Decision on violation charge EMAS Offshore Limited

Arntzen de Besche AS
Postboks 2734 Solli
0204 OSLO

Enquiries to: Ola Aamodt Enger
Dir line: +47 22 93 99 41
Our reference: 17/2261
Date: 20.03.2017

Reference is made to Finanstilsynet's (the Financial Supervisory Authority of Norway) preliminary decision and notice of violation penalty of 2 February 2017 and the response of 8 February 2017 from EMAS Offshore Limited (EOL, the company).

Pursuant to the Norwegian Securities Trading Act (STA) section 17-4 (2) Finanstilsynet may impose a violation charge if a listed company violates the statutory deadline for publishing its annual report, and this is due to negligence or willful misconduct.

As stated in the notice, the deadline for publication of the annual report is according to STA section 5-5 subsection (1) at the latest four months after the end of each financial year, i.e. 31 December 2016 for EOL which applies a deviating financial year (1 September – 31 August). Publication must be in conformity with STA section 5-12 subsection (1). According to the stock exchange announcement 10 January 2017, the company was not in position to release its annual report for 2016 within the deadline and expected to publish the report on 7 February 2017. The company announced an additional delay in the stock exchange announcement on 7 February 2017. The statement included an expectation to publish the report on 9 May 2017 as certain matters relating to the finalization of the annual report is not resolved.

Finanstilsynet ordered the Oslo Stock Exchange (OSE) to suspend trading in the shares of the company on OSE with effect from close of trading 3 March 2017. The suspension will be lifted upon publication of the audited annual report for 2016. The company has requested Singapore Exchange (SGX) for a voluntary suspension of its shares on SGX. Finanstilsynet finds that the company has violated STA section 5-5 subsection (1). The question is whether EOL's delayed reporting is due to negligence or willful conduct.

The reasons for the delay is according to EOL mainly:"- As disclosed by the Company in Note 4 of the Q1 FY2017 results, both Ezra and EOL will have going concern issues if discussions on going restructuring efforts are not favourably completed in a timely manner. Ezra is a guarantor to EOL's various loans and sale and leaseback transactions, and as such, restructuring efforts at Ezra level is relevant as this may have a negative impact on EOL, including a delay in the conclusion of its fund –raising activities; - Taking into consideration the discussion above, the outcome of which is uncertain and beyond the control of EOL, it is therefore the view of EOL that to have the audit report signed off without sufficiently more clarity will not be prudent and would entail significant risks". Furthermore EOL states that "As the delay is caused by circumstances beyond the Company's control and furthermore that the Company is not able to release the AR2016 report without risking to prejudice its legitimate interests, the Company asks Finanstilsynet to re-consider the need to impose a violation charge given the current circumstances for the company."

The question is whether the company has departed from the standard of conduct expected as reasonable. Listed companies are expected to exercise a high level of due care in fulfilling their obligations to the market. Timely filing of periodic financial information is essential for a well-functioning market. Finanstilsynet is of the opinion that EOL should have published its audited annual report for 2016 within the deadline and disclosed the uncertainties and risks facing the company. Finanstilsynet finds that the company acted negligently.

STA section 17-4 (4) specifies the criteria to be applied when fixing the amount of the violation charge. Additional guidance is set out in "Guidelines- violation charge related to periodic financial reporting", published by Finanstilsynet on 10 June 2009.

EOL asks that Finanstilsynet re-considers the level of the fine as the market value of EOL prior to release of the announcement on 7 February 2017 was NOK 267.4 million, against approx. 395 million on 29 December 2015 and the market value has declined further since the announcement. EOL refers also to the fact that the market has received updated financial information about the company in the preliminary annual accounts and the Q1 2017 report.

Finanstilsynet uses the annual listing fee from OSE which is linked to the market value of the company as of 1 January 2016 as a starting point for measuring the violation charge. Finanstilsynet emphasizes the long delay. According to stock exchange announcement 7 February 2017, EOL is planning to publish the annual report 9 May 2017, i.e. over 5 months after the deadline. Even though the company has updated the market with interim financial reports, Finanstilsynet emphasizes that the annual report contains the audited financial statements, the management report and the statements made by the persons responsible within the issuer. Currently, the market does not have this information.

Based on the above and with legal basis in STA section 17-4 (2) and section 5-5 (1), Finanstilsynet has adopted the following individual decision:

EMAS Offshore Limited has to pay a violation penalty of NOK 164.600-
one hundred and sixty four thousand six hundred kroner – which falls to the Treasury.

Pursuant to the Norwegian Public Administration Act section 28, Finanstilsynet's decision to impose a violation penalty may be appealed to the Ministry of Finance. The time limit for appeal is three weeks from the date of receipt of this letter.

A separate invoice will be sent to EMAS Offshore Limited.

On behalf of Finanstilsynet

Anne Merethe Bellamy
Director

Christian Falkenberg Kjøde
Head of section