ZSE Annuls Its Own Decisions on the Delisting of 15 Companies

Acting in accordance with the decision of Hanfa, the Zagreb Stock Exchange on Friday annulled its own decisions regarding the transfer of shares of 15 companies to the parallel market. Thus, these companies, as well as a good portion of other shares that were forced by law to be listed on the stock exchange, will still be compelled to be more transparent to shareholders than they wish for a maximum of the next six months.

 By announcing that it will act in accordance with the decisions of the regulator, the leaders of the Zagreb Stock Exchange ended the saga that lasted last week, which arose due to a misinterpretation of the rather vague new Capital Market Act. Although with its over 600 articles, the mentioned law can be considered overly extensive, its transitional provisions, which determine the interim period between the start of the application of the new law and the cessation of the use of the old law, introduced certain ambiguities that influenced what is now seen as the incorrect decisions of the Zagreb Stock Exchange. 

Namely, the new law abolishes the forced listing on which companies that fell under the listing of public joint-stock companies were placed, and the misunderstanding arose due to the misinterpretation of the final provisions. These provisions gave the exchange six months to align its own rules with the new law, but the same principle was not explicitly established for the companies themselves. Interpreting the law, the exchange understood that there is no similar deadline for companies and allowed them to decide whether they want to be in the regular or parallel market, leading to a gradual exodus of companies from the exchange since the beginning of 2009. This situation is quite understandable, as many of those companies have no particular interest in being on the exchange, either due to ownership or other reasons. However, unlike the exchange, Hanfa interpreted the Capital Market Act differently.

– In the transitional period (until 30.06.09.) due to compliance with the Capital Market Act, companies from the JDD listing automatically enter the regular market. During this period, the Zagreb Stock Exchange must adopt rules that will prescribe the conditions and procedures for listing, including the regular one. – say from Hanfa. Namely, the procedure must be respected for companies from that listing to execute delisting. During this transitional period, the exchange is essentially considered the operator of the Multilateral Trading Platform, and certain provisions of the new law do not apply until the only domestic regulated securities market adopts new rules.

However, if the new law is taken literally, the companies have made even more mistakes, as they must have the support of the General Assembly of shareholders for the delisting decision, and none of the mentioned have done so. – Article 332 of the ZTK refers to the situation of market functioning after the transitional period, i.e., when the Zagreb Stock Exchange adopts rules on the conditions and procedures for listing and delisting, which must be in accordance with the ZTK, or specifically with the provision of Article 332.  In those rules, the procedure for companies according to Article 332 will be prescribed, i.e., the impossibility of delisting along with other conditions and decisions of the company’s general assembly – says Hanfa about the procedure of companies that decided to delist, giving them six months to align their decisions with the new law. This decision by Hanfa, although some experts consider it somewhat clumsy (due to the degradation of the exchange to the operator of the MTP until it adopts new rules), will have positive effects regarding legal certainty, especially for small shareholders. (Amir Kulenović)