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Company Law Framework: Practical and Legislative Brexit Changes
The United Kingdom’s departure from the European Union has resulted in many changes for company procedures including the updating of filing requirements in accordance with the Companies Act 2006 (the Act) and regulations made under the Act to reflect the UK’s position outside of the EU.
These changes will only affect a small number of companies; the status quo will apply to the majority of companies. However, it’s important that companies that are affected take the right and necessary decisions in order to prepare.
Filing and Disclosure Changes for Companies
Changes concerning the filing requirements and other company procedures will be introduced into UK Statute by the ‘Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019 (2019/348)’ on the 1st January 2020.
Who these changes will affect The key changes to filing requirements will only impact the following:
– UK companies which employ an EEA corporate officer, such as a director or secretary; and
– EEA-registered companies which have registered a UK establishment (including newly registered UK Societies and UK EIGs).
What do companies need to do?
UK Companies which have an EEA Corporate Officer
UK companies will now have to provide additional information to Companies House regarding their EEA corporate officer (which is a limited company).
Currently, such UK companies are only required to provide limited information in accordance with s164 and s278 of the Companies Act 2006. However, they will now need to file an updated form CH02 to include the corporate officers’ legal form and its governing law.
Registered overseas companies
EEA companies with a UK establishment will need to provide further information to Companies House. This includes:
– Information on the law under which the company is incorporated;
– The address of its principal place of business or registered office;
– The company’s purpose (its ‘objects’);
– The amount of share capital issued; and
– The company’s accounting period and period of disclosure (for companies that are required to disclose accounts under their parent law).
In addition to the above, they must also publish information on customer-facing Material, such as on their letterheads and website.
Cross-Border Mergers
After exit day
After the 31st January (exit day), the EU cross-border merger regime, which is currently implemented into UK law via the Companies (Cross-Border Mergers) Regulations 2007 will no longer apply to companies. This will be removed from law by The Companies, Limited Liability Partnerships and Partner- ships (Amendments etc.) (EU Exit) Regulations 2019 on exit day.
The effects of this may be that any cross-border mergers involving a UK and EEA company (or Partnership) which has not been completed prior to 1st January 2021 may fall through.
What do companies need to do?
It is imperative that any company that is undergoing a cross-border merger under the EU cross-border merger regime, seek urgent legal advice on the status of their merger to prevent any potential issues.
Those companies which are seeking a merger with companies based outside of the UK will need to transfer all assets and liabilities using contractual arrangements, mirroring the current position between UK and non-EEA companies.
Removal of Benefits for certain UK Companies only listed on an EEA Market
The change
There have been changes and updates to the definition of ‘regulated market’ under the Companies Act 2006 (and related legislation). There are two changes of the definition that will affect certain groups of companies. In both respects these amendments were introduced to ensure all non-UK entities are treated in the same way after 31st January 2020 so that the UK complies with the rules of the World Trade Organisation.
This rids any preferential treatment given to entities listed on EEA regulated markets. Therefore, following the withdrawal of the UK from the EU, only entities listed on UK regulated markets will be able to make use of certain benefits.
Who these changes affect
These changes will affect intermediaries who deal in securities that are listed on an EEA regulated market and do not have access to a UK regulated market and who own shares in a parent holding company.
In addition, investment companies listed on an EEA regulated market, and not on a UK regulated market, and that currently make use of relaxations on controls on their distribution of profit will also be affected.
What do companies need to do?
Intermediaries who deal in securities who do not have access to a UK regulated market, need not take any action – as they will still be able to hold the shares. However, they will no longer be able to exercise the voting rights attached to those shares.
UK investment companies that are listed on an EEA regulated market as opposed to a UK regulated market will not be able to make use of relaxations on controls on their distribution of profits.
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