Insurance Rule 29 of 2009

Prudential assessment of acquisitions and increase

of holdings in authorised companies

Rule pursuant to article 38 and 38A of the Act

1.	(1)	This Insurance Rule on the prudential assessment of acquisitions and increase of holdings in authorised companies (“this Rule”) is made by the Authority pursuant to, and for the purposes of, article 38 and 38A of the Act.

(2)	This Rule shall come into force on the 1st January 2010.

Application

2.	This Rule applies to any person or persons acting in concert desirous of acquiring directly or indirectly a qualifying shareholding in a company authorised to carry on business of insurance or increasing the existing qualifying shareholding in the company concerned.

Scope

3.	The scope of this Rule is:

(a)	to transpose, in part, the relevant provisions of Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 amending Council Directive 92/49/EC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector;

(b) to transpose the relevant provisions of the Guidelines for the prudential assessment of acquisitions and increases in holdings in the financial sector required by Directive 2007/44/EC issued by the 3L3 Committees of European Financial Supervisors (CEBS, CESR, CEIOPS)(‘the 3L3 Guidelines’): http://www.ceiops.org;

(c)	to determine the criteria to be applied by the Authority in the assessment process of a proposed acquirer; and

(d)	to ensure that the proposed acquirer knows what information is required to be provided in order to allow the Authority to assess the proposed acquisition in a complete and timely manner.

Definitions

4.	In this Rule, unless the context otherwise requires -

“beneficial owners” are the individuals who ultimately own or control the proposed acquirer, and or persons on whose behalf the acquisition is being conducted. It also includes persons who exercise ultimate effective control over a proposed acquirer which is a legal person or a legal arrangement, such as a trust.

“control” shall mean the relationship between a parent undertaking and a subsidiary, as defined in article 2 of the Companies Act, or a similar relationship between any person and an undertaking;

“significant influence” is exercised where a proposed acquirer’s shareholding, although below the 10% threshold allows it to exercise a significant influence over the management of the authorised company (for example allows it to have a representative on the board of directors).

“voting rights” shall be calculated on the basis of all the shares to which voting rights are attached even if the exercise thereof is suspended. Voting rights exercised in any of the following cases or a combination of them shall also be included:

voting rights held by a third party with whom a person has concluded an agreement, which obliges the person and the third party to adopt, by concerted exercise of the voting rights they hold, a lasting common policy towards the management of the issuer in question;

voting rights held by a third party under an agreement concluded with a person providing for the temporary transfer for consideration of the voting rights in question;

voting rights attaching to shares which are lodged as collateral with a person, provided the person controls the voting rights and declares its intention of exercising them;

voting rights attaching to shares in which a person has the life interest;

voting rights which are held, or may be exercised within the meaning of paragraphs (a) to (d), by an undertaking controlled by a person;

voting rights attaching to shares deposited with a person which person can exercise at its discretion in the absence of specific instructions from the shareholders;

voting rights held by a third party in its own name on behalf of a person;

voting rights which a person may exercise as a proxy where the person can exercise the voting rights at its discretion in the absence of specific instructions from the shareholders.

Notification and Assessment Process of Proposed Acquisition or increase in shareholding

5. (1) In terms of article 38(1) of the Act, a proposed acquirer is required to provide notification of a proposed acquisition to the Authority as soon as a decision is made to acquire or increase a qualifying shareholding in an authorised company. Notification is also required:

if the shareholding held by the acquirer in the company involuntarily reaches or exceeds 10%, 20%, 30% or 50% of the shares or voting rights in the authorised company. This may occur as a result of the repurchase by the authorised company of shares held by other shareholders, or in the event of an increase in capital in which existing shareholders do not participate. In such cases, notification to the Authority is still necessary upon becoming aware that a shareholding reaches or exceeds one of the thresholds referred to in this paragraph, even if the acquirer intends to reduce its level of shareholding so that it once again falls below the said thresholds;

when a number of persons are “acting in concert” such that each of them decides to exercise his rights linked to the shares he acquires in accordance with an explicit or implicit agreement made between them. In such a case, notification of the voting rights held collectively by these persons will have to be made to the Authority by each of the parties concerned or by one of these parties on behalf of the group of persons so acting in concert;

(c) in the case of indirect qualifying shareholdings. Where the authorised company directly concerned by the proposed acquisition, in turn, directly or indirectly, controls subsidiaries that are regulated entities subject to the supervision of their overseas regulatory authorities, the proposed acquirer is required to provide notification of its proposed acquisition to each of these authorities. However, the responsibility for the final decision regarding the prudential assessment remains with the Authority, if the proposed acquisition relates to an authorised company.

(2)	If qualifying shareholdings are held indirectly through one or more third parties, all persons in the chain of holdings are subject to assessment by the Authority against the five assessment criteria, described in article 7 of this Rule, where a threshold mentioned in sub-paragraph (a) of paragraph (1) of this article is reached or exceeded. These requirements may be satisfied by assessing the person at the top of the chain and those who hold shares in the authorised company directly, unless the Authority has doubts about intermediate holders.

(3)	In some cases, such as when the proposed transaction presents some complexity (linked, for instance, to the transaction itself, to the complex group structure of the proposed acquirer, to the structure of the authorised company, etc.) the proposed acquirer should in anticipation of the formal notification contact the Authority.

(4) Formal notification is to be accompanied by:

(a) in the case of a proposed acquirer who is an individual, a completed Personal Questionnaire as set out in the Appendix to Insurance Rule 15 of 2008;

(b) in the case of a proposed acquirer who is not an individual, the Questionnaire for Qualifying Shareholders other than Individuals set out in the Annex to this Rule,

together with the information contained in the Schedule to this Rule.

(5)	In order to avoid undue delays in the assessment process laid down in article 38A of the Act, it is essential that the proposed acquirer promptly transmits all required information, together with the notification of its decision to the Authority. The assessment period will only commence when all required information is transmitted to the Authority. Without prejudice to paragraph (6) of this article, the list of information necessary to carry out the assessment set out in the Schedule to this Rule shall be considered to be an exhaustive list of all the required information.

(6)	The information required shall be proportionate and adapted to the nature of the proposed acquirer and proposed acquisition. Notwithstanding, the provisions of paragraph (5) of this article:

in some cases, the Authority may not require the proposed acquirer to provide all of the information that appears in the Schedule to this Rule (for example, if the Authority already possesses some information or can obtain it from another overseas regulatory authority);

(b)	in other cases, the Authority may consider, on the basis of its analysis of the information submitted in accordance with this article by the proposed acquirer, that some additional information is necessary for the assessment of the proposed acquisition. In that case, the Authority may request in writing that the proposed acquirer provides the additional information referred to in article 38A of the Act. Such a request shall initiate the beginning of the interruption period referred to in article 38A(4) of the Act. This additional information clarifies and completes the information submitted in accordance with the Schedule to the Rule.

(7) In the event that any of the information submitted is false or forged, rendering the conclusions of the Authority liable to be erroneous, the Authority shall refuse the approval of the proposed acquisition.

Determination of voting rights

6.	For the purpose of determining voting rights:

(a)	a UCITS management company within the meaning of Article 1a, point 2 of Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) authorised in another Member State or EEA State or in a sector other than that in which the acquisition is proposed (the management company) and its parent undertaking:

(i) need not aggregate their holdings, provided that they exercise their voting rights independently of each other; but

(ii) must aggregate their holdings if the management company:

manages holdings for its parent undertaking or an undertaking in respect of which the parent undertaking is a controller; and

has no discretion to exercise the voting rights attached to such holdings and may only exercise the voting rights attached to the holdings under direct or indirect instructions from its parent undertaking or an undertaking in respect of which the parent undertaking is a controller.

(b) an investment firm and its parent undertaking need not aggregate holdings of the parent undertaking with holdings managed by the investment firm on a client by client basis, provided that the investment firm:

has permission to provide portfolio management;

exercises its voting rights independently from the parent; and

(iii) may only exercise the voting rights attached to such shares under instructions given in writing or by electronic means or has appropriate mechanisms in place for ensuring that individual portfolio management services are conducted independently of any other services.

(c)	shares reaching or exceeding 5% of the total voting rights in an authorised company held by a market maker (as defined in article 4.1(8) of the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC) acting in the capacity of a market maker need not be aggregated provided that:

(i) it is authorised by its home Member State under Directive 2004/39/EC; and

(ii)	it neither intervenes in the management of the issuer concerned not exerts any influence on the issuer to buy such shares or back the share price;

(d)	shares held by a credit institution or investment firm in its trading book need not be aggregated provided that:

(i) the voting rights held in the trading book do not exceed 5%; and

(ii)	the credit institution or investment firm ensures that the voting rights attaching to shares held in the trading book are not exercised nor otherwise used to intervene in the management of the authorised company;

(e)	shares acquired for the sole purpose of clearing and settling within a short settlement cycle shall not be taken into account;

shares held by a custodian, in its capacity as custodian capacity shall not be taken into account provided that the custodian can only exercise the voting rights attached to such shares under instructions given in writing on by electronic means;

voting rights or shares held by a credit institution or an investment firm as a result of –

(i) providing the underwriting of financial instruments; and/or

(ii) placing financial instruments on a firm commitment basis in terms of point 6 of Section A of Annex I to Directive 2004/39/EC,

shall not be taken into account provided that those rights are, on the one hand, not exercised or otherwise used to intervene in the management of the issuer and, on the other, disposed of within one year of acquisition.

The Five assessment criteria

7.	In assessing the notification provided for in Article 38 of the Act and the information referred to in Article 38A of the Act, the Authority shall in order to ensure the sound and prudent management of the authorised company in which an acquisition is proposed, and having regard to the likely influence of the proposed acquirer on the authorised company, appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition against all of the following criteria:

(a)	the reputation of the proposed acquirer;

(b)	the reputation and experience of any person who will direct the business of the authorised company as a result of the proposed acquisition;

(c)	the financial soundness of the proposed acquirer, in particular in relation to the type of business pursued and envisaged in the authorised company in which the acquisition is proposed;

(d)	whether the authorised company will be able to comply and continue to comply with prudential requirements of the Act and of any regulations and insurance rules issued thereunder, and where applicable, the Financial Conglomerates Regulations, 2004, in particular, whether the group which it will become a part of has a structure that makes it possible to exercise effective supervision, effectively exchange information among the Authority and overseas regulatory authorities and determine the allocation of responsibilities amongst the Authority and overseas regulatory authorities;

(e)	whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing within the meaning of article 1 of Directive 2005/60/EC is being or has been committed or attempted or that the proposed acquisition could increase the risk thereof.

First assessment criterion - Reputation of the proposed acquirer

8.	(1)	Without prejudice to the requirements of Insurance Rule 2 of 2007, the assessment of the reputation of the proposed acquirer covers two elements:

integrity; and

professional competence.

Integrity - Situations subject to assessment

(2) In general, the proposed acquirer is assumed to be of ‘good repute’ (trustworthy) if there is no evidence to the contrary.

(3) Integrity requirements imply the absence of ‘negative records’. The Authority retains discretionary power to determine which other situations cast doubt in the trustworthiness of the proposed acquirer. For this purpose, the following situations, shall be taken into account:

(a) conviction of a relevant criminal offence. Special consideration shall be given to any offence under the laws governing banking, financial, securities, or insurance activity, or concerning securities markets or securities or payment instruments, including laws on money laundering, market manipulation, or insider dealing and usury; to any offences of dishonesty, fraud, or financial crime; and to other offences under legislation relating to companies, bankruptcy, insolvency, or consumer protection;

(b) any relevant criminal offences currently being tried or having been tried in the past may also be relevant, as they can cast doubt on the integrity of the proposed acquirer and may mean that the integrity requirements are not met.

(4) The integrity of the proposed acquirer is not only affected by court decisions and ongoing judicial proceedings. The following situations shall also be taken into account since they may cast doubt on the integrity of the proposed acquirer:

(a)	current or past investigations and/or enforcement actions related to the proposed acquirer, or the imposition of administrative sanctions for non-compliance with provisions governing banking, financial, securities, or insurance activity or those concerning securities markets, securities or payment instruments, or any financial services legislation; or

(b)	current or past investigations and/or enforcement actions by any other regulatory or professional bodies for non-compliance with any relevant provisions.

(5) In addition to considering judicial or administrative decisions or procedures, the assessment of the integrity of the proposed acquirer shall examine its correctness in past business dealings, the lack of which may undermine the integrity and trustworthiness of the proposed acquirer at the time of the proposed acquisition. The Authority shall pay attention to:

(a) any evidence that the proposed acquirer has not been transparent, open, and cooperative in its dealings with the Authority or any overseas regulatory authority, including any evidence that the proposed acquirer knowingly ignored the obligation of notification according to the Act or attempted to evade the prudential assessment that such person is required to undergo as a proposed qualifying shareholder;

(b)	refusal of a registration, authorisation, membership, or licence to carry out a trade, business, or profession; or revocation, withdrawal, or termination of such registration, authorisation, membership, or licence; or expulsion by a regulatory or government body;

(c)	dismissal from employment or a position of trust, fiduciary relationship, or similar situation, or having been asked to resign from employment in such a position;

(d)	disqualification from acting as a person who directs the business.

(6)	The Authority shall assess the relevance of such situations on a case-by-case basis, recognising that the characteristics of each situation may be more or less severe and that some situations may be significant when considered together, even though each of them in isolation may be not significant.

(7) The Authority may judge the relevance of criminal records differently according to the type of conviction, the level of appeal (definitive vs. non-definitive convictions), the type of punishment (imprisonment vs. less severe punishments), the length of the sentence (more vs. less than a specified period), the phase of the judicial process reached (conviction, trial, indictment), the effect of rehabilitation.

(8) In cases involving the acquisition of a new qualifying shareholding, the information requirements on which the assessment of integrity is based may vary according to the nature of the proposed acquirer (individual vs. legal person, regulated or supervised entity vs. unregulated entity). However, in all cases, the proposed acquirer himself should attest in a statement that none of the situations described in paragraphs (3) to (5) of this article occurs or has, to his best knowledge, occurred in the past. A delayed, incomplete, or undelivered declaration will call into question the approval of the acquisition. In all cases, the Authority should be able to verify the statement submitted by the proposed acquirer by asking such person to provide documents evidencing that the statement is true (e.g. police conduct certificates), and, if needed, by requesting confirmation from other authorities (e.g. judicial authorities or other regulators), domestic or otherwise.

(9) In the case of an increase in an existing qualifying shareholding, and to the extent that the integrity of the proposed acquirer has previously been assessed by the Authority, the relevant information shall be updated as appropriate.

(10)	When assessing the integrity of the proposed acquirer, the Authority may take into consideration any person linked to the proposed acquirer: i.e., any person who has, or appears to have, a relevant family or business relationship with the proposed acquirer. In this context, by way of examples (where A is the proposed acquirer and B is a connected person): a relevant business relationship could be where:

(a) A is the controlling shareholder of a company and B is a board member of that company appointed by A, or vice versa;

(b) A and B jointly control a company;

(c) A and B are board members of a company appointed by the same shareholder;

(d) A and B participate in a shareholder agreement regarding the exercise of voting rights which have a significant influence in a company.

Professional competence

(11) The professional competence of the proposed acquirer covers competence in management (‘management competence’) and in the area of the financial activities carried out by the authorised company ('technical competence').

(12) The management competence may be based on the proposed acquirer’s previous experience in acquiring and managing holdings in companies, and should demonstrate due skill, care, diligence, and compliance with the relevant standards.

(13) The technical competence may be based on the proposed acquirer’s previous experience in operating and managing financial firms as a controlling shareholder or as a person who effectively directs the business of a financial firm. In this case, the experience should also demonstrate due skill, care, diligence, and compliance with the relevant standards.

Where the Proposed Acquirer is a Legal Person

(14) If the proposed acquirer is a legal person, the integrity requirements and the assessment of professional competence must be satisfied by the legal person as well as by all of the persons who effectively direct the business. When assessing professional competence, the technical competence assessment should relate primarily to the financial activities currently performed by the proposed acquirer and/or by companies in the group to which such person belongs. In the light of the above, all persons who effectively direct the business of the proposed acquirer, which is not regulated in a Member State or an EEA State or in an approved jurisdiction, shall be required to submit to the Authority the Personal Questionnaire set out in the Appendix to Insurance Rule 15 of 2008.

Second assessment criterion – Reputation and experience of those who will direct the business

9.	(1)	The second criterion addresses circumstances when the proposed acquirer:

(a) is in a position to appoint new persons who will direct the business of the authorised company; and

(b)	has already identified these new persons who will direct the business that the proposed acquirer intends to appoint.

In contrast, and without prejudice to the fit and proper on-going requirements that apply to persons who currently direct the business of an authorised company under the Act, this criterion does not apply to a proposed acquisition that does not involve the appointment of new persons who will direct the business.

(3) If the proposed acquirer intends to appoint a person who is not fit and proper, then the Authority shall oppose the proposed acquisition.

Third assessment criterion –Financial soundness of the proposed acquirer

10.	(1) The financial soundness of the proposed acquirer can be understood as the capacity of the proposed acquirer to finance the proposed acquisition and to maintain a sound financial structure for the foreseeable future. This capacity should be reflected in the overall aim of the acquisition and the policy of the proposed acquirer regarding the acquisition, but also, in case of a change in control, in the forecast financial objectives, consistent with the strategy identified in the business plan.

(2)	The information required for the assessment of the financial soundness of the proposed acquirer will depend on the legal status of the proposed acquirer: for example, whether it is:

(a)	an entity subject to prudential supervision;

(b)	an entity which is not so subject; or

(c)	an individual.

(3)	In the case of a change in control, in particular in relation to the type of business pursued and envisaged in the authorised company in which the acquisition is proposed, the extent of the proposed acquirer’s compliance with prudential requirements should also be taken into account. While the objective of this criterion is to assess the financial soundness of the proposed acquirer, the objective of the fourth assessment criterion is to assess the prospective soundness of the authorised company in which the acquisition is proposed, which presupposes the financial soundness of the proposed acquirer (i.e. its ability to implement the business plan).

(4) The Authority shall also analyse whether the financial mechanisms put in place by the proposed acquirer to finance the acquisition, or existing financial relationships between the proposed acquirer and the authorised company concerned, could give rise to conflicts of interest that could destabilise the financial structure of the authorised company.

(5)	The Authority shall oppose the proposed acquisition if it concludes, based on its analysis of the information received, that the proposed acquirer is likely to face financial difficulties during the acquisition process or in the foreseeable future.

Fourth assessment criterion – Compliance with Prudential Requirements

11.	(1) Whereas the third criterion aims at clarifying whether the financial situation of the proposed acquirer is sound enough to support the proposed acquisition in the authorised company, this criterion requires that the proposed acquisition does not adversely affect the authorised company’s compliance with prudential requirements. In particular, effective supervision, information exchange, and the clear allocation of responsibilities should not be hindered as a result of the proposed acquisition.

(2)	In assessing this criterion, the Authority shall take into consideration not only the objective facts, such as the intended share in the authorised company, the reputation of the proposed acquirer, its financial soundness, and its group structure; but also the proposed acquirer’s declared intentions towards the authorised company concerned as expressed in its strategy (business plan). This could be backed by appropriate commitments made by the proposed acquirer to meet prudential requirements under the assessment criteria laid down in this Rule, provided that the rights of the proposed acquirer under the Act and any regulations and insurance rules issued thereunder are not affected. These commitments could concern, for example, financial support provided in case of liquidity or solvency problems, corporate governance issues, the proposed acquirer’s future intended shareholding in the authorised company, directions and goals for development, etc.

The Authority shall take into account the ability of the authorised company in which the acquisition is proposed to comply at the time of the proposed acquisition, and to continue to comply thereafter, with all prudential requirements, including capital requirements, liquidity requirements, requirements related to governance arrangements, internal control, risk management, compliance, etc.

If the authorised company in which the acquisition is being proposed is part of a group, the group structure shall make it possible for the Authority to exercise effective supervision, effectively exchange information with different overseas regulatory authorities, and determine the allocation of responsibilities among the Authority and overseas regulatory authorities.

The prudential assessment of the proposed acquirer shall also cover its capacity to support an adequate organisation of the authorised company within its new group. Both the authorised company concerned as well as the group should have clear and transparent corporate governance arrangements and adequate organisation, including an effective internal control system and independent control functions (risk management, compliance, and internal audit).

The group of which the authorised company will become a part of should be adequately capitalised, and its own funds should be distributed appropriately within the group according to the level of risk in each part and the requirements of any applicable law.

The authorised company shall also consider whether the proposed acquirer will be able to provide the authorised company concerned with the financial support it may need for the type of business pursued by and/or envisaged for it; to provide any new capital that the authorised company may require for future growth in its activities; or to implement any other appropriate solution to accommodate the authorised company’s needs for additional own funds.

(8) This criterion is mainly relevant in cases of change in control at the time of acquisition and on continuous basis for the foreseeable future. The business plan provided by the proposed acquirer to the Authority should cover at least a period of three years. On the other hand, in cases of qualifying shareholdings of less than 20%, the applicable information requirements are those set out in section B1 of Part II of the Schedule to this Rule.

(9) The business plan shall clarify the plans of the proposed acquirer concerning the future activities and organisation of the authorised company in which the acquisition is proposed. This shall include a description of its proposed group structure. The plan should also evaluate the financial consequences of the proposed acquisition and include a medium-term forecast.

(10) For the purposes of this article:

(a) the "group structure" shall cover the members of the group, including their parent entities and subsidiaries, and intra-group corporate governance procedures (decision-making mechanisms, level of independence, capital management).

(b)"to exercise effective supervision" shall mean that the Authority is not prevented from fulfilling its supervisory duties by the authorised company's close links to other persons. It also means that the Authority shall not be prevented from fulfilling its monitoring duties by the laws, regulations, or administrative provisions of another country governing a person with close links to the authorised company, or by difficulties in the enforcement of those laws, regulations, or administrative provisions.

Fifth assessment criterion – Suspicion of Money Laundering or terrorist financing

12. (1) In terms of the Prevention of Money Laundering and Funding of Terrorism Regulations, 2008 authorised companies are required to report transactions to the Financial Intelligence Analysis Unit and to the Authority whenever they suspect or have reasonable grounds to suspect that the funds involved may have been or are the proceeds of a criminal activity or are linked to terrorism. Transactions should be reported whenever the circumstances surrounding them would lead a reasonable person to be suspicious. These concepts shall be similarly used for the prudential assessment of acquirers.

(2) If the proposed acquirer is suspected or known to be involved in money laundering operations or attempts, whether or not this is linked directly or indirectly to the proposed acquisition, the ‘integrity' aspect referred to in the first assessment criterion shall be sufficient for the Authority to oppose the proposed acquisition.

(3) Similarly, if the proposed acquirer is ‘listed’ as being a terrorist, or if he is suspected or known to finance terrorism, the said ‘integrity’ aspect shall also be sufficient to allow the Authority to oppose the proposed acquisition.

(4) The Authority can also oppose the proposed acquisition even when there has been no criminal records, or where there are no reasonable grounds to doubt the integrity of the proposed acquirer, if the context of the acquisition would increase the risk of money laundering or terrorist financing. This could be the case, for example, if the proposed acquirer is established in a country or territory considered by the FATF to be ‘non-cooperative’, or, more broadly, in a country or territory that has not taken sufficient measures to comply with the FATF-GAFI 40 and 9 recommendations.

(5) In addition to information relating to the proposed acquirer collated during the assessment process, the Authority shall collect information from (for example) court decisions, public prosecutor's files, FATF-GAFI country assessments or typology reports which offer a comprehensive overview of the most recurrent money laundering or terrorism financing typologies etc.

(6) The money laundering or terrorism financing assessment complements the integrity assessment referred to in the first assessment criterion and shall be carried out regardless of the value and other characteristics of the proposed acquisition.

S C H E D U L E

List of information required for the assessment of an acquisition

The Schedule is divided into two parts. Part I lists ‘the general information requirements’, that is, all of the information which will generally be requested by the Authority concerning the nature of the proposed acquirer and the proposed acquisition, regardless of the presumed degree of involvement (percentage of capital or voting rights) that the proposed acquirer will have in the authorised company.

Part II lists the specific information required on the basis of the proportionality principle, distinguishing between two cases, when the acquisition will result in a change in control over the authorised company, and when the proposed acquirer will not gain control over the authorised company but will acquire a qualifying shareholding.

In case of a change in control, the proposed acquirer shall provide a business plan to the Authority.

Where the proposed acquirer acquires a qualifying shareholding but does not gain control over the authorised company, the information required should be proportionate to the presumed degree of involvement of the proposed acquirer in the management of the authorised company.

In all cases, the proposed acquirer should attest to the Authority that all of the information communicated by him is accurate, and is not false, misleading, or deceptive. The Authority should be able to verify the statement submitted by the proposed acquirer by asking to provide documents evidencing that the statement is true (e.g., recent extracts from the criminal register) and, if needed, by requesting confirmation from other authorities (e.g. judicial authorities or other regulators), domestic or otherwise.

The information requirements listed in this Schedule have to be provided by the persons (whether direct or indirect proposed acquirers) subject to notification requirement according to paragraph (2) of article 5 of this Rule.

PART 1- General information requirements

Identity and Information of the proposed acquirer

A:	In the case of a natural person:

Where a proposed acquirer is an individual, the Personal Questionnaire set out in the Appendix to Insurance Rule 15 of 2008 shall be submitted by the individual.

B:	In the case of a legal person:

Where a proposed acquirer is not an individual, the Questionnaire for Qualifying Shareholders other than Individuals set out in the Annex to this Rule shall be submitted. In the case of a chain of holdings, reference should be made to article 5(2) of the Rule.

C:	In the case where the proposed acquirer is a trust that already exists or would result from the acquisition:

(a) Names of all the persons who will manage the assets (trustees) under the terms of the trust document and the respective shares in the distribution of income;

(b) Names of all the persons who are ’beneficial owners’ of the trust property indicating their percentage holdings. If the Trustees are not aware of all beneficiaries of the Trust, detailed reasons as to why must be given (for example, if the selection of beneficiaries is at the discretion of the Trustees the extent of this discretion and the class of persons from whom beneficiaries may be selected should be described);

A copy of the trust deed. In situations where the trustees do not wish to disclose all the provisions of the trust deed, an extract of the relevant clauses of the trust deed signed by the trustees is to be submitted to the Authority. The extract of the trust deed is to include:

What type of trust it is;

What are the powers of the trustee;

Who are the settlors, beneficiaries, protector (if any);

Duration of the trust.

A Personal Questionnaire as set out in the Appendix to Insurance Rule 15 of 2008 is to be submitted by:

(i) a beneficiary, holding directly or indirectly, 10% or more in an authorised company, in whose favour a discretion to appoint or advance trust property has been exercised, or from a guardian where the beneficiary is a minor;

(ii) a settlor when exercising extensive control over the administration of the trust or when the trust deed provides that the trust property reverts to the settlor upon termination of the trust;

a director of the trustee, if the trustee is not regulated in an approved jurisdiction. Where a director is a legal person, the Questionnaire for Qualifying Shareholders other than Individuals set out in the Annex to this Rule shall be submitted;

a qualifying shareholder of the trustee, if the trustee is not regulated in an approved jurisdiction. Where a qualifying shareholder is a legal person, the Questionnaire for Qualifying Shareholders other than Individuals set out in the Annex to this Rule shall be submitted.

For the purposes of sub-paragraphs (iii) and (iv) of this paragraph “approved jurisdiction” has the same meaning as is assigned to it by the Trust and Trustees Act (Cap.331).

2:	Information on the acquisition

A1: Identification of the authorised company in which the acquisition is being proposed;

A2: The overall aim of the acquisition (e.g. strategic investment, portfolio investment, etc.);

A3: The number and type of shares (ordinary shares or any other kind) of the authorised company owned by the proposed acquirer before and after the acquisition; the amount of the shares in the total capital, in percentage, in Euros or in the reporting currency in an authorised company; and the proportion of voting rights, if different from the proportion of capital;

A4: Any action in concert with other parties (contribution of other parties to the financing, means of participation in the financial arrangements, future organisational arrangements, etc.);

A5: Provisions of (contemplated) shareholder's agreements with other shareholders in relation to the acquisition in the authorised company;

3.	Information on the financing of the acquisition

A1: Details on the use of private financial resources and their origin: documentary evidence or a signed statement;

A2: Information on the means and the network used to transfer funds (availability of the resources which will be used for the acquisition, financial arrangements, etc.);

A3: Details on access to capital sources and financial markets and on the funding for the purchase of the shares;

A4: Information on the use of borrowed funds contracted with the banking system (financial instruments to be issued) or any kind of financial relationship with other shareholders of the authorised company (maturities, terms, pledges and guarantees);

A5: Information on assets of the proposed acquirer or the authorised company which are to be sold in the short term (conditions of sale, price appraisal, and details on their characteristics).

PART II – Additional information requirements linked to the level of the shareholding to be acquired

A:	Change in control

If there is a ‘change in control’ in the authorised company, a business plan should be provided, containing information on the contemplated strategic development plan relating to the acquisition, prospective data, and details on principal modifications or changes in the authorised company envisaged by the proposed acquirer:

A1: A strategic development plan indicating, in general terms, the main goals of the acquisition and the main ways for reaching them, including:

(a) the rationale for the proposed acquisition;

(b) medium-term financial goals (return on equity, cost-benefit ratio, earnings per share, etc.);

(c) the main synergies to be pursued within the authorised company;

(d) the possible redirection of activities/products/targeted customers and the possible reallocation of funds/resources anticipated within the authorised company;

(e) general modalities for including and integrating the authorised company in the group structure of the proposed acquirer, including a description of the main synergies to be pursued with other companies in the group as well as a description of the policies governing intra-group relations.

A2: Estimated financial statements of the authorised company, on a both solo and consolidated basis, for a period of 3 years, including:

(a) a forecast balance sheet and a profit and loss account;

(b) a forecast of prudential ratios;

(c) information on the level of risk exposure (credit, market, operational, etc.); and

(d) a forecast of provisional intra-group operations.

A3: The impact of the proposed acquisition on the corporate governance and general organisational structure of the authorised company, including the impact on:

(a) the composition, (including information concerning the persons who will be appointed to direct the business) and duties of the board and the main committees created by the decision-taking body (the management committee, risk committee, audit committee, and any other committees);

(b) administrative and accounting procedures and internal controls: principal changes in procedures and systems related to accounting, audit, internal control, and compliance (including anti-money laundering) including the appointment of key functions (auditor/internal controller and compliance officer);

(c) the overall IT systems architecture: this includes, for example, any changes concerning the subcontracting policy, the data flowchart, the in-house and external software used and the essential data and systems security procedures and tools (e.g. back-up, continuity plan, audit trails, etc); and

(d) the policies governing subcontracting and outsourcing (areas concerned, selection of service providers, etc.) and the respective rights and obligations of the principal parties as set out in contracts (e.g., audit arrangements, quality of service expected from the provider, etc.).

B:	Qualifying shareholding without a change in control

If there is no change in control, the proposed acquirer should provide a document on strategy to the Authority. Applying the proportionality principle, the level of information provided should depend on the degree of influence on the management and activities of the authorised company inherent in the holding to be acquired (less than 20% vs. between 20% and 50%).

Depending on the global structure of the shareholding of the authorised company, the more detailed information foreseen under section B2 below may be requested by the Authority even in cases where the shareholding to be acquired remains below the threshold of 20%, if the ‘influence’ exercised by that shareholding is considered to be equivalent to the influence exercised by shareholdings considered under section B2.

B1: Qualifying holding of less than 20 %:

The ‘document on strategy’ should contain the following information:

1.	The policy of the acquirer regarding the proposed acquisition. In addition to the information required in Part I, Section 2- (Information on the Acquisition) of this list, the proposed acquirer shall inform the Authority about:

(a) the period for which the proposed acquirer intends to hold his shareholding after the acquisition;

(b) any intention of the proposed acquirer to increase, reduce, or maintain the level of his shareholding in the foreseeable future;

2.	An indication of the intentions of the proposed acquirer towards the authorised company, and in particular whether or not he intends to act as an active minority shareholder, and the possible rationale for such action;

3.	Information on the ability (financial position) and willingness of the proposed acquirer to support the authorised company with additional own funds if needed for the development of its activities or in case of financial difficulties.

B2: Qualifying holding between 20 and 50 %:

Information of the same nature as mentioned under section B1 above shall be provided, but in more detail, including:

1.	Details on the influence that the proposed acquirer intends to exercise on the financial position (including dividend policy), the strategic development, and the allocation of resources of the authorised company.

2.	A description of the proposed acquirer’s intentions and expectations towards the authorised company in the medium-term, covering all the elements mentioned above under section A1 of Part II of the Schedule.

A N N E X

QUESTIONNAIRE FOR QUALIFYING SHAREHOLDERS OTHER THAN INDIVIDUALS

“Qualifying Shareholding” is defined in Article 2 of the Act. Qualifying shareholders other than individuals should provide the information as set out hereunder. For the purposes of this questionnaire, “qualifying shareholder” shall include a prospective qualifying shareholder.

Name(s) of licence holder(s) or entity in connection with which this questionnaire is being completed.

Name(s) of the qualifying shareholder including the registered name, and any business name(s) used for the purposes of or in connection with any business carried on by it and indicate the legal form of the qualifying shareholder (body corporate, partnership, etc.) and the percentage holding (capital/voting rights) to qualify as such.

Any former name(s) under which the qualifying shareholder has been registered or has traded.

Country and date of incorporation or formation of the qualifying shareholder supported by official documents evidencing such incorporation or formation. Please provide certified true copies of the Memorandum and Articles of Association or any other constitutional documents of the qualifying shareholder.

(a)	Registered address of the Head Office of the qualifying shareholder:

and

(b)	address of the principal place of business if different from registered	address.

Up to date description of the qualifying shareholder's business activities.

Names of all persons who effectively direct the business of the qualifying shareholder. Please attach the Personal Questionnaire as set out in the Appendix to Insurance Rule 15 of 2008 in the case of directors of qualifying shareholders which are not regulated in a Member State or an EEA State or in an approved jurisdiction.

Names of all ‘beneficial owners’ of the qualifying shareholder, indicating their percentage holdings.

With respect to the qualifying shareholder and any company under its control, the following information is required:

relevant criminal records, criminal investigations or proceedings, relevant civil and administrative cases, or disciplinary actions (including disqualification as company director or bankruptcy, insolvency or similar procedures);

investigations, enforcement proceedings, or sanctions by a supervisory authority which the qualifying shareholder has been the subject of;

refusal of registration, authorisation, membership, or licence to carry out a trade, business or profession; or the withdrawal, revocation or termination of registration, authorisation, membership or license; or expulsion by a regulatory or government body.

Information as to whether an assessment of reputation, as or as a qualifying shareholder or person who directs the business of a regulated entity, has already been conducted by an overseas regulatory authority (the identity of that authority and evidence of the outcome of this assessment);

Information as to whether a previous assessment by another authority or overseas regulatory authority from another sector has already been conducted (the identity of that authority and evidence of the outcome of this assessment);

Description of the financial (financial interests include for example credit operations, guarantees, pledges …) and non-financial (e.g. same shareholders, same managers, etc.) interests or relationships of the qualifying shareholder with:

any other current shareholders of the licence holder or entity;

any person entitled to exercise voting rights of the licence holder or entity (see the situations mentioned in Article 10 of Directive 2004/109/EC on the harmonisation of transparency requirements) – for example shares held by the qualifying shareholder as trustee or nominee, shares in the licence holder or entity not registered in the name of the qualifying shareholder but in which it has a beneficial interest and shares charged or pledged in the name of the qualifying shareholder;

any member of the board or similar body, or of the senior management of the licence holder or entity;

the licence holder or entity itself and its group;

any other interests or activities of the qualifying shareholder that may be in conflict with the licence holder or entity and possible solutions to those conflicts of interest.

The shareholding structure of the qualifying shareholder, with the identity of all shareholders with significant influence and their respective percentages of capital and voting rights and information on shareholders agreement.

If the qualifying shareholder is part of a group (as a subsidiary or as the parent company), a detailed organisational chart of the entire corporate structure and information on the percentages (share capital and voting rights) of relevant shareholders and on the activities currently performed by the group.

Identification of supervised institution(s) within the group, and the names of their home state regulators.

Statutory financial statements, regardless of the size of the firm, for the last three financial years, approved by an auditing firm, including:

Balance Sheet,

Profit and Loss accounts/Income Statements,

Annual Reports and all relevant financial annexes.

Information about the credit rating of the qualifying shareholder and the overall rating of its group, if applicable.

DECLARATION

We certify that the information given in the answers to the questions above is complete and accurate to the best of our knowledge, information and belief and that there are no other facts relevant to this application of which the Authority should be made aware.

We undertake that, in the event that the entity filling in this questionnaire is granted approval as qualifying shareholder, we will notify the Authority of any material changes to or affecting the completeness or accuracy of the answers to the above questions immediately these come to our attention.

By signing the declaration below, we authorise the Authority to contact any or all of the above named or any other person and to make such enquiries and seek further information as considered by the Authority to be relevant and as it thinks appropriate in the course of verifying the information given in this questionnaire. This authorisation is valid at the date of signature and at any time in the future. This authorisation is valid at the date of signature and at any time in the future. We also understand that the results of any verification carried out by the Authority, in connection with this Questionnaire may be disclosed to the Licence Holder or the promoters of the Entity, in connection with which this Questionnaire is being submitted.

We understand that the information provided in this Questionnaire will be used by the Authority to discharge its regulatory and statutory functions under the laws under which it has been appointed Competent Authority and other relevant legislation, and will not be disclosed for any other purpose.

Knowing or recklessly giving to the Authority information which is false or misleading may be a criminal offence.

(To be signed by applicant institutional qualifying shareholder)

Name	____________________________	Position held	___________________________

Signed	____________________________	Date	_________________________________

Name	____________________________	Position Held	___________________________

Signed	____________________________	Date	____________________________________