Investor Relations

80INVESTOR RELATIONSholdings in a company when they pass a certain threshold, expressed eitherin nominal value, as a percentage of the share capital or of the voting rights.There are also countries where no such obligation exists. Furthermore, incertain jurisdictions, the power of investigation is given to the companies,while, in others, the nation’s regulator has the power to dictate shareholderidentification.3.1.1.1 Notification of threshold crossingDepending on applicable regulations in the country where the shares arelisted and the company’s bylaws, shareholders may be required to disclosethe number of shares or voting rights they hold when threshold limitsare crossed (generally fractions of 0.5% of the capital). Stock-market lawstrictly regulates the crossing of legal and statutory thresholds; the latterare approved by shareholders and included in the bylaws. Failure to makethe required disclosure can result in lawsuits and deprivation of the votingrights attached to the shares. This, for instance, would prevent voting rightsfrom being exercised in the event of a hostile takeover bid.3.1.1.2 Identification by a central securitiesdepositarySecurities have been dematerialized on the world’s major stock markets,meaning they now exist in electronic rather than paper form. In a number ofcountries, central securities depositaries and clearing agencies exist whichare responsible for maintaining register of securities, issuing internationalsecurities identification numbers (ISIN) for all issues of securities, andclearing and settlement of securities. In addition, they provide additionalservices to the issuers, such as securities ownership identification, wherebythey allow an issuer of bearer securities to request and obtain a list of, all orpart of, securities’ holders registered on the custodians’ books.Issuers may regularly request (once a year or more) that the agency makeinquiries based on thresholds as set in their bylaws, for instance, upwardof 10,000 shares per custodian bank and 500 shares per shareholder. Theymay also ask for full identification of all shareholders, even those with onlyone share, although this is a costly undertaking for companies with millionsof shareholders, and the content analysis process is quite complex. In addition,while significant progress has been made over the past years in certainlegislations, there is still no way for companies to identify individual foreignshareholders as opposed to the custodian banks where these shares aredeposited. This is an important factor if we consider that in certain markets,foreign or “nonresident” investors may hold more than half of an issuer’sshares.