Corporate weekly highlights—28 October 2016

Corporate weekly highlights—28 October 2016
Welcome to the weekly highlights from the pexels-photo-27406Lexis®PSL Corporate team for the week ending 28 October 2016, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: European Securities and Market Authority’s (ESMA) guidelines on persons receiving market soundings under MAR and the delay in disclosure of inside information under MAR; ESMA’s newly published Q&As regarding the implementation of MAR; as part of the European Commission’s proposed package of corporate tax reforms, the Common Consolidated Corporate Tax Base (CCCTB); analysis of the decision in Rush Hair Ltd v Hayley Gibson-Forbes, S.J. Forbes Ltd considering how restrictive covenants in a share purchase agreement should be construed; and Restructuring & Insolvency analysis on the new Insolvency Rules laid before Parliament.

Equity capital markets—MAR related developments

ESMA publishes guidelines on persons receiving market soundings under MAR

ESMA has published its guidelines on the steps and the records that the persons receiving market soundings (MSR) will have to consider and implement according to Article 11(11) of the Market Abuse Regulation (EU) No 596/2014 (MAR) of the European Parliament and of the Council.

Article 11(11) of MAR provides that ESMA shall issue guidelines addressed to MSRs regarding: factors that such persons are to take into account when information is disclosed to them as part of a market sounding in order for them to assess whether the information amounts to inside information; steps that such persons are to take if inside information has been disclosed to them in order to comply with arts 8 and 10 of MAR; and records that such persons are to maintain to demonstrate that they have complied with arts 8 and 10 of MAR.

The purpose of the guidelines is to: ensure a uniform approach in relation to the requirements that MSRs are subject to; reduce the overall risk of spreading of the inside information communicated in the course of the market sounding; and provide tools for the competent authorities to effectively conduct investigations.

ESMA publishes final guidelines on delay in disclosure of inside information under MAR

ESMA has translated its final guidelines (ESMA/2016/1478) on legitimate interests of issuers to delay the disclosure of inside information under MAR into the official languages of the EU and published them on its website.

The guidelines provide a non-exhaustive and indicative list of legitimate interests of issuers that are likely to be prejudiced by immediate disclosure of inside information and situations in which delay of disclosure is likely to mislead the public, in order to help issuers decide whether to delay public disclosure of inside information under art 17(4) of MAR.

Competent authorities and financial market participants are required to make every effort to comply with the guidelines. They must notify ESMA within two months whether they comply or intend to comply with the guidelines, with reasons for non-compliance.

The guidelines will apply from 20 December 2016.

ESMA issues Q&As on the implementation of the Market Abuse Directive

ESMA has published a set of Questions and Answers (Q&As) regarding the implementation of MAR.

The Q&As are designed to promote common supervisory approaches and practices in the application of MAR and its implementing measures and includes detailed answers on managers' transactions, and investment recommendations and information recommending or suggesting an investment strategy.

The documents is aimed at competent authorities, issuers, investors and other market participants.

EU tax reform

Commission proposes major EU corporate tax reform

The European Commission has put forward, as part of a broader package of corporate tax reforms, the CCCTB, which it claims will make it easier and cheaper to do business in the Single Market, and act as a powerful tool against tax avoidance. With the CCCTB, companies will for the first time have a single rulebook for calculating their taxable profits throughout the EU.

The CCCTB aims to combat tax avoidance, resolve double taxation disputes and address mismatches with non-EU countries.

The Commission says the CCCTB will eliminate mismatches between national systems which aggressive tax planners currently exploit. It will also remove transfer pricing and preferential regimes, which are primary vehicles for tax avoidance. Additionally, it contains robust anti-abuse measures to stop companies shifting profits to non-EU countries.

The Commission has also proposed an improved system to resolve double taxation disputes in the EU and has proposed that current dispute resolution mechanisms should be adjusted to better meet the needs of businesses.

The third proposal in the Commission's package contains new measures to stop companies from exploiting loopholes, known as hybrid mismatches, between member states' and non-EU countries' tax systems to escape taxation.

The Commission has also published a Q&A on the CCCTB.

The proposals will now be submitted to the European Parliament for consultation and to the Council for adoption.

Restrictive covenants

High Court decides not to trim restrictive covenants (Rush Hair Ltd v Hayley Gibson-Forbes, S.J. Forbes Ltd)

This analysis considers the decision in Rush Hair Ltd v Hayley Gibson-Forbes, S.J. Forbes Ltd. In this case, the court considered how restrictive covenants in a share purchase agreement should be construed, including the circumstances in which the court will pierce the corporate veil where the alleged breaches are carried out by a company controlled by the seller.

The decision is of interest to corporate lawyers as it provides a useful summary of the relevant case law relating to restrictive covenants, in particular the circumstances in which the courts will prevent a party from circumventing the effect of these provisions through the use of a company controlled by the party.

Relevant updates from other practice areas

Restructuring & Insolvency

New Insolvency Rules laid before Parliament

The Insolvency (England and Wales) Rules 2016 have been laid before Parliament, and will come into force on 6 April 2017—subject to some transitional provisions—on which date the Insolvency Rules 1986 (IR 1986) and other secondary legislation that has subsequently amended them will be repealed. As the biggest change in insolvency law for 30 years, there will be relief that the new insolvency rules have finally been laid before Parliament, but also apprehension that insolvency professionals now have little under six months to digest the new insolvency rules, which contain a number of changes to procedures and processes, and be ready for their commencement. This analysis outlines the background to the new insolvency rules, the changes contained in the new rules and what Lexis®PSL are doing in relation to the new rules.

The purpose of the new insolvency rules is to: consolidate the amendments made to IR 1986, SI 1986/1925since they came into force; change the structure of the insolvency rules so as to make it more logical; use modern and gender neutral language; and deal with changes to insolvency law and practice brought about by the Deregulation Act 2015 and Small Business, Enterprise and Employment Act 2015.

In summary, the changes include: removing creditors' meetings as the default of all decision making (subject to some exceptions) and the creation of new decision making processes; giving creditors the chance to opt-out of receiving communications from an insolvency practitioner in relation to a particular case, other than communications relating to dividends, requiring creditors to lodge a proof of debt in creditors' voluntary liquidations, which was already required in other insolvency processes; the stripping out and streamlining of procedures and processes common to all insolvency processes, and setting these out in separate parts of the new insolvency rules; and the ability of insolvency practitioners to use websites and electronic mail to communicate with creditors in certain circumstances.

Dates for your diary

DateSubjects covered
26 October 2016The deadline for submissions to the inquiry launched by the Business, Innovation and Skills (BIS) Committee in the House of Commons. The inquiry is on corporate governance and focuses on executive pay, directors’ duties and boardroom composition. It follows the BIS Committee's recent inquiries into BHS and Sports Direct, which highlighted certain corporate governance failings, and the commitments to overhaul corporate governance that have been made by the Prime Minister. The BIS Committee will examine executive pay, directors' duties and board composition.
28 October 2016The deadline for responses to the FCA's consultation paper (CP16/19) seeking feedback on the implementation of the Markets in Financial Instruments Directive 2014/65/EU (MiFID II). The consultation follows on from CP15/43, published in December 2015, and covers the following issues: commodity derivatives; supervision; prudential standards; senior management arrangements, systems and controls; remuneration requirements for sales staff; whistleblowing; client assets sourcebook; complaint handling; and fees manual.
10 November 2016The deadline for comments on HM Treasury's consultation paper regarding the transposition of the Money Laundering Directive into UK law. The consultation paper was published by HM Treasury in September 2016.

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