Affiliation of companies to a securities central

What is Euroclear Sweden AB? 

Euroclear Sweden AB (“Euroclear”) is the only securities central in Sweden. They have been active since the beginning of the 1970’s to help companies issue their securities electronically and became a part of the international Euroclear group during the late 2000. 

It is within the Euroclear system that all settlement of securities due to trading in the Swedish stock markets take place. This means that traded instruments (shares, for example) is delivered to their new owners in exchange for the payment that has been made for the purchase. 

All listed companies in Sweden are affiliated to Euroclear, and approximately 50 banks and financial institutes have access to Euroclears system to be able to execute corporate actions in the Swedish market. 

An affiliation of the company’s shares to Euroclear simply means that the shares are electronically registered, hence that they will be visible in a securities depository account in the bank. When a company is affiliated, they go from being a so called coupon company to becoming a record company, and the share register will from this point be held and administrated by Euroclear instead of the company itself. Affiliating a company to Euroclear is a requirement before becoming a listed company, and in order to affiliate a company to Euroclear it’s required to do so through an issuing agent. Nordic Issuing is able to support from the beginning and throughout the whole affiliation process. 

How does the affiliation to Euroclear take place and what does it mean to your company? 

Most often it is you as a company who sees a benefit in being an Euroclear affiliated company with electronic shares. For example, share holders are unable to see their holdings in their bank before the company is affiliated to Euroclear, which could be one reason to affiliate the company. Another reason could be that the company is planning to become listed in e near future – electronical shares are then a requirement due to make it possible to trade the shares in a stock market. 

An affiliation to Euroclear normally takes 4-5 weeks, since the information that Euroclear needs to process the application is quite extensive. Amongst other, Euroclear will need an up to date share register, an application form and information of where the shares are to be delivered when affiliated. As an issuing agent, Nordic Issuing will act as the in between party to inform you of what documents are required from Euroclear to be able to process the application. We will make sure that they are correctly filled out and that they are Euroclear at hand at expected time. 

When your company is affiliated to Euroclear you will be able to, through your issuing agent, execute different corporate actions in connection to capitalizations or other transactions. Examples of corporate actions are affiliating different share types or other securities, issue warrants or perform dividends. Additionally, Euroclear will be the one holding your share register from the day that you will become affiliated. 

What requirements are there for your company to become affiliated to Euroclear? 

In order to become affiliated to Euroclear, some requirements need to be met. One of them is that 90% of the shares in the company needs to be able to deliver to the existing shareholders. This is applicated both to the number of shares, number of shareholders and number of votes in the company. All three categories needs to amount to 90% in order for the issuing agent to be able to complete the affiliation of shares in the company. 

Another requirement needed to be able to be electronically affiliated is that no physical share lettes can exist in the company. In Sweden, physical share letters were used until 1990 as a proof of a person’s or company’s holdings in a company. These were dematerialized and replaced with electronically held shares. 

Affiliation to VP Securities A/S in Denmark 

What is VP Securities A/S? 

A company can choose to affiliate its shares to VP Securities A/S in Denmark, if the company for example wants its shares to be listed and that the trading shall be carried out in Danish currency instead of Swedish currency. It is common that Danish companies chooses to get listed in Sweden but wants to keep the Danish currency for the trading. To do so, an affiliation to VP Securities A/S must be conducted instead of an affiliation to Euroclear Sweden AB, since Euroclear doesn’t provide settlement in Danish currency in their system. An affiliation to VP Securiteis A/S means the same as an affiliation to Euroclear – the shares in the company will be digitalized and the share register will no longer be held by the company itself. 

Cross border transactions 

Danish companies which wishes to list their shares in Sweden always has to affiliate their shares to VP Securities A/S. If the company wishes that the trading shall be carried out in Swedish currency, the company also needs to be affiliated to Euroclear Sweden AB. This opens up the possibility for so called cross border transactions, where the financial instruments affiliated to VP Securities are “mirrored” to the Swedish system held by Euroclear. When this is completed, the trading could be settled in Swedish currency.