This week’s edition of Corporate highlights includes the latest updates on Brexit, plus the FCA’s publication of Primary Market Bulletin No 20 detailing proposed changes to its Knowledge Base, the government’s publication of new guidance on gender pay gap matters, ESMA’s publication of a list of national thresholds below which a prospectus is not required and details of two new cases concerning the enforceability and binding nature of oral agreements.
Corporate weekly highlights—14 February 2019
In this issue:
Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019
SI 2019/177: The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 are made in exercise of legislative powers under the European Communities Act 1972, the Limited Liability Partnerships Act 2000, the Companies (Audit, Investigations and Community Enterprise) Act 2004, the Companies Act 2006 (CA 2006) and the European Union (Withdrawal) Act 2018 (EU(W)A 2018) in preparation for Brexit. The Regulations make amendments to UK primary and subordinate legislation and retained direct EU legislation relating to the framework for regulatory oversight and professional recognition of statutory auditors and third country auditors in the UK to address failures of retained EU law to operate effectively, and other deficiencies arising from the implementation of Brexit. The Regulations will come into force partly on 22 February 2019 and fully on exit day.
For further information, see: LNB News 06/11/2018 108.
Scheme—Transfer of business—Brexit
In Re The Royal London Mutual Insurance Society Ltd  All ER (D) 23 (Feb),  EWHC 185 (Ch), the High Court sanctioned plans for the UK's largest mutual insurer (Royal London), to transfer £1bn of European business to Ireland, over concerns about the uncertainties surrounding a no deal Brexit. The court considered the impact of Brexit on the exercise of its discretion. It also noted that the transfer scheme was not one that Royal London had chosen to implement for its own commercial purposes. The High Court found it was reasonable for Royal London's board to avoid the risk of its UK insurance business losing its passporting rights to other EEA jurisdictions, which allow it to serve EEA customers from London, in the event of a no deal Brexit. Although the court noted that a quarter of policyholders would lose certain protections under the UK's Financial Services Compensation Scheme, which offers financial compensation if firms fail, the proposed transfer scheme had built-in safeguards protecting customers from the ‘remote’ event Royal London became insolvent.
Updated draft Financial Services Brexit SI: The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (published 12 February 2019)
On 12 February 2019, HM Treasury published an updated draft of the Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 further to the draft published on 5 February 2019. The amendments remove a reference to exit day in relation to the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2019, SI 2019/38 and make other minor changes to the format. The statutory instrument (SI) amends a number of pieces of UK legislation and retained EU law relating to financial services, in order to address deficiencies arising from the implementation of Brexit. Amendments to primary and secondary legislation are dealt with in Part 2 and Part 3 of the draft SI. Part 4 of the draft SI deals with amendments to retained EU law. The purpose of the draft SI is further detailed in its explanatory information which was also published on 12 February 2019.
For further information, see News Analysis: Updated draft Financial Services Brexit SI: The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019 (published 12 February 2019).
Parliament seeks public views on Financial Services (Implementation of Legislation) Bill
The UK parliament is seeking views on the Financial Services (Implementation of Legislation) [Lords] Bill (the Bill), which is currently passing through parliament. The Bill enables the government to make corresponding or similar provisions in UK law to upcoming EU financial services legislation in the event of a no deal Brexit.
Parliament has published on its website a request for members of the public with relevant expertise and experience or a special interest in the Bill to submit their views in writing to the House of Commons Public Bill Committee, which will be considering the Bill. The Public Bill Committee will meet for the first time on 26 February 2019 and will stop receiving written evidence at the end of the Committee stage, expected to be no later than 5 pm on 28 February 2019.
For further information, see: LNB News 12/02/2019 123.
Takeovers (Amendment) (EU Exit) Regulations 2019
SI 2019/217: On 11 February 2019, The Takeovers (Amendment) (EU Exit) Regulations 2019 were made in exercise of legislative powers under the EU(W)A 2018 in preparation for Brexit, further to the prior publication of a draft of these Regulations. The Regulations amend CA 2006, Pt 28 to enable the domestic takeovers regime to operate effectively on a freestanding basis outside the EU framework. Shareholders should continue to receive the protection of takeover regulation which ensures, so far as possible, fair treatment during a takeover bid. The Regulations come into force on exit day.
For further information, see: LNB News 06/11/2018 46.
Draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019—correction slip 12 February 2019
Financial Services analysis—HM Treasury published a correction slip amending the draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019 which were first published on 9 January 2019 and laid before parliament on 21 January 2019. The amendments renumber paragraphs and change some of the references to EU legislation.
The purpose of the draft Regulations is to make amendments to domestic legislation and retained EU law relating to UK financial services regulators sharing confidential information with third country regulatory and supervisory authorities to help them carry out their functions.
For further information, see News Analysis: Draft Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019—correction slip 12 February 2019.
Equity capital markets
FCA published guidance consultation and finalised guidance in Primary Bulletin No 20
The Financial Conduct Authority (FCA) has published Primary Market Bulletin No. 20. It contains guidance consultation 19/1 (GC19/1), which consults on changes that the FCA is proposing to make to the Knowledge Base, and finalised guidance 19/1 (FG19/1), which sets new and amended guidance in relation to the Knowledge Base. The Knowledge Base is the FCA's repository of non-handbook commentary that has the status of formal FCA guidance. It consists of a series of short procedural and technical notes published in PDF form and ordered by topic. The notes relate to aspects of the Listing Rules, the Prospectus Rules and the Disclosure Guidance and Transparency Rules.
Primary Market Bulletin No 20 also notes that the FCA is, over time, going to retire the name ‘UK Listing Authority’ or ‘UKLA’. Instead, the FCA will refer to their ‘primary market functions’.
For further information, see: LNB News 07/02/2019 104.
FCA paper says regulators should encourage funds to focus on corporate governance
The FCA has published a research note reviewing recent academic research on the impact of the growth of passive investing on market efficiency and market effectiveness. The paper suggests that, rather than examining the asset management market from a strictly investor protection perspective, regulators should design a regime that encourages both active and passive funds to focus more on corporate governance.
For further information, see: LNB News 08/02/2019 73.
New government guidance on understanding and reducing an organisation’s gender pay gap
The Government Equalities Office has published two new pieces of guidance for employers to help them identify the potential causes of any gender pay gap (or GPG) within their organisation and develop an effective approach to tackle it: ‘Eight ways to understand your organisation's gender pay gap’ and ‘Four steps to developing a gender pay action plan’. The guidance is timely, as the deadline for public sector employers to report their GPG this year is 30 March 2019, while for large private and voluntary sector employers it is 4 April 2019.
For further information, see: LNB News 11/02/2019 59.
Financial services regulation for corporate lawyers
ESMA publishes list of national thresholds below which a prospectus is not required
The European Securities and Markets Authority (ESMA) has published a document listing the thresholds below which an offer of securities to the public does not need a prospectus in the various EU Member States under the Prospectus Regulation (EU) 2017/1129. ESMA has drawn up this document to create transparency around the regimes adopted across the EU.
For further information, see: LNB News 08/02/2019 95.
Additional Corporate updates this week
Contract law—Formation and enforceability of alleged oral contract
O’Neill v Avic International Corporation (UK) Ltd  All ER (D) 24 (Feb),  EWHC 165 (QB), relates to an alleged oral contract made between Mr O’Neill and Mr Lou, on behalf of Avic International Corporation (UK) Limited (Avic UK), at a meeting on 30 May 2015. Mr O’Neill’s case was that he entered into an oral contract with Avic UK under which he agreed to resolve an issue that Avic UK was facing, in consideration of a fee payable by Avic UK to him. Mr O’Neill relied on a handwritten note which he said he prepared in the presence of Mr Lou on 30 May 2015. The document was one side of an envelope, which Mr O’Neill said was copied and attached to non-disclosure and non-circumvention agreements. Mr Lou had not signed that document and claimed he had never been provided with a copy. The High Court ruled that Mr. O’Neill had not proved that there was an oral contract, and therefore found that this alleged contract was not made. In so finding, the court reviewed the law relating to oral contracts and considered the extent there was documentary evidence to support the existence of an oral contract.
Supreme Court—‘a welcome ruling’ reinforcing oral agreements
In Wells (Respondent) v Devani (Appellant)  All ER (D) 54 (Feb),  UKSC 4, the Supreme Court unanimously held that there was a binding oral contract between Mr Wells, a property developer and Mr Devani, an estate agent, without the need to imply any terms into such a contract. The case centred on whether the parties had entered into a binding agreement that Mr Devani would be compensated by way of commission, for his work in introducing a purchaser for Mr Wells’ property development. Mr Devani maintained such commission details were communicated to Mr Wells initially in a telephone conversation. The Supreme Court held, among other matters, that a binding oral contract had been reached between the parties despite there being no express identification of the event which would trigger the obligation to pay commission to Mr Devani. Tricia Hemans of Falcon Chambers, Nick Southworth of IBB Solicitors, Peter Hall of Weightmans LLP and Gary Blaker QC of Selborne Chambers comment on the judgment. In particular, Mr Blaker explains that ‘this seems to be a sensible and practical decision which prevents a party from relying upon the imprecise nature of words to wriggle out of a contractual obligation.’
For further information, see: LNB News 13/02/2019 118.
Additional news—daily and weekly news alerts
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We have updated the following precedents in our Equity Capital Markets (Main Market): IPOs topic:
Dates for your diary
|15 February 2019||Deadline for responses to the FRC’s post-implementation review of its 2016 changes to ethical and auditing standards.|
The FRC’s review looks at what the impact of its 2016 changes to ethical and auditing standards has been on auditor independence, prevention of conflicts and on audit quality.
See: LNB News 20/11/2018 76.
To track key legislative and regulatory developments, see our Trackers:
To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.
To read about the latest corporate announcements, see our Market Tracker weekly round-up—8 February 2019.
To read about the latest issues and developments which we are following in Market Tracker, see our latest blog post: Market Tracker weekly bulletin—14 February 2019.