Corporate weekly highlights—7 March 2019

This week’s edition of Corporate highlights includes all the latest updates on Brexit, such as the Takeover Panel response statement on Takeover Code amendments relating to Brexit, plus news of a further Panel response statement on its asset valuations consultation and analysis of the CMA’s proposals for legislative and institutional reforms to the UK’s competition law regime.

In this issue:

Brexit

Brexit Bulletin

Public Law analysis: As we reach the final month of the Article 50 withdrawal period, the government is aiming to secure last minute parliamentary approval of its Brexit deal, but with negotiations ongoing, just weeks remaining and exit day fixed in law on 29 March 2019, preparations to mitigate the risk of the UK exiting the EU without a deal in place are under increasing scrutiny. Acknowledging the deep concern over the uncertainty and lack of time, the government has committed to allowing MPs a further meaningful vote on the Withdrawal Agreement, followed by votes on a no deal exit, or failing that, extension of Article 50, by 14 March 2019. This bulletin highlights some of the latest developments in the Brexit preparations and contingency planning, plus details of our latest Brexit enhancements, tips for tracking Brexit related legislation and links to useful materials to help you keep up-to-date as exit day approaches.

See News Analysis: Brexit Bulletin—one month to exit day?

Takeover Panel publishes response statement relating to amendments to the Code arising from Brexit

The Takeover Panel (Panel) has published a response statement following its November 2018 public consultation paper (PCP 2018/2) on proposed amendments to Takeover Code (Code) arising from the UK’s withdrawal from the EU. The Panel has adopted most of its proposed amendments, which included the removal of the shared jurisdiction rules and aligning the treatment of EEA shareholders with other overseas shareholders. As outlined in PCP 2018/2, the Panel is not intending to amend the Code provisions dealing with the European Commission competition proceedings.

For further information, see: LNB News 06/03/2019 118.

Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019

SI 2019/405: These regulations were made on 28 February 2019 in exercise of legislative powers under the European Union (Withdrawal) Act 2018 (EU(W)A 2018) in preparation for Brexit. The regulations amend UK subordinate legislation in relation to the European Economic Area’s (EEA) ‘financial services passport' which allows firms in EEA states to offer services in any other EEA state on the basis of their home state authorisation and to non-UK central counterparties and trade repositories which provide certain services in the UK under the European Market Infrastructure Regulation in order to address deficiencies in retained EU law. Without this instrument, where these firms do not enter the UK’s temporary regimes, they may not be able to meet existing contractual obligations or provide services. This could be detrimental to UK-based customers and could lead to disruption of services. A correction slip was issued after this enactment was laid in draft. It comes into force on 1 March 2019 (Updated from draft on 1 March 2019).

For further information, see: LNB News 16/01/2019 75.

Financial Services (Miscellaneous) (Amendment) (EU Exit) (No.2) Regulations 2019

Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019 were laid for sifting on 27 February 2019. The sifting period for this instrument closes on 19 March 2019.

Among other things, this SI includes amendments to the provisions contained in the EEA Passport Rights (Amendment etc and Transitional Provisions) (EU Exit) Regulations 2018, SI 2018/1149, allowing passported EEA firms to carry out business in the UK after exit day to the extent necessary to run off pre-existing contractual obligations (including a modification to the restriction on financial promotions in pre-existing contracts).

See News Analysis: Brexit SI Bulletin—drafts laid for sifting on 27 February 2019.

Government delays vote on proposed amendments to Financial Services (Implementation of Legislation) Bill

As detailed in the House of Commons (Commons) Hansard on 4 March 2019, a Commons vote on proposed amendments to the Financial Services (Implementation of Legislation) Bill has been delayed by the government. The amendments, which had been backed by more than 50 MPs, relate to crown dependencies and anti-money laundering in the context of the Bill. The delay in voting on the proposed amendments was dubbed ‘outrageous’ by one MP. The government has said that it is committed to passing the Bill before exit day, which is currently due to be 29 March 2019.

For further information, see: LNB News 05/03/2019 130.

FCA confirms proposals in the event of a no-deal Brexit

The Financial Conduct Authority (FCA) has published Policy Statement PS 19/5: Brexit Policy Statement and Transitional Directions. The policy statement contains feedback received in response to its Brexit consultations:

  1. CP 18/28: Brexit: proposed changes to the Handbook and Binding Technical Standards

  2. CP 18/36: Brexit: proposed changes to the Handbook and Binding Technical Standards—second consultation

  3. CP 18/29: Temporary permission regime for inbound firms and funds

  4. CP 19/2: Brexit and contractual continuity, and

  5. CP 18/34: Regulatory fees and levies, policy proposals for 2019/20

The policy statement also includes near-final Handbook rules and Binding Technical Standards as well as more detail on how the FCA intends to use the Temporary Transitional Power.

For further information, see: LNB News 28/02/2019 113.

ESMA will recognise UK central securities depository in the event of a no-deal Brexit

The European Securities and Markets Authority (ESMA) has announced that, in the event of a no-deal Brexit, the central securities depository (CSD) established in the UK–Euroclear UK and Ireland Limited—will be recognised as a third-country CSD to provide its services in the EU. The recognition decision would take effect on the date following Brexit, in a no-deal scenario.

For further information, see: LNB News 01/03/2019 83.

BoE publishes approach to financial services legislation under the EUWA

The Bank of England (BoE), together with the Prudential Regulatory Authority (PRA), has published a joint policy statement (Policy Statement 5/19) and a package of other materials updating firms on the BoE's regulatory and supervisory approach in relation to its work on EU withdrawal. The package builds on its previous engagement with firms on their preparations around EU withdrawal, and acts as a contingency for a scenario in which the implementation period, which has been agreed in principle as part of the UK's Withdrawal Agreement with the EU, does not take effect on 29 March 2019. It reflects close coordination between the BofE and the FCA whose package of communications has also been released.

For further information, see: LNB News 01/03/2019 10.

Money Market Funds (Amendment) (EU Exit) Regulations 2019

SI 2019/394: These regulations (which were made on 26 February 2019) are made in exercise of legislative powers under the EU(W)A 2018 in preparation for Brexit. The regulations address the deficiencies in retained EU law in relation to money market funds, arising from the withdrawal of the UK EU, ensuring the legislation continues to operate effectively at the point at which the UK leaves the EU. They come into force partly on 27 February 2019, and fully on exit day. (Updated from draft on 28 February 2019.)

For further information, see: LNB News 25/01/2019 23.

Government urges business owners to prepare for no-deal scenario

HMRC is urging business owners to take action to prepare in the event the UK leaves the EU without a deal. Businesses are advised to consider three steps to ensure they can continue to trade with the EU. Current estimates show that 145,000 VAT-registered companies trade with the EU but not the rest of the world and that a further 95,000 businesses trade with the EU but are not VAT-registered. This means an estimated 240,000 businesses need to take necessary action. Steps businesses are advised to take include registering for an Economic Operator and Registration Identification (EORI) number.

For further information, see: LNB News 28/02/2019 107.

Providing services to EEA and EFTA countries—no-deal guidance

The government has published new guidance for UK businesses on EU service provision that collates stakeholder and sector guidance on Brexit, focusing on preparing for the no-deal scenario. In the event of the UK withdrawing from the EU without a deal, the UK will no longer operate under the European Economic Area regulations concerning the cross-border trade services, which means that rights and protections under the EU Directives and EU Treaty rights of Freedom of Movement and Freedom of Establishment will no longer apply to the UK.

For further information, see: LNB News 01/03/2019 43.

Providing services to EEA and EFTA countries—no deal Brexit guidance

The government has published a collection of guidance to help stakeholders prepare for a no deal Brexit. The guidance covers: data protection and cross-border trade regulations for professional qualification and visa requirements for UK businesses providing services to countries in the EEA or EU should the UK leave the EU without a deal (thereby no longer operating under the EEA regulations for the cross-border trade in services). This guidance is a continuation of Providing services to EEA and EFTA countries—no-deal guidance, LNB News 01/03/2019 43.

For further information, see: LNB News 05/03/2019 39.

Public company takeovers

Takeover Panel publishes response statement to its consultation on asset valuations

The Panel has published a response statement following its October 2018 public consultation paper (PCP 2018/1) on proposed amendments to Rule 29 of the Code, which relates to asset valuations. The Panel has adopted most of its proposed amendments and these will take effect on 1 April 2019.

For further information, see: LNB News 06/03/2019 109.

CMA proposes changes to the competition regime

Competition analysis: On 25 February 2019, the Competition and Markets Authority (CMA) published a letter from Lord Tyrie, CMA Chair, to the Secretary of State for BEIS, outlining proposals for legislative and institutional reforms to the UK’s competition and consumer law regimes. The proposals if implemented have the potential to change significantly the UK’s competition law regime. The proposals would entail a massive increase in ‘red tape’ with less judicial oversight over the CMA. The most eye-catching proposals are in relation to antitrust appeals and the merger control process. This analysis piece looks at what the impact of this may be.

See News Analysis: CMA proposes changes to the competition regime.

Public company takeovers; Private M&A

Council of EU adopts Regulation establishing investment screening framework

The Council of the EU has adopted a Regulation establishing a framework for the screening of foreign direct investments into the EU. The proposal to create a first EU-wide framework for investment screening was announced by President Juncker in his 2017 State of the Union speech, and the European Parliament approved the text of the Regulation in February 2019 following three-way talks between the Parliament, the Council of the EU and the European Commission.

For further information, see: LNB News 05/03/2019 127.

Corporate governance

European Commission seeks views on draft guidelines on remuneration report

The European Commission has published a consultation document seeking input from Member States and stakeholders on the draft guidelines on the remuneration report under the Shareholders Rights Directive. The consultation closes on 21 March 2019.

For further information, see: LNB News 04/03/2019 4.

Audit

FRC issues a position paper on the next steps for development of ethical and auditing standards

The Financial Reporting Council (FRC) has issued a position paper which sets out how ethical and auditing standards will be developed to respond better to the needs of users of audited financial information. The paper sets out the issues to be developed to support a public consultation on the text of revised standards over summer 2019. It also sets out how the FRC’s work on the standards responds to certain recommendations made by Sir John Kingman in his independent review of the FRC, how proposals are being developed to support the Market Study by the CMA of the UK Statutory Audit Market, and how revisions made to the international Code of Ethics will be incorporated into the FRC ethical standard.

The paper follows the November 2018 call for feedback, in which the FRC sought views from stakeholders as to the effectiveness with which the FRC’s auditing standards had achieved the objectives it had set in 2016.

For further information, see: LNB News 05/03/2019 132.

Additional news—daily and weekly news alerts

This document contains the highlights from the past week’s news. To receive all 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.

New and updated content

New Practices Note—Brexit

We have published the following new Practice Note concerning the impact of Brexit:

  1. Brexit—UK takeover regime.

Dates for your diary

DateDevelopment
21 March 2019Deadline for comments on the European Commission consultation on remuneration report
On 4 March 2019, the European Commission published a consultation document seeking input from Member States and stakeholders on the draft guidelines on the remuneration report under the Shareholders Rights Directive.
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 Shareholder Rights Directive (Directive 2017/828)(SRD II). The 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 CP19/6: 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 11pm 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

Trackers

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

  1. Brexit legislation tracker

  2. Brexit timeline

  3. 2019: Corporate case tracker

  4. 2018: Corporate case tracker

  5. Listing Rules tracker

  6. Disclosure Guidance and Transparency Rules Sourcebook tracker

  7. Prospectus Rules tracker

  8. Prospectus Regulation tracker

  9. Transparency Directive tracker

  10. Market Abuse Regulation—timeline

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

Latest Q&As

New Q&As added this week:

  1. Once a public limited company has been converted to an Societas Europaea is it the same legal entity?

  2. Can you appoint a proxy for multiple meetings using a single proxy form?

  3. Now that the new section 24(1A) of the Trade Marks Act 1994 is in force, what practical steps should be taken when transferring a business to ensure that trade marks that are required to be retained are not inadvertently assigned to the purchaser? Is there any guidance as to the circumstances in which the presumption in favour of transfer will not apply?

Useful information

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

To read about the latest corporate announcements, see New Analysis: Market Tracker weekly round-up—1 March 2019.

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Area of Interest