminal offence. Section 52(1) of the Criminal Justice Act 1993.
(^86) Rule 2.1 of the City Code on Takeovers and Mergers.
(^87) Rule 2.2 of the City Code on Takeovers and Mergers.