Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 1 June 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: Lexis®PSL Corporate and Market Tracker’s UK public M&A Trend Report update (1 Jan–30 Apr 2017); ESMA’s updated Q&As on the Market Abuse Regulation, AIFMD and UCITS; the EU’s agreement to revamp the EuVECA and EuSEF regulations; case analysis of a High Court decision concerning whether a provision in an option agreement could give the company’s board an absolute veto over the exercise of the option; analysis considering the introduction and impact of unexplained wealth orders; and analysis exploring the proposed beneficial ownership disclosure regime for overseas entities. Headlines (News updates & analysis) Market Tracker UK public M&A Trend Report update (1 Jan–30 Apr 2017) Lexis®PSL Corporate and Market Tracker has conducted research to examine the current trends in UK public M&A for the period 1 January 2017 to 30 April 2017. This report is an update to our previous Market Tracker Trend Report which reviewed trends in UK public M&A in 2016. For details see News Analysis: UK public M&A Trend Report update (1 Jan–30 Apr 2017). Equity capital markets ESMA updates its Q&As on the Market Abuse Regulation The European Securities and Markets Authority (ESMA) has updated its Q&As on practical questions regarding the implementation of the Market Abuse Regulation. The updated Q&As include new answers regarding the disclosure of inside information related to Pillar II requirements, and the blanket cancellation of orders policy. For details see news, LNB News 30/05/2017 120. New ESMA Q&As on AIFMD and UCITS ESMA has published updated Q&As on the application of the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS). The AIFMD Q&As include three new ones on: reporting to National Competent Authorities (NCAs) on the breakdown between retail and professional investors; notification of AIFMs on the AIFs to be managed, if domiciled in another Member State; and use by an AIF of the exemption for intragroup transactions under Article 4(2) of Regulation (EU) 648/2012 (EMIR), if subject to the clearing obligation of Article 4(1) of EMIR. The UCITS Q&As include one new one on the application to UCITS of the exemption for intragroup transactions under Article 4(2) of Regulation (EU) 648/2012 (EMIR), if subject to the clearing obligation of Article 4(1) of EMIR. For details see news, LNB News 25/05/2017 85. Private equity EU agrees to overhaul EuVECA and EuSEF regulations The European Commission has announced that small and growing companies and social enterprises will enjoy better access to finance, due to EU rules agreed by the European Parliament, the Council of the EU and the Commission. The European Venture Capital Funds (EuVECA) and European Social Entrepreneurship Funds (EuSEF) regulations set up two new types of collective investment funds to make it easier and more attractive for investors to invest in unlisted SMEs. Both regulations were adopted on 17 April 2013 and came into force on 22 July 2013. The Commission proposed an overhaul of the existing EuVECA and EuSEF regulations in 2016 as part of the Capital Markets Union (CMU) Action Plan. The objective of these reforms is to improve access to finance for small and growing companies and social enterprises to promote jobs and growth. The revamped rules are part of the Commission's drive to stimulate venture capital investments in the EU, a core objective of its CMU project. The political agreement among other matters: extends the range of managers eligible to market and manage EuVECA and EuSEF funds to larger fund managers, ie those with assets under management of more than €500m, expands the ability of EuVECA funds to invest in small mid-caps and SMEs listed on SME growth markets, and decreases the costs by explicitly prohibiting fees imposed by competent authorities of host Member States where no supervisory activity is performed. For details see news, LNB News 31/05/2017 129. Case analysis High Court ticks off Watchfinder board for refusing to issue options (Watson and others v Watchfinder.co.uk) This analysis examines the decision in Watson & Ors v Watchfinder.co.uk Ltd [2017] EWHC 1275 (Comm). In this case the High Court considered a provision in an option agreement which purported to give the board of Watchfinder.co.uk (Watchfinder) an absolute veto over the exercise of the option. The High Court considered whether there was an implied duty imposed on the directors not to act unreasonably, capriciously or arbitrarily in deciding whether to give its consent to the option exercise. The High Court held among other matters that Watchfinder's board: did not have an unconditional right of veto over the option exercise, had an implied duty when determining whether or not to approve the option exercise to exercise this discretion in a way which was not arbitrary, capricious or irrational in the public law sense, and had not carried out a proper exercise of this discretion. The case highlights among other matters: the importance of seeking legal advice before entering into important commercial arrangements, the danger of relying on provisions in commercial agreements purporting to be an absolute veto right, and the importance, where the exercise of a board's discretion is concerned, of establishing an appropriate documentary trail showing the range of factors that directors considered and the process followed to arrive at that decision. For details see News Analysis: High Court ticks off Watchfinder board for refusing to issue options (Watson and others v Watchfinder.co.uk). Relevant updates from other practice areas Corporate Crime Criminal Finances Act 2017—unexplained wealth orders What are unexplained wealth orders and why have they been created? In this analysis, Michael Potts, managing partner at Byrne and Partners, explores the impact that these orders could potentially have and addresses the major concerns for practitioners. For details see News Analysis: Criminal Finances Act 2017—unexplained wealth orders. Banking & Finance Exploring the beneficial ownership disclosure regime for overseas entities—UK property How would the government’s proposed new public register showing who controls overseas legal entities that own UK property or participate in significant UK public procurement work in practice? In this analysis, Laura Bentham, professional support lawyer in Baker McKenzie’s corporate team, says there are clearly big picture issues around the implementation of proposals to create this beneficial ownership register by the Department for Business, Energy & Industrial Strategy (BEIS) that are undecided and a lot will depend upon the final form of the legislation. For details see News Analysis: Exploring the beneficial ownership disclosure regime for overseas entities—UK property. Dates for your diary Date Subjects covered 1 June 2017 Deadline for responses to the FCA's CP17/5: Reforming the availability of information in the UK equity IPO process. Feedback will be considered after the consultation period has closed. Depending on the nature of feedback, the FCA expects to publish a Policy Statement outlining any Handbook changes later in 2017. For further information, see LNB News 01/03/2017 123. 9 June 2017 The Shareholders' Rights Directive will enter into force. The Directive looks at corporate governance in relation to the behaviour of companies and their boards, shareholders (institutional investors and asset managers), intermediaries and proxy advisors. Member states will have up to two years to incorporate the new provisions into domestic law. For further information, see LNB News 20/05/2017 1. Further dates To look further ahead, see: Corporate horizon scanning—2017 and beyond.