Legal Restrictions

Restrictions on Voluntary Corporate Actions

A voluntary corporate action may have restrictions associated with it in terms of those shareholders considered eligible, either for notification or participation in a voluntary offer. Such restrictions may include, but are not limited to the following:

In certain instances, companies involved with the Corporate Action Event may be restricted from providing notification of the complete offer details. In such a case, investors will be responsible for researching upcoming voluntary corporate actions through a third party. For example, if the Offer Documentation of an event may not be distributed in country A, then in theory investors from country A will not get notified about the event through the usual chain (broker/custodian) and those investors need to contact the company investor relations or lead agent for more information. It’s unlikely that investors impacted by the notification restrictions are allowed to participate.

Such a restriction, as set out in the voluntary offer documentation, will either include or exclude residents of specified countries from participating in an offer. The details of any residency restriction will be outlined in the offer documentation and may be verified with the company’s Investor Relation department.

Similar to residency restriction; however the restriction is based on the country of citizenship rather than the current residency of the account holder.

Acompany may open an offer only to Qualified investors. This type of restriction will be outlined in the offer details and may be verified with the company’s Investor Relations department. Investors are responsible for confirming they are eligible to participate in the offer should this restriction be in place.

Impact of Restrictions

Legal Restrictions may create an additional challenge for the industry, as it is not always clear who the beneficial owners are as seen from each point in the chain of companies in the industry. For example, a fund may have 1000 underlying beneficial owners who may be in resident in different countries. But this may not be visible by the Broker Dealer or Custodian at which the funds are held. 

As the registration in the company register is often done in a Nominee name, a “Disclosure of Beneficial Owner Details” may be required. This means that companies in the chain disclose the Beneficial Owner Details to the issuer of the stock. Based on this, details should or should not be sent down the chain.

In reverse, when clients are sending their instructions to participate in certain restricted Corporate Actions Events, it is possible that they are required to include Beneficial Owner Details with their instruction. This is breaking Straight Through Processing and manual intervention is required. It is also possible that qualified investors are required to include certification with their instructions to participate, proving that they are indeed qualified investors. Usually there are deadlines by which the requested information needs to be sent and received.

Example of what Restrictions looks like in reality

Below is an extract from the Offer Document and contains the restrictions text in the offer document dated 27 March 2018 RECOMMENDED CASH OFFER by THALES S.A. (a public limited liability company incorporated under the laws of France) for all issued and outstanding ordinary shares including ordinary shares represented by American depositary shares of GEMALTO N.V (a public limited liability company (naamloze vennootschap) incorporated under the laws of The Netherlands). The Offer Document, which can be found here, is 261 pages long and the text with regards to Legal Restrictions can be found on page 8, 9 and 10. 

Try reading this out to your mates in the pub!

QUOTE

2. RESTRICTIONS 2.1 General This Offer Document is not an offer to sell securities and it is not a solicitation of an offer to buy securities, nor shall there be any sale or purchase of securities pursuant hereto, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the laws of any such jurisdiction. If you are in any doubt as to your eligibility to participate in the Offer, you should contact a professional adviser immediately. The Offer applies to all the Shares and is made with due observance of such statements, conditions and restrictions as are included in this Offer Document. Thales reserves the right to accept any tender pursuant to the Offer, which is made by or on behalf of a Shareholder, even if it has not been effected in the manner set out in this Offer Document. The Offer is not being made, and the Shares will not be accepted for purchase from or on behalf of any Shareholder, in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities or other laws or regulations of such jurisdiction or would require any registration, approval or filing with any regulatory authority not expressly contemplated by the terms of this Offer Document. Notwithstanding the foregoing, acceptances of the Offer by Shareholders not residing in The Netherlands, France and/or the United States of America will be accepted by Thales if such acceptances comply with (i) the acceptance procedure set out in this Offer Document and (ii) the applicable laws and regulations of the jurisdiction from which such acceptance has been made. Persons obtaining the Offer Document are required to take due note and observe all such restrictions under the applicable laws and regulations and obtain any necessary authorisations, approvals or consents. Neither Thales or any of its affiliates, board members, employees nor any of their respective advisers accepts any liability for any violation by any person of any such restriction. Any person (including, without limitation, custodians, nominees and trustees) who would or otherwise intend to forward this Offer Document or any related document to any jurisdiction other than The Netherlands or France should carefully read this Section 2 (Restrictions) and Section 3 (Important Information) before taking any action. The distribution of this Offer Document in jurisdictions other than The Netherlands or France may be restricted by law and therefore persons into whose possession of this Offer Document comes should inform themselves about and observe such restrictions. Any failure to comply with any such restrictions may constitute a violation of the law of any such jurisdiction. 2.2 United States of America The Offer is being made for the securities of Gemalto, a public limited liability company incorporated under Dutch law, and is subject to Dutch disclosure and procedural requirements, which differ from those of the United States of America. The financial information of Gemalto included or referred to herein has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and, accordingly, may not be comparable to financial information of U.S. companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. The Offer will be made in the United States of America in compliance with Section 14(e) of the U.S. Securities Exchange Act of 1934, as amended (the U.S. Exchange Act), and the rules and regulations promulgated thereunder, including Regulation 14E, and is subject to the exemptions from regulation under Regulation 14D and certain provisions of Regulation 14E provided by Rule 14d-1(d) under the U.S. Exchange Act and otherwise in accordance with the requirements of Dutch law. Accordingly, the Offer will be subject to certain disclosure and other procedural requirements, including with respect to the Offer timetable, settlement procedures, withdrawal, waiver of conditions and timing of payments, that are different from those applicable under U.S. tender offer procedures and laws. The receipt of cash pursuant to the Offer by a U.S. Shareholder may be a taxable transaction for U.S. federal income tax purposes and may be a taxable transaction under applicable state and local, as well as foreign and other tax laws. See also Section 11 (Tax aspects of the Offer). Each Shareholder is urged to consult his independent professional adviser immediately regarding the tax consequences of accepting the Offer. It may be difficult for U.S. Shareholders to enforce their rights and claims arising out of the U.S. federal securities laws because Gemalto and Thales are located in a country other than the United States of America, and some or all of their respective officers and directors may be residents of a country other than the United States of America. U.S. Shareholders may not be able to sue a non-U.S. company or its officers or directors in a non-U.S. court for violations of U.S. securities laws. Further, it may be difficult to compel a non-U.S. company and its affiliates to subject themselves to a U.S. court’s judgment. To the extent permissible under applicable law or regulations, including Rule 14e-5 of the U.S. Exchange Act, and in accordance with normal Dutch practice, Thales and its affiliates or broker(s) (acting as agents or on behalf of Thales or its affiliates, as applicable) and Gemalto and its affiliates or broker(s) (acting as agents or on behalf of Gemalto or its affiliates, as applicable) may from time to time both prior to and after the date hereof, and other than pursuant to the Offer, directly or indirectly purchase, or arrange to purchase, Shares. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. In no event will any such purchases be made for a price per Ordinary Share that is greater than the Offer Price or a price per ADS that is greater than the ADS Offer Price. To the extent information about such purchases or arrangements to purchase is made public in The Netherlands, such information will be disclosed by means of a press release or other means reasonably calculated to inform U.S. Shareholders of such information and on the website of Thales at www.thalesgroup.com/en/investors. No purchases will be made outside of the Offer in the United States of America by or on behalf of Thales, Gemalto and/or their respective affiliates. Affiliates of the financial advisers of Thales and Gemalto may engage in ordinary course trading activities in securities of Gemalto, which may include purchases or arrangements to purchase such securities. To the extent required in The Netherlands, any information about such purchases will be announced by press release in accordance with Article 13 of the Decree. This Offer Document has not been filed with or reviewed by any federal or state securities commission or regulatory authority of any jurisdiction in the United States of America, nor has any such commission or authority passed upon the accuracy or adequacy of this Offer Document. Any representation to the contrary is unlawful and may be a criminal offence.

END QUOTE

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