As a no-deal Brexit (i.e. the UK leaving the European Union on 29 March 2019 without a withdrawal agreement in place) remains the legal default unless the European Union (Withdrawal) Act 2018 is amended ahead of that deadline, below are some developments that will be of interest to corporate practitioners in the event of a no-deal Brexit. In each case, the changes below will only come into effect at 11pm on 29 March 2019 if no deal is agreed and Brexit is not delayed (although current expectation is for a delay to either 12 April or 22 May 2019).
Primary Market Bulletin No. 22
The Financial Conduct Authority (FCA) has published Primary Market Bulletin No. 22, which focuses on the key changes to the Listing Rules, Transparency Rules and the Prospectus Rules (LTPR) in the event of a no-deal Brexit. It follows Primary Market Bulletin No. 21, which focused on changes in relation to disclosures under the Market Abuse Regulation (see our corporate update 2019/5).
PMB No. 22 does not set out any changes which have not been previously consulted upon or otherwise flagged by the FCA (and discussed in our earlier corporate updates) but draws the LTPR changes together in brief in one place. There are no transitional provisions and the FCA expect issuers to take reasonable steps to comply from Exit day. The key changes are:
- Transparency Rules (DTRs 4-7) – All issuers with securities admitted to trading on a UK regulated market will have to comply with the Transparency Rules. This means that some issuers whose current home member state is not the UK will need to comply with the UK Transparency Rules.
- Consolidated accounts– Issuers preparing consolidated accounts will have to use International Financial Reporting Standards (IFRS) as adopted by the UK for all financial years commencing on or after Exit day, instead of IFRS as adopted by the EU. The Treasury intends to issue an equivalence decision, in time for Exit day, to the effect that EU-adopted IFRS are equivalent to UK-adopted IFRS for the purposes of the Prospectus Directive and Transparency Directive. This would mean that non-UK incorporated issuers will continue to be able to prepare their consolidated accounts using EU-adopted IFRS.
- Free float – Holders in any jurisdiction, not just the EEA, will count towards the free float requirement that sufficient shares of a listed company (or applicant for admission to listing) be held in public hands.
- Audit committees – There is currently an exemption from the requirements in DTR 7.1 (Audit committees) for an issuer with a parent undertaking which is itself subject to DTR 7.1 or to the equivalent requirements under the Audit Directive as implemented in another EEA State. Post-Brexit, this exemption will no longer be available where the parent complies with equivalent requirements in another EEA State.
Amendments to the LSE Admission and Disclosure Standards and AIM Rules
The London Stock Exchange (LSE) has published a notice (N04/19) on the minor amendments to its rule books in the event of a no-deal Brexit. The amendments include changing references to EU legislation to refer to the new UK law that will come into force in the event of a no-deal Brexit. Blacklines showing the changes are available here:
CMA guidance on effect of no-deal Brexit
The Competition and Markets Authority (CMA) has published the final form of its Guidance on the functions of the CMA after a no-deal Brexit.
The guidance explains how leaving the EU in a no-deal scenario will affect the powers and processes of the CMA for antitrust and cartel enforcement, merger control and consumer protection law enforcement after Exit day.
Signing contracts over the weekend of 30/31 March 2019
As discussed in our corporate update 2019/1, the UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements in December 2018 and the Convention will come into force for the UK on 1 April 2019 in the event of a no-deal Brexit.
There will therefore be a short gap between the UK leaving the EU at 11pm on 29 March 2019 and acceding to the Hague Convention in its own right on 1 April 2019. Parties should carefully consider the impact of this gap on the enforcement of judgments, particularly in the EU, in the context of contracts with an exclusive English jurisdiction clause and so whether to delay signing any contracts scheduled for execution on 30/31 March until 1 April 2019.