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Corporate Governance Reporting Requirement Now Written Into Law

22.05.2009

Submission of an issuer’s corporate governance report is now required by law. Listed issuers of shares and parent companies consolidating their accounts are now required to provide information on compliance with corporate governance recommendations in their annual reports. This requirement applies to reporting periods starting from 1 July 2009 or later. There will be no major changes for companies that have submitted reports on compliance with the Corporate Governance Recommendations adopted by the Tallinn Stock Exchange.

 On 6 April 2009 an amendment to the Accounting Act took effect, making it obligatory for companies whose shares giving the right to vote (in the case of companies registered in Estonia this primarily applies to shares of a public limited company) are traded on a regulated securities market in the European Economic Area to provide data on the corporate governance rules the company complies with and to submit a corporate governance report based on these rules. The corporate governance report must be submitted as part of the annual report. It should be noted that this requirement does not apply to companies whose bonds or other securities not giving the right to vote have been admitted to trading.

For the issuers of shares listed on the Tallinn Stock Exchange who, due to the Tallinn Stock Exchange Rules, are submitting the corporate governance report as part of the 2008 annual report already for the third time, this requirement does not result in any significant change. The only difference is that now the requirement to submit a corporate governance report is a statutory requirement and there are some additional items which the Corporate Governance Recommendations introduced by the Financial Supervision Authority as advisory guidelines do not deal with, e.g. there is a requirement to provide a description of the main characteristics of internal audit and risk management systems in relation to the process of preparing annual accounts. 

By adopting the amendments, the requirement to submit a corporate governance report is extended to those companies who are not listed on the Tallinn Stock Exchange but whose shares have been admitted to trading on another regulated securities market. In addition, the obligation to submit a corporate governance report is imposed on consolidation groups if a member of the group is an issuer whose shares have been admitted to trading on a regulated securities market.

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