Corporate weekly highlights—7 February 2019

This week’s edition of Corporate highlights includes the latest Brexit developments plus updated Q&A guidance from the ESMA on Prospectuses and the Transparency Directive in the event of no-deal Brexit.

In this issue:

Brexit

European Union (Withdrawal) Act 2018 (Consequential Modifications and Repeals and Revocations) (EU Exit) Regulations 2019

SI 2019/Draft: These draft Regulations are laid in exercise of legislative powers under the European Union (Withdrawal) Act 2018 (EU(W)A 2018) in preparation for Brexit. These draft Regulations propose to amend and revoke UK primary and subordinate legislation in relation to the 2018 Act in order to ensure that the UK statute book accommodates ‘retained EU law’, a new body of domestic law introduced by the 2018 Act, coherently and effectively after the UK’s withdrawal from the EU. They come into force partly on the day after the day on which these draft Regulations will be made and fully on exit day.

For further information, see: LNB News 31/01/2019 76.

Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019

SI 2019/Draft: These draft Regulations are laid in exercise of legislative powers under the EU(W)A 2018 in preparation for Brexit. These draft Regulations propose to amend and revoke provisions of UK primary and subordinate legislation in relation to financial services and markets in order to address deficiencies arising from the withdrawal of the UK from the EU, ensuring that the UK’s financial services legislative framework continues to operate effectively in a scenario where the UK leaves the EU without an agreement. Pursuant to these provisions, certain amendments are proposed to be made to the Financial Services and Markets Act 2000. They come into force partly on the day after the day on which these draft Regulations will be made and fully on exit day.

For further information, see: LNB News 01/02/2019 46.

FCA explains how it will use the temporary transitional power if there is a no-deal Brexit

The Financial Conduct Authority (FCA) has set out how it would use the temporary transitional powerwhich HM Treasury is proposing to grant it pursuant to draft legislation in the event the UK leaves the EU without an agreement. The FCA intends to use this power to ensure that firms and other regulated entities do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit. The FCA has also set out the areas where it would not make transitional provision and consequently expects firms and other regulated persons to start preparing now to comply with these post-exit regulatory obligations.

For further information, see: LNB News 01/02/2019 124.

BEIS updates for businesses and sectors trading or operating in the EU—no deal Brexit guidance

The government has published new guidance pages for UK businesses collating existing stakeholder and sectoral guidance on Brexit, focusing on preparing for a ‘no deal’ scenario. The majority of the guidance within the webpages is not new, but has been collated by sector (or subject) for ease of reference and bookmarking. Some of the guidance may change depending on the terms upon which the UK leaves the EU, so stakeholders are advised to monitor these pages for updates.

For further information, see: LNB News 04/02/2019 17.

Accounts and Reports (Amendment) (EU Exit) Regulations 2019

SI 2019/145: These draft Regulations are laid in exercise of legislative powers under the European Communities Act 1972 and the EU(W)A 2018 in preparation for Brexit. These draft Regulations amend UK primary and subordinate legislation in relation to accounts and reports of UK corporate bodies in order to address failures of retained EU law to operate effectively, as well as other deficiencies arising from the withdrawal of the UK from the EU. They come into force partly on 6 February 2019 in relation to financial years beginning on or after exit day, and fully on exit day.

For further information, see: LNB News 01/11/2018 102.

International Accounting Standards and European Public Limited-Liability Company (Amendment etc) (EU Exit) Regulations 2019

SI 2019/Draft: These draft Regulations are laid in exercise of legislative powers under the EU(W)A 2018 in preparation for Brexit. These draft Regulations propose to amend UK primary legislation, UK subordinate legislation and retained direct EU legislation (as well as 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, as well as other deficiencies arising from the withdrawal of the UK from the EU. In addition, consequential amendments and transitional provision are also laid as a result of the European Public Limited-Liability Company (Amendment etc) (EU Exit) Regulations 2018. They come into force on exit day.

For further information, see: LNB News 04/02/2019 105.

Equity capital markets

ESMA updates its Q&A on Prospectuses and the Transparency Directive in the event of no-deal Brexit

The European Securities and Markets Authority (ESMA) has added new Q&As to its Q&A documents on Prospectuses and the Transparency Directive to cover the situation where the UK withdraws from the EU without a withdrawal agreement in place.

For further information, see: LNB News 31/01/2019 129.

Members

Unfairly prejudicial conduct

In McCallum-Toppin and another v McCallum-Toppin and others [2019] EWHC 46 (Ch)[2019] All ER (D) 156 (Jan) the petitioners succeeded on their petition, under section 994 of the Companies Act 2006 (CA 2006), complaining of unfairly prejudicial conduct by the first three respondent directors (the directors) in respect of the fourth respondent family company. The petitioners had acted in their capacity as the executors and trustees of a will made by the deceased former shareholder of the company (AG). The court had held in earlier proceedings that AG's estate had been transferred, so as to be vested in the petitioners. The Companies Court held, among other things, that the payment of excessive remuneration to the directors, and the failure to make a decision in good faith to pay dividends, amounted to unfairly prejudicial conduct. Accordingly, in circumstances where the third respondent did not wish to continue to be a shareholder in the company, and on the facts, the first two respondents were ordered to buy the petitioners' shares in the company at a fair value.

Accounts and reports

Financial Reporting Council seeks views on improving reporting of intangible assets

The Financial Reporting Council (FRC) has published a consultation paper, which invites comments on how business reporting of intangible assets could be improved. The FRC argues that intangible assets are increasingly important in a knowledge-based economy and notes concerns that financial statements often fail to recognise important intangibles, such as intellectual capital. The FRC is requesting comments by 30 April 2019.

For further information, see: LNB News 06/02/2019 37.

Audit

Auditor negligence

In AssetCo plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm)[2019] All ER (D) 13 (Feb) the claimant company had proved its losses based on its counterfactual, in which the defendant had acted as a competent auditor, and had not mitigated any loss which had been caused by the defendant. Although the Commercial Court found the claimant was contributorily negligent, including by the dishonesty of the claimant's senior management and its failure to look after its own interests, it refused the defendant's application for relief from liability under CA 2006, s 1157, as it had not acted reasonably.

Additional Corporate updates this week

EU adapts company law to digital age

The EU has taken further steps to revise company law rules to remain fit for purpose in the digital age, with the aim of achieving greater efficiency, transparency and legal certainty through the use of digital tools. Provisional agreement between the Council and the Parliament was reached on 4 February 2019 on a draft directive to facilitate and promote the use of online solutions in a company’s interactions with public authorities throughout its lifecycle, including the ability for companies to be incorporated and file documents online.

For further information, see: LNB News 05/02/2019 29.

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.

New content

New Trackers

We have added two new case trackers:

2019: Corporate case tracker

2018: Corporate case tracker

Dates for your diary

DateDevelopment
15 February 2019Deadline for responses to the FRC’s post-implementation review of its 2016 changes to ethical and auditing standards.
The FRC’s review looks at what the impact of its 2016 changes to ethical and auditing standards has been on auditor independence, prevention of conflicts and on audit quality.
See: LNB News 20/11/2018 76.

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

2019: Corporate case tracker

2018: Corporate case tracker

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—1 February 2019.

To read about the latest issues and developments which we are following in Market Tracker, see our latest blog post: Market Tracker weekly bulletin—7 February 2019

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