19.7 Selective Disclosure to Outsiders by the Target 535On-going negotiations can provide a legitimate interest for delaying disclosure
to the public.^101 Ensuring confidentiality after a permitted form of selective disclo-
sure will typically require the use of non-disclosure obligations or the existence of
statutory confidentiality obligations.^102 In the takeover context, the issuer’s perma-
nent company-specific insider list required by the Market Abuse Directive must be
complemented by a project-specific insider list.^103
Disclosure is neither selective nor confidential when it is made to a large num-
ber or an unlimited group of people,^104 and disclosure is not selective just because
it is made to people who owe a duty of confidentiality to the issuer. Even where
disclosure is both selective and confidential, the existence of a large number of re-
cipients will increase risk. The wider the group of recipients of inside information,
the greater the likelihood of a leak which will trigger full public disclosure under
the Directive on market abuse.^105
The City Code requires an announcement already when “negotiations or discussions are
about to be extended to include more than a very restricted number of people (outside those
who need to know in the companies concerned and their immediate advisers)”. Further-
more, the City Code provides that “an offeror wishing to approach a wider group, for ex-
ample in order to arrange financing for the offer, to seek irrevocable commitments or to or-
ganise a consortium to make the offer should consult the Panel”.
19.7 Selective Disclosure to Outsiders by the Target
Whether the target company is prevented under the Directive on market abuse
from disclosing inside information selectively to the potential acquirer or offeror
is a matter of interpretation and depends on the scope of the Directive.
Inside information. First, the Directive on market abuse does not cover the use
or disclosure of information that is not regarded as “inside information”.^106 The
Directive thus only requires the issuer to keep price-sensitive information secret.^107
(^101) Articles 6(2) and 6(3) of Directive 2003/6/EC (Directive on market abuse) and Article
3(1)(a) of Directive 2003/124/EC.
(^102) Articles 6(2) and 6(3) of Directive 2003/6/EC (Directive on market abuse). See also Ar-
ticle 5(5) of Directive 2004/72/EC: “Member States shall ensure that the persons re-
quired to draw up lists of insiders take the necessary measures to ensure that any person
on such a list that has access to inside information acknowledges the legal and regula-
tory duties entailed and is aware of the sanctions attaching to the misuse or improper
circulation of such information.”
(^103) See Article 5(1) of Directive 2004/72/EC: “... on a regular or occasional basis”.
(^104) An offer of securities addressed to fewer than 100 persons per Member State will not
trigger an obligation to publish a prospectus according to Article 3(2)(b) of Directive
2003/71/EC (Prospectus Directive).
(^105) See also DTR 2.5.9 G.
(^106) Article 1(1) of Directive 2003/6/EC (Directive on market abuse).
(^107) Articles 3 and 1(1) of Directive 2003/6/EC (Directive on market abuse).