Corporate weekly highlights—23 May 2019

This week’s edition of Corporate highlights includes the latest updates on Brexit, publication of a report on the Draft Registration of Overseas Entities Bill that calls for loopholes in the draft legislation to be addressed and a FCA decision that found three asset management firms breached competition law by sharing sensitive information regarding prices for IPOs. It also focuses on two recent cases, one relating to the doctrine of economic duress and one relating to a breach of warranty claim that was capped by provisions in a SPA.

In this issue:

Brexit

Competitiveness of Enterprises and Small and Medium-sized Enterprises (Revocation) (EU Exit) Regulations 2019

SI 2019/934: These regulations are made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. These regulations revoke EU Regulation (EU) 1287/2013establishing a programme for the competitiveness of enterprises and small and medium-sized enterprises and repealing EU Decision 1639/2006/EC in order to address failures of retained EU legislation to operate effectively, and other deficiencies arising from the withdrawal of the UK from the EU. It comes into force on the later of exit day or on 7 June 2019.

For further information, see: LNB News 17/05/2019 68.

Corporate crime for corporate lawyers

Joint committee calls for loopholes in draft property money laundering Bill to be fixed

The Joint Committee examining the draft Registration of Overseas Entities Bill has called for loopholes in the draft legislation to be addressed.

In a report published on 20 May 2019, the Joint Committee says the Bill is to be welcomed to aid criminal investigations that are currently impeded due to difficulties in accessing information on individuals who own or control overseas entities used in money laundering. The draft Registration of Overseas Entities Bill aims to tackle these difficulties with increased transparency around who owns UK land and the creation of a public register of beneficial owners—the individuals who profit from an overseas entity’s investment—through Companies House. However, the Joint Committee highlights specific areas that must be improved to ensure its efficacy. Issues include the Bill not covering trusts, a lack of clarity around entity exemption, infrequent updates to the register of beneficial owners, a lack of verification checks and difficulty in enforcing the new law.

For further information, see: LNB News 20/05/2019 80.

FCA: First decision under concurrent competition powers published—anti-competitive conduct in the asset management sector

On 22 May 2019, the Financial Conduct Authority (FCA) published the full text of its decision of 21 February 2019, which found that three asset management firms breached competition law by sharing sensitive information regarding prices for initial public offerings. In its first formal decision under its ‘concurrent’ competition powers, the FCA fined Hargreave Hale Ltd £306,300 and River & Mercantile Asset Management LLP £108,600. Newton Investment Management Limited was given immunity under the competition leniency programme and was therefore not fined.

For further information, see Practice Note: Asset management firms (information sharing) and LNB News 22/05/2019 16.

Additional Corporate updates this week

Commercial contract not avoided on economic duress grounds where duress was lawful (Times Travel (UK) LTD v Pakistan International Airlines Corporation)

Dispute Resolution analysis: In Times Travel (UK) LTD v Pakistan International Airlines Corporation[2019] EWCA Civ 828, the Court of Appeal considered the issue of whether a contract may be avoided on the grounds of economic duress stemming from a lawful act or omission. The court held that, in a commercial context, if one party is exerting lawful economic pressure to achieve a result which it believes, in good faith, it was entitled to (irrespective of whether such a belief was reasonable), then such actions will not amount to economic duress so as to avoid the contract. The analysis is written by Laura Alliss, associate director/solicitor at DJM Solicitors.

For further information, see News Analysis: Commercial contract not avoided on economic duress grounds where duress was lawful (Times Travel (UK) LTD v Pakistan International Airlines Corporation).

Damages for breach of accounting warranties capped at the purchase price of target company by SPA provisions (116 Cardamon Ltd v Macalister)

In 16 Cardamon Ltd v Macalister [2019] All ER (D) 97 (May), the High Court considered a claim for breach of various accounting warranties included in a share purchase agreement. The High Court found that contrary to the impression given by the target company’s accounts as warranted in the share purchase agreement, it was insolvent. It therefore held that there had been a breach of warranty and awarded damages equal to the amount of the purchase price of the target company (being the maximum aggregate sum recoverable for a breach of warranty pursuant to the terms of the share purchase agreement), although the High Court found that the damages flowing from the breach of warranty were in excess of that figure.

Additional news—daily and weekly news alerts

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Dates for your diary

DateDevelopment
31 May 2019Deadline for feedback on NEX Exchange’s consultation regarding its Growth Market Rules for Issuers.
The main reason for the consultation is to reflect the changes being brought in by the Prospectus Regulation in July 2019, which introduces the new EU growth prospectus for certain issues by SMEs. The EU growth prospectus will have a standardised format and allow reduced disclosure requirements. It is intended that the Growth Market Rules for Issuers, will reflect many of the requirements of the new EU regime
For further information, see: LNB News 02/05/2019 35.
7 June 2019Closing date for the call by the Department of Business, Enterprise & Industrial Strategy (BEIS) for views on the quality and effectiveness of statutory audit in the UK. This follows BEIS publishing in February 2019 the terms of reference for an independent review by Sir Donald Brydon into the quality and effectiveness of the UK audit market.
The Brydon Review is seeking views, information and evidence from anyone with a direct or indirect interest in UK audit on the extent of the assurance that audit currently provides to users of financial statements and how it might develop to better meet those users' needs, as well as serve the interests of other stakeholders and the public interest.
For further information, see: LNB News 10/04/2019 85.

Trackers

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

  1. Brexit legislation tracker

  2. Brexit timeline

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

  4. Market Abuse Regulation timeline

  5. Prospectus Regulation tracker

  6. Transparency Directive tracker

  7. Listing Rules tracker

  8. Disclosure Guidance and Transparency Rules Sourcebook tracker

  9. Prospectus Rules tracker

Latest Q&As

New Q&A added this week: Is a provision of a company’s articles that a director can be removed by a members’ resolution requiring 75% approval valid, or does section 168 of the Companies Act 2006 take precedence?

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: Market Tracker weekly round-up—17 May 2019.

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