Last updated on 6 September 2022
Post Brexit, the UK capital markets do not qualify as "regulated markets" for the purposes of EU legislation, and therefore UK issuers now need to negotiate two separate (albeit very similar) regimes in order to access EEA capital markets.
As regards the public M&A regime, although it is derived from the EU Takeovers Directive, Brexit has not had a significant impact other than the removal of the "shared jurisdiction" provisions.
Capital markets regulation
The current UK capital markets regime (in particular the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules and the market abuse regime) is largely derived from EU Directives and Regulations. The relevant EU regulations, including the Market Abuse Regulation and the Prospectus Regulation have become part of English law by virtue of the European Union (Withdrawal) Act 2018, and UK versions of these regulations and various subordinate legislation are currently in force.
The FCA has updated its handbook to update terminology such as references to "regulated markets" and other concepts which no longer apply. It has also amended the rules so that, in general, EEA issuers are not given differential treatment over other third country issuers. References to EU law and EU institutions have been replaced with UK equivalents. The FCA has incorporated some of the ESMA guidance into its own guidance.
On a broader note, Brexit has provided an opportunity to reform the listing and prospectus regimes in order to make London a more attractive listing venue. Please see our client notes for further details of the ongoing and proposed reforms:
- FCA reform continues: a single route to listing
- Radical prospectus reform: a step closer
- Radical prospectus reform balancing access agility and protection
- Listing regime rule changes - the first step is always the hardest
- A balancing-act - removing barriers to listing whilst maintaining reputation - the FCA's Primary Markets Effectiveness Review
The secondary fundraising regime is also being overhauled – for details, please see: Second to none - redefining the UK's secondary fundraising regime
Due to the separation of the EU and UK capital markets regimes, offers of securities can no longer be made by UK issuers in the EEA, or vice versa, by way of a passported prospectus.
As UK markets have lost their status as “regulated markets” under EU law, companies listed on both EEA and UK markets can no longer appoint a single regulator under the current "home state" system. Instead they will be regulated separately by their EEA regulator and the FCA.
As a result, EEA entities listed in the UK are now required to make certain filings with the FCA where previously they were required to file only in their EEA home state. For example, EEA issuers listed in the UK are required to comply with DTR 5 (major shareholding notifications) and their major shareholders and management need to report dealings to the FCA. Various information required to be provided to the competent authority under the Market Abuse Regulation ("MAR") such as notifications of directors' dealings, the provisions of insider lists and notifications of delayed disclosure, now needs to be made to two regulators.
The Takeover Code has not been significantly affected, although again some terminology has changed.
However, there have been changes to its scope as regards EEA issuers and markets. The provisions by which the Takeover Panel could previously share jurisdiction with another EEA regulator have been removed and:
- an offer for a company incorporated in an EEA state but traded on a UK market is no longer be subject to the Code;
- an offer for a UK company traded on an EEA market (and not a UK market) is not subject to the Code unless the target has its central management and control in the UK; and
- the Code applies to an offer for a UK company listed on a regulated market in an EEA Member State if the residency test is satisfied.
Obtaining merger clearance for certain transactions has become more onerous post-Brexit (see Brexit: Competition Law).