As with many areas of law, the precise impact of a Brexit on corporate law and transactions remains unclear at this stage. A few areas that may be affected, depending on the exact terms negotiated post-Brexit, are considered below.
Impact on M&A
There is much debate around the impact of Brexit on investor confidence and their appetite for M&A. The UK legal framework for private M&A transactions itself is not typically subject to much EU regulation. Brexit is therefore unlikely to have a significant impact on the legal framework (subject to the impact of Brexit on the competition regime and TUPE in the context of asset sales. Please refer to our competition and employment sections respectively for more on these topics).
There are EU measures in place to facilitate cross-border M&A transactions via the Directive on Cross-Border Mergers of Limited Liability Companies. This provides a framework for cross-border mergers to take place between companies in the UK and companies from other EEA states. The UK will be unable to take advantage of these provisions following a Brexit if it becomes a non-EEA state but this may be the subject of negotiation.
Impact on equity capital markets
The precise impact on UK equity capital markets will depend on the terms of a Brexit and whether the UK seeks to maintain the current regime in order to protect the London Stock Exchange's status as one of the leading international securities markets.
EU legislation such as the Prospectus Directive, the Takeovers Directive, the Transparency Directive and the Market Abuse Directive has been implemented into UK law. We expect that many of these measures would initially remain in place post-Brexit but the regimes may diverge in future. This would depend on the specific terms negotiated and the approach taken by the Government and the Financial Conduct Authority.
Please refer to the financial services section for more on the regulatory angle and, in particular, the impact of a Brexit on passporting rules.
Impact on company law
The main piece of legislation in the UK on company law is the Companies Act 2006 and related secondary legislation. Some of the provisions of the Companies Act 2006 are based on EU Directives such as the Accounting Directives, the Shareholder Rights Directive and the Company Law Directives but company law is mostly regulated by individual member states. The Companies Act 2006 has only recently been reviewed and amended following a lengthy consultation process. We do not anticipate that company law would be identified as a priority area for reform following a Brexit. The purpose of the Companies Act 2006 was to repeal, simplify, modernise and consolidate existing company law. It may be that these aims would be revisited following a Brexit with a view to further reducing the regulatory burden on companies originating from EU law.
Corporate groups with both UK and EU incorporated companies will need to adapt if and when EU and UK company laws diverge following a Brexit.
A European company (or Societas Europaea) is a European public limited company subject to EU-wide laws, which can be created and registered in any one of the EEA member states. Such entities incorporated in the UK may be affected by a Brexit and may need to relocate their registered office if the UK becomes a non-EEA state following a Brexit.