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This week’s edition of Corporate highlights includes the latest updates on Brexit, ESMA’s publication of guidelines on information for inclusion in a prospectus on takeovers, mergers and divisions and separately on prospectus risk factors, ESMA’s publication of updated Q&As on MAR and the AIFMD and the publication of a revised version of the Takeover Code.
Public company takeovers
Financial services regulation for corporate lawyers
Additional Corporate updates this week
Additional news—daily and weekly news alerts
Dates for your diary
SI 2019/707: These regulations were made on 27 March 2019 in exercise of legislative powers under the European Union (Withdrawal) Act 2018 (EU(W)A 2018) in preparation for Brexit. They amend and revoke provisions of UK primary legislation and retained direct EU legislation relating to the official listing of securities and prospectus and transparency requirements in order to address deficiencies which arise from the UK leaving the EU. This instrument will therefore act to ensure that the UK’s listing regime and transparency framework continues to operate as intended in the UK once the UK has left the EU. It comes into force on exit day. These regulations were first published in draft form in December 2018.
For further information, see: LNB News 01/01/0001 2478.
SI 2019/685: These regulations were made on 26 March 2019 in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. They amend UK primary and subordinate legislation and retained direct EU legislation and revoke miscellaneous other retained direct EU legislation in the field of accounts and reports of UK corporate bodies in order to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the UK from the EU. Consequential amendments and transitional provisions are also made as a result of the European Public Limited-Liability Company (Amendment etc) (EU Exit) Regulations 2018, SI 2018/1298. It comes into force on exit day. The regulations were published in draft form in January 2019.
For further information, see: LNB News 04/02/2019 105.
SI 2019/710: These regulations were made on 27 March 2019 in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. These regulations address deficiencies in UK domestic law and retained EU law arising from the UK’s withdrawal from the EU, in line with the approach taken in other financial services EU exit instruments under the 2018 Act and revoke a number of pieces of retained EU law and UK domestic law. Regulation 38 comes into force on the day before the day on which exit day falls. Regulations 1 and 13–24 come into force immediately before exit day. The remaining provisions come into force on exit day.
For further information, see: LNB News 27/02/2019 29.
SI 2019/718: These regulations were made at 12:40 pm on 28 March 2019 in exercise of legislative powers under EU(W)A 2018 in preparation for Brexit. These regulations amend the definition of ‘exit day’ in EU(W)A 2018, s 20(1) from 29 March 2019 at 11pm to 22 May 2019 at 11pm, if the negotiated withdrawal agreement has been approved by the House of Commons by 11pm on 29 March 2019, or to 12 April 2019 at 11pm if the negotiated withdrawal agreement has not been approved by the House of Commons by 11pm on 29 March 2019 and consequently amend EU(W)A 2018, s 20(2). Amending the definition of exit day will ensure the correct functioning of the domestic statute book and avoid a discrepancy between UK law and EU law. It came into force immediately after it was made on 28 March 2019.
For further information, see: LNB News 26/03/2019 47.
The Association for Financial Markets in Europe (AFME) has published model wording setting out selling restrictions for use in equity offerings either following a no deal Brexit or in a scenario where a deal is agreed with a transitional period.
For further information, see: LNB News 28/03/2019 117.
The Takeover Panel (the Panel) published a revised version of the Takeover Code (the Code) to reflect three recent amendments. The first concerned amendments made by Instrument 2019/1 (asset valuations and other matters), published on 6 March 2019. The second concerned amendments made by Instrument 2019/2 (amendments to references to the UKLA and other matters), published on 25 March 2019. The third related to Practice Statement No 20 (secrecy, possible offer announcements and pre-announcement responsibilities), which was amended in order to bring cross-references to certain provisions of the Code up to date.
For further information, see: LNB News 01/04/2019 119.
SI 2019/719: These regulations were made on 28 March 2019 and extend the existing definitions of the methods used for stamping transfer instruments in order to provide flexibility for the use of alternative, replacement stamping mechanisms or machines in the UK. Stamp duty is charged on instruments transferring shares or chargeable securities, on the impression of a physical stamp on the document(s) in question. The regulations amend legislation relating to stamp duty to enable the Commissioners for HMRC to denote duty other than by impressed stamps. They will come into force on 22 April 2019.
For further information, see: LNB News 02/04/2019 3.
The European Securities and Markets Authority (ESMA) has published its technical advice on the minimum information content of documents describing a takeover, merger or division. The document sets out minimum information content for inclusion in a prospectus in relation to: (a) the offer of securities to the public or the admission to trading of securities on a regulated market, and (b) the description and impact that a takeover, merger or division may have on the issuer's operational and financial activities. ESMA's advice on the minimum information content is addressed at national competent authorities (NCAs), issuers, their advisors and financial market participants in general. The advice is published in response to a mandate from the European Commission and has been developed following an earlier consultation with the public that took place between July and October 2018. The technical advice will form the basis for the delegated acts to be adopted by the European Commission.
For further information, see: LNB News 29/03/2019 80.
On 29 March 2019, ESMA published its final guidelines on how national competent authorities (NCAs) should review risk factors, as required by the Prospectus Regulation (EU) 2017/1129. The guidelines aim to encourage more appropriate, focused and streamlined risk factor disclosures for securities, which is presented in an easy to analyse, concise and comprehensible form.
For further information, see: LNB News 29/03/2019 109.
On 29 March 2019, ESMA updated its Q&A document regarding the implementation of the Market Abuse Regulation (Regulation (EU) 596/2014) (MAR). The document now includes new detailed answers on: (a) the meaning of 'parent' and 'related undertaking' in Regulation (EU) 596/2014, art 17(2), and (b) disclosure of inside information concerning emission allowances, referring to installations of other undertakings of the group of the EAMP.
For further information, see: LNB News 01/04/2019 4.
On 29 March 2019, ESMA updated its Questions and Answers on the application of the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD). ESMA has added two new Q&As, which provide clarification on: (a) the treatment of short-term interest rate futures for the purposes of AIFMD leverage exposure calculations according to the gross and commitment methods, and (b) the required frequency of the calculation of leverage by an alternative investment fund manager managing an EU alternative investment fund which employs leverage.
For further information, see: LNB News 01/04/2019 3.
The Financial Conduct Authority (FCA) has published Handbook Notice No 64, which includes changes to the FCA Handbook made by the FCA board on 28 February and 28 March 2019, together with feedback on consultation papers (CPs) that will not have a separate policy statement (PS). The notice also includes changes made by the Board of the Financial Ombudsman Service (FOS) to its rules and standard terms on 6 and 27 March 2019 and approved by the FCA board on 28 March 2019. These changes include changes to the Listing Rules, Prospectus Rules and the Disclosure Guidance and Transparency Rules sourcebooks, which are to take effect on exit day pursuant to the publication of the final version of the Exiting the European Union: Listing, Prospectus and Disclosure Sourcebooks (Amendments) Instrument 2019 (FCA 2019/26).
For further information, see: LNB News 29/03/2019 110.
The Business, Energy and Industrial Strategy (BEIS) committee has published a report arguing that the Competition and Markets Authority (CMA) should break-up the ‘Big Four’ firms (EY, PwC, KPMG and Deloitte) into audit and non-audit businesses. The report claims that the split would be effective in tackling conflicts of interest and providing the professional scepticism required to deliver high-quality audits.
For further information, see: LNB News 02/04/2019 106.
In this case, the Commercial Court considered a worldwide freezing order (WFO) and search orders obtained by the claimant company (AMUSA) against the first defendant company (Essar) and certain linked companies in aid of enforcement of an arbitral award for USD $1.3bn made by a Minnesota-seated tribunal. The court held that, among other things, it was appropriate for the WFO to continue, and that the search orders would not be set aside.
In considering the issue of the continuation of the WFO, the court held that AMUSA needed to demonstrate that there was a real risk of dissipation of assets by the Essar group of companies, noting that in this respect, it was legitimate to look at the actions of the ultimate beneficial owners of a group of companies, or conduct in relation to a holding company and subsidiary, notwithstanding the existence of separate legal personality. The court further noted that the straightforward reason for doing this was that, if there was solid evidence that the owners or controllers of company A had dissipated its assets, that was highly material to the question of whether there was a risk of dissipation of the assets of company B which was within the same ownership or control.
For further information, see: ArcelorMittal USA LLC (a company incorporated under the laws of the State of Delaware) v Essar Steel Ltd (a company incorporated under the laws of Mauritius); ArcelorMittal USA LLC (a company incorporated under the laws of the State of Delaware) v Ruia  All ER (D) 142 (Mar),  EWHC 724 (Comm).
Commercial analysis: Matthew Bradley of 4 New Square analyses the decision of Mrs Justice Moulder in the Commercial Court to dismiss a claim for breach of warranty in a share purchase agreement (SPA). The primary basis for that decision was that the claim, as pleaded, was unsustainable in law. The claimant, Oversea-Chinese Banking Corp Ltd (OCBC), alleged that its loss was referable to a hypothetical indemnity which it would have negotiated and obtained, but for the breach of warranty, and the amount which could have been claimed under that hypothetical indemnity. This way of putting the loss rendered the claim unsustainable in law. The warranty breached was in the nature of a warranty of quality, and as such the only loss which could be claimed was the diminution in value measure, ie the difference between (i) the true value of the shares and (ii) the value of the shares as warranted. Separately, the court held that neither causation nor a breach of warranty was established in any event.
For further information, see New Analysis: Commercial Court considers share purchase breach of warranty claims and correct measure of loss (Oversea-Chinese Banking Corp Ltd v ING Bank NV).
This document contains the highlights from the past week’s news. To receive all our news stories, whether on a daily or a 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.
To track key legislative and regulatory developments, see our Trackers:
Brexit legislation tracker
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
New Q&As added this week:
Is it possible to certify documentation taken from Companies House online?
Can a stock transfer form for a UK company be executed electronically?
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 News Analysis: Market Tracker weekly round-up—29 March 2019.
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