Corporate weekly highlights—21 March 2019

This week’s edition of Corporate highlights includes the latest updates on Brexit, the adoption by the European Commission of two delegated regulations relating to the Prospectus Regulation, a High Court case involving a warranty claim brought on a share purchase relating to inaccurate financial projections and a Court of Appeal case on formation of contracts and the construction of the Contracts (Rights of Third Parties) Act 1999.

In this issue:

Brexit

CMA: Guidance on CMA functions in a no-deal Brexit scenario published

On 18 March 2019, the Competition and Markets Authority (CMA) published guidance on the functions of the CMA after a no-deal exit from the EU. The guidance explains how a no-deal Brexit would affect the powers and processes of the CMA for merger control, antitrust and cartel enforcement and consumer protection law enforcement after exit day (as defined in the European Union (Withdrawal) Act 2018(EU(W)A 2018)). The guidance is intended to come into effect on exit day, in the event that the UK leaves the EU in a no deal scenario, and the Competition (Amendment etc) (EU Exit) Regulations 2019, SI 2019/93 has come into effect. If the UK does not leave the EU in a no-deal scenario, the guidance will be withdrawn.

For further information, see: LNB News 18/03/2019 96.

FCA publishes statements regarding MiFID II pre-and post-trade transparency regime

The Financial Conduct Authority (FCA) has published statements of policy and a  supervisory statement setting out how it intends to operate the pre- and post-trade transparency regime for the secondary trading of financial instruments if the UK leaves the EU in a no deal scenario.

For further information, see: LNB News 14/03/2019 159.

Financial Regulators’ Powers (Technical Standards etc) and Markets in Financial Instruments (Amendments) (EU Exit) Regulations 2019

SI 2019/576: This enactment was made on 14 March 2019 in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. This enactment amends UK subordinate legislation by adding the binding technical standards (BTS) to the list of BTS which the regulators may amend to correct deficiencies in order to ensure that the recently adopted BTS continue to operate effectively after the UK leaves the EU, and by making some minor amendments in order to ensure that it effectively addresses deficiencies in retained EU law relating to markets in financial instruments, so that it continues to operate effectively after the UK leaves the EU. The regulations were made on 14 March 2019 and came into force on 15 March 2019.

For further information, see: LNB News 30/01/2019 58.

Short Selling (Amendment) (EU Exit) Regulations 2018

SI 2018/1321: This enactment is made in exercise of legislative powers under  EU(W)A 2018 in preparation for Brexit. This enactment amends UK primary legislation and EU retained legislation in order to address deficiencies in retained EU law in relation to short selling, the selling of securities which are either borrowed or not owned by the seller, arising from the withdrawal of the UK from the EU. This ensures that the legislation continues to operate effectively at the point at which the UK leaves the EU. It comes into force on exit day. (Updated from draft on 7 December 2018. Updated to include correction slip on 18 March 2019.)

For further information, see: LNB News 11/10/2018 102.

Companies Act 2006 (Extension of Takeover Panel Provisions) (Isle of Man) Order 2019

SI 2019/567: This order was made on 13 March 2019 to replace the Companies Act 2006 (Extension of Takeover Panel Provisions) (Isle of Man) Order 2008, SI 2008/3122 partly to reflect changes in responsibility for company registration on the Isle of Man and partly to deal with the UK’s withdrawal from the EU. The order will come into force on exit day.

For further information, see: LNB News 14/03/2019 109.

Financial Services (Gibraltar) (Amendment) (EU Exit) Regulations 2019

SI 2019/589: This enactment is made in exercise of legislative powers under  EU(W)A 2018 in preparation for Brexit. This enactment amends UK primary and subordinate legislation in relation to financial services passporting rights between the UK and Gibraltar in order to address deficiencies arising from the withdrawal of the UK from the EU. This instrument ensures authorised financial services firms in Gibraltar will continue to be able to provide services and establish branches in the UK market after exit day on current terms. It comes into force partly on 16 March 2019 and fully on exit day. (Updated from draft on 18 March 2019.)

For further information, see: LNB News 23/01/2019 43.

FCA Primary Market Bulletin 22 summarises changes to rules and guidance in a no deal Brexit

The FCA has published Primary Market Bulletin 22 which focuses on Brexit and summarises the key changes to the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules that will apply if the UK leaves the EU in a no deal scenario. The key changes for issuers in a no deal scenario—confirmed in the FCA’s  Brexit Policy Statement PS19/5: Feedback on CP18/28, CP18/29, CP18/34, CP18/36 and CP19/2—are set out within the document.

For further information, see: LNB News 20/03/2019 84.

Equity capital markets

European Commission reports on progress towards capital markets union ahead of Council meeting

The European Commission (Commission) has published a report on progress achieved on the capital markets union (CMU), including with regard to sustainable finance, ahead of the upcoming meeting of the EU Council on 21–22 March 2018. The Commission has called on EU leaders to keep up the political engagement necessary to lay down the foundation of the CMU.

Commenting on the report, the Association for Financial Markets in Europe (AFME) said it highlights the ‘significant steps’ that have been taken towards achieving CMU, but it noted that ‘much further work’ remains to be done. Although time is short within the current legislative cycle, AFME believes further progress can still be made over the coming weeks in key areas such as the European Supervisory Authorities review.

For further information, see: LNB News 15/03/2019 114.

Commission adopts two delegated regulations on certain provisions in the Prospectus Regulation

The Commission has adopted two Delegated Regulations on certain provisions in the Prospectus Regulation. One Delegated Regulation (C(2019) 2020 final) concerns the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The other Delegated Regulation (C(2019) 2022 final) relates to regulatory technical standards concerning key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus, and the notification portal.

For further information, see: LNB News 14/03/2019 164.

Private M&A (intra-group reorganisation)

Triumph Controls—UK Ltd v Primus International Holding Company

In this case, the High Court found that the defendant was in breach of warranty in a share purchase agreement (SPA) in that it had failed to prepare certain financial projections with care. Accordingly, the High Court awarded the claimant damages based on the difference between the purchase price agreed on the assumption that the financial projections were correct and what the price would have been had the financial projections been adjusted to take account of certain factors, subject to a contractual cap of $15m. The High Court also considered whether the claimant had provided adequate notice of its claims in accordance with the procedure set out in the SPA.

Triumph Controls—UK Ltd v Primus International Holding Company [2019] EWHC 565 (TCC).

Additional Corporate updates this week

Formation of contracts, third parties rights and causation of loss (Chudley v Clydesdale Bank plc)

Commercial analysis: This Court of Appeal case deals with a Letter of Instruction (LOI) made between a property developer and Yorkshire Bank (Bank). The LOI provided that a specific account was to be opened into which the claimant and others (the investors) would pay investment monies for the development of a resort by the property developer. The account was never opened and the property developer fraudulently misapplied the monies. The investors commenced numerous proceedings against the Bank. The Court of Appeal’s decision is concerned with the contractual aspect of the case. The decision is important as it deals with the principles applicable in ascertaining the formation of an unconditional and binding contract as well as a construction of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999) and causation of loss. It is one of the few cases on C(RTP)A 1999. Written by Lynne Counsell, barrister at 9 Stone Buildings.

For further information, see News Analysis: Formation of contracts, third parties rights and causation of loss (Chudley v Clydesdale Bank plc).

Chudley v Clydesdale Bank plc (trading as Yorkshire Bank) [2019] EWCA Civ 344.

Additional news—daily and weekly news alerts

This document contains the highlights from the past week’s news. To receive all our news stories, whether on a daily or a weekly basis, amend your personal settings within your ‘News’ tab on the homepage by clicking on either ‘Email’ or ‘RSS’ (depending on how you prefer to receive them) on the right hand side of the blue banner.

Dates for your diary

DateDevelopment
21 March 2019Deadline for comments on the Commission consultation on remuneration reports
On 4 March 2019, the Commission published a consultation document seeking input from Member States and stakeholders on the draft guidelines on the remuneration report under the Directive 2017/828, revised Shareholders Rights Directive (SRD II).
LNB News 04/03/2019 4
27 March 2019Deadline for comments on CP19/7: Consultation on proposals to improve shareholder engagement
On 30 January 2019, the FCA issued CP19/7 which proposed regulatory measures to implement parts of the revised Directive 2017/828, SRD II. SRD II aims to promote effective stewardship and long-term investment decision-making primarily through better transparency of engagement policies and investment strategies across the institutional investment community. The proposed measures implement the provisions of SRD II for FCA-regulated life insurers and asset managers, and for issuers of shares in respect of related party transactions.
LNB News 30/01/2019 105
28 March 2019Deadline for comments on CP 19/6: Changes to align the FCA Handbook with the EU Prospectus Regulation
On 29 January 2019, the FCA published CP 19/6. The majority of the changes proposed involve reproducing text from the Prospectus Regulation directly into the new sourcebook. The FCA assumes that an implementation period will be agreed on the UK leaving the EU and that EU law will continue to apply in the UK until the end of the implementation period.
LNB News 29/01/2019 71
29 March 2019At 11 pm on 29 March 2019 UK time (which will be 00.00am CET on 30 March 2019), the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) shall cease to apply to the UK, along with all other EU primary and secondary law and the UK's withdrawal from the EU (Brexit) will be achieved.
On 29 March 2017, the UK Prime Minister gave formal notification of the UK's intention to withdraw from the EU, commencing the withdrawal process under Article 50 TEU. Article 50 TEU prescribes a two-year period for the UK and the EU to negotiate the terms of Brexit, which may be extended by agreement.
Brexit: UK Article 50 TEU notification starts the clock—what happens now?
29 March 2019Deadline for comments on the FRC’s proposed revision to the UK Stewardship Code
In January 2019, the FRC announced intention to overhaul the UK Stewardship Code (the Code). On 30 January 2019, the FRC issued a consultation paper setting out its proposed new Code along with a summary of the changes from the existing Code.
LNB News 30/01/2019 105
1 April 2019The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, SI 2018/1155, will come into force and apply to financial years starting on or after this date.
The Regulations make changes to reporting requirements for quoted companies. They also introduce new reporting requirements for large unquoted companies and large limited liability partnerships to annually report on emissions, energy consumption and energy efficiency action in the UK.
LNB News 19/07/2018 19
1 April 2019The CRC Energy Efficiency Scheme ends (although ongoing compliance obligations in respect of the phase just ended and the phase prior to that survive after this date) and corresponding increases the climate change levy rates are introduced from this date.
The CRC Energy Efficiency Scheme (Revocation and Savings) Order 2018, SI 2018/841, came into force on 1 October 2018. It makes a number of changes to the CRC Energy Efficiency Scheme Orders of both 2010 and 2013. It brings an end to the CRC Energy Efficiency Scheme with effect from the end of the current phase (which ends on 31 March 2019), while ensuring that ongoing compliance obligations in respect of that phase (and the prior phase) survive after that date. The CRC Energy Efficiency Scheme is the mandatory UK-wide emissions trading scheme under which large public and private-sector organisations surrender a number of allowances at the end of each scheme year equal to their total CO2 emissions. The government announced at the 2016 Budget that it would abolish the CRC Energy Efficiency Scheme in 2019.
LNB News 12/10/2017 83LNB News 19/07/2018 18LNB News 19/07/2018 114

Trackers

To track key legislative and regulatory developments, see our Trackers:

Brexit legislation tracker

Brexit timeline

Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) timeline

Market Abuse Regulation timeline

Prospectus Regulation tracker

Transparency Directive tracker

Listing Rules tracker

Disclosure Guidance and Transparency Rules Sourcebook tracker

Prospectus Rules tracker

Latest Q&As

A new Q&A was added this week: Can a manager who is not a director sign a simple contract on behalf of a company? If so, what is required to show authority to sign?

Useful information

To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.

To read about the latest corporate announcements, see our Market Tracker weekly round-up—15 March 2018.

To read about the latest issues and developments which we are following in Market Tracker, see our latest blog post  Market Tracker weekly bulletin—21 March 2019.

Relevant Articles
Area of Interest