A director of a fully listed company is obliged to notify their company of any dealing in its shares within four business days, and the company must pass that information to the market by the end of the following business day. ‘Dealing’ is widely defined: the buying and selling of shares, the grant and exercise of options and pledging your shares as security for a loan are all disclosable. Similar rules apply to share dealings by directors of AIM companies.
In the case of a listed company, this obligation to disclose share dealings extends beyond directors to other ‘PDMRs’ – that is, persons discharging managerial responsibilities, namely senior executives who make management decisions and have regular access to inside information.
Prospectuses, listing particulars, admission documents and certain circulars produced by fully listed and AIM companies will also require details of directors’ interests in the company’s shares.
Where the company’s shares are traded on the full list, AIM or PLUS markets, a director whose voting rights in the company’s share capital reach three per cent or more has a separate obligation to give notice to the company of that interest. (This applies to all shareholders, not just directors.) The company must in turn make an announcement of the notifications it receives about such substantial interests in its shares.
Directors of companies with shares quoted on a stock exchange are obliged not only to disclose details of their dealings, but also to observe restrictions on when they can buy and sell shares in their company. (There are few restrictions on when shares in an unquoted company can be bought or sold, but a director may have entered voluntarily into a ‘lock-in’ agreement not to sell their shares for a certain period, and many unquoted companies will have restrictions in their articles or in a shareholders’ agreement that limit the ability to transfer shares freely.)
There are three separate regimes that potentially restrict a director or a senior manager of a fully listed company (or a director of an AIM company) from dealing in the company’s shares:
These regimes can overlap: more than one of them might apply to a single set of facts. Moreover, their reach is potentially wide. They relate not just to directors but also to senior managers below board level, and indeed, in some circumstances, to any employee who has unpublished price-sensitive information about their company when they deal in its shares. A humble lab technician in a pharmaceuticals company who sees that the final tests on a new wonder drug are not going well might be just as liable as a director who deals before a profits announcement. So the rules on share dealing need to be widely known and understood throughout the organisation (for an example in another sector, see the case of Matthew and Neel Uberoi, described in OUT-LAW guide's guide to The Model Code on share dealing).