As a no-deal Brexit (i.e. the UK leaving the European Union without a withdrawal agreement in place) remains a possible outcome, below is a summary of the legislative and regulatory changes that will apply in the event of a no-deal Brexit that will be of interest to listed companies and corporate law practitioners.
Further detail can be found in the corporate law, capital markets and contract and other obligations sections of our Brexit legal guide, which have been updated to reflect the latest developments and which cover the anticipated impact of Brexit depending on whether there is a “no-deal” Brexit or a negotiated withdrawal deal is reached.
The Government has published legislation to deal with a range of corporate law matters in a no-deal Brexit scenario including:
- Companies Act 2006 – Various statutory instruments will amend the Companies Act including:
- the Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019, which will make a range of miscellaneous amendments in relation to EEA companies with a UK establishment or branch and revoke the Companies (Cross-Border Mergers) Regulations 2007;
- the Accounts and Reports (Amendment) (EU Exit) Regulations 2018, which will amend provisions on the preparation and filling of accounts to remove the preferred treatment for EEA companies and limit the scope of certain exemptions to UK companies with UK parents; and
- the European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 which will create a new corporate form (UK Societas).
- Audit – The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018 will make amendments so that the framework for the regulatory oversight and professional recognition of statutory auditors and third country auditors in the UK should continue to work effectively.
- Market abuse and inside information – The Market Abuse (Amendment) (EU Exit) Regulations 2018 will address the deficiencies in the market abuse regime arising from Brexit. The regulations will amend retained EU Law relating to market abuse, including MAR, supplementary EU legislation made under MAR and the UK legislation which complements MAR, to ensure that the relevant legislation operates effectively at the point at which the UK leave the EU.
- Listing regime – The Official Listing of Securities, Prospectus and Transparency (Amendment) (EU Exit) Regulations 2019 will underpin the changes to the Listing Rules, Disclosure Guidance and Transparency (see below on the FCA Handbook changes). A second set of regulations is expected to be published in draft shortly to reflect implementation of the directly-effective EU Prospectus Regulation.
- FCA/PRA – The Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 will provide that binding technical standards and rules made by the UK regulators (including the Financial Conduct Authority and Prudential Regulation Authority) will continue to operate effectively after Brexit.
- Contract – The Law Applicable to Contractual Obligations and Non-Contractual Obligations (Amendment etc.) (EU Exit) Regulations 2018 are intended to ensure that EU rules that determine the law applicable to contractual and non-contractual obligations continue to operate effectively in domestic law after Brexit.
- Enforcement of judgments – The Government has deposited an instrument acceding to the Hague Convention so that, with effect from 1 November 2019, the Hague Convention will govern jurisdiction and enforcements of judgments as between the UK and other signatories to it. The Government has also published regulations which set out how the Hague Convention will apply to contracts entered into both prior to and following Brexit.
- Competition – The Competition and Markets Authority will be granted power under the Competition (Amendment etc.) (EU Exit) Regulations 2019 to review mergers that affect the UK market (even where the transaction is also being reviewed by the European Commission), where the UK jurisdictional thresholds are met. Transitional provisions for ongoing proceedings and investigations are also covered.
No-deal technical notes
The Government has also published a number of technical notes which provide guidance, in the context of a ‘no-deal’ Brexit, on actions for businesses and on the UK Government’s plans to afford assistance to affected businesses and individuals. Topics covered include structuring a business, accounting, audit and enforcement of judgments. There is also a tool for businesses, Find out how to prepare your business for Brexit, which takes companies to relevant guidance via a series of questions.
FCA Handbook changes
The FCA has confirmed the final rule changes to its Handbook that will apply in the event of no-deal. The impact of the changes for UK incorporated companies which have securities admitted only to a UK regulated market will be minimal. Issuers which have shares admitted to a regulated market in the UK and in another EEA state will have to adjust their systems and controls and, for example, make additional notifications to regulators for certain matters, including in relation to PDMR transactions.
Takeover Code changes
The Takeover Panel has set out, in its response statement RS 2018/2, the changes required to be made to the Takeover Code as a result of Brexit. The changes will take effect when the UK ceases to be an EU Member State or, if a withdrawal agreement is reached, at the end of any transition period.
The changes will not have a significant impact on transactions. In particular, the Panel is not changing its treatment of conditions relating to the EU Merger Regulation to align it with its treatment of other merger control regimes around the world. The key changes are:
- Removal of the shared jurisdiction regime – Following Brexit, the shared jurisdiction regime will cease to apply to UK incorporated companies. As a result, the Takeover Code will apply in full to an offer for a UK incorporated company that has its securities listed on an EEA market, provided the company has its place of central management and control in the UK; and the Panel will no longer have any jurisdiction over offers for EEA-incorporated companies which have their securities admitted to trading on a UK market.
- Sending documents to shareholders in the EEA – The Note on Rule 30.4 currently says that the Panel will not normally grant a dispensation from the requirement to send offer documentation to shareholders or employee representatives in the EEA. This Note will be amended to refer only to the UK, Channel Islands or Isle of Man. However, the Panel says that it is unlikely to grant a dispensation for EEA shareholders in the short term post-Brexit, assuming there is no immediate change in the current convergence of laws.