Corporate considerations and M&A post-Brexit

Posted: 05/09/2016

Apart from EU merger control laws (see the competition law section on our Brexit hub page), corporate law is unlikely to change significantly following Brexit as the majority of English corporate law is not derived from EU legislation, or at least contentious pieces of legislation. However, depending on the terms of our exit, there may be changes to specific aspects of M&A, investment transactions and capital markets which are directly affected by EU regulation. 

• Investments and M&A - it will be crucial to consider how EU legislation affects a target business at the due diligence stage of any deal, whether that be an acquisition or an investment round. Each of the areas of law referred to below may be relevant to consider as part of the due diligence process and due diligence questionnaires should be tailored to ensure the right questions are asked to highlight any Brexit-related risk areas.

Except in relation to merger clearances, public M&A will be largely unaffected and significant changes to the UK Takeover Code are not anticipated. 

• Capital markets - the UK equity capital markets derive much of their regulatory framework from EU legislation, including under the Prospectus Directive, the Transparency Directive and the Market Abuse Regulation. As a non-EU member state, the UK's capital markets regime would need to be deemed ‘equivalent’ for UK prospectuses to benefit from mutual recognition in EU member states. Failure to do so would result in the additional burden of having to get a prospectus approved both in the UK and an EU member state where a multi-jurisdictional company wishes to issue shares in the UK and the EU. It remains to be seen how Brexit will affect the implementation of the EU's Capital Markets Union Action Plan, including the new Prospectus Regulation.
• Corporate governance – directors of companies should be considering and identifying Brexit-related risks and uncertainties associated with the UK’s renegotiation of its EU position. The Financial Reporting Council has issued a document highlighting issues for company directors to consider, and where a significant risk area is identified, that risk should be disclosed to shareholders. Considerations may include future business performance, increased market volatility, the impact Brexit may have on specific sectors and the ability to recruit EU migrants.

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