Corporate Weekly Highlights- 5 July 2018
This week’s edition of Corporate highlights includes analysis of Panel Statement 2018/8 (Takeover Panel v King) and analysis of Minera Las Bambas SA v Glencore Queensland Limited on the interpretation of a tax indemnity in a share purchase agreement. It also reports on forthcoming changes to the Companies Act 2006 provisions on the restoration of companies, the coming into force of the Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018 as well as certain provisions of the European Union (Withdrawal) Act 2018. In addition, it considers recent statements issued by each of the Financial Conduct Authority and Her Majesty’s Treasury on financial services regulation and preparation for Brexit.
In this issue:
Public company takeovers
Takeover Panel kicks King’s request for committee hearing into touch
Corporate analysis: Panel Statement 2018/8 is considered, in which the Takeover Panel (Panel) refused a request by Mr David King that the Hearings Committee (Committee) be convened to review a decision of the Executive. The Executive had decided to refuse Mr King’s request for an extension of time to send an offer document to the shareholders of Rangers International Football Club plc (Rangers) pursuant to Rule 24.1 of the City Code on Takeovers and Mergers (Code).
The Executive had previously ruled that Mr King had incurred an obligation under Rule 9 of the Code to make a mandatory offer for Rangers as a result of him and his concert parties controlling voting rights attached to more than 30% of the issued share capital of Rangers. This ruling had been upheld by the Committee and the Takeover Appeal Board.
Following Mr King’s failure to comply with the ruling, the Panel successfully applied to the Outer House of the Court of Session in Edinburgh under section 955 of the Companies Act 2006 (CA 2006) for an order requiring Mr King to procure the making of an offer. This was the first occasion on which the Panel had used its statutory powers to apply for a court order. This decision was upheld by the Inner House of the Court of Session following an appeal by Mr King.
This News Analysis considers the circumstances in which the Panel can refuse to convene the Committee, what the Panel (through the Committee chair) decided and what lessons can be drawn from that decision.
For further information, see News Analysis: Takeover Panel kicks King’s request for committee hearing into touch.
For background, see News Analyses: Court grants an Order requiring Mr King to make a mandatory offer under the Takeover Code (Panel on Takeovers and Mergers v King) and Scottish appeal court upholds decision requiring King to make Rule 9 offer for Rangers.
Private M&A (share purchase), Tax for corporate lawyers
Tax analysis: In Minera Las Bambas SA v Glencore Queensland Limited  EWHC 1658 (Comm), the High Court was required to determine whether Peruvian VAT was ‘payable’ in the context of a tax indemnity contained in a share purchase agreement. It held that the VAT assessed by the Peruvian tax authorities was not ‘payable’ within the tax indemnity’s meaning and would only be ‘payable’ if and to the extent the Peruvian tax court determined that VAT was payable and such debt became ‘coercively’ enforceable in accordance with Peruvian tax law.
This News Analysis considers the court’s decision in detail and, in particular, the impact it may have on the drafting and negotiation of tax indemnities in practice.
For further information, see News Analysis: Tax only ‘payable’ under SPA indemnity when court determines appeal against assessment (Minera Las Bambas v Glencore).
Striking off, dissolution and restoration
Third Parties (Rights Against Insurers) Act 2010 (Consequential Amendment of Companies Act 2006) Regulations 2018
The government has published a draft statutory instrument, the Third Parties (Rights Against Insurers) Act 2010 (Consequential Amendment of Companies Act 2006) Regulations 2018, that proposes to amend CA 2006, s 1030. The amendments will give an insurer of a company that has been dissolved the right to restore it to the companies register at any time. The company can be restored for the insurer to bring legal proceedings, in the name of the company, to recover contributions from third parties who are liable for a personal injury claim (alongside the company), where the insurer has paid out damages in respect of that claim. Currently, an insurer can only apply for the restoration of a company within six years of the date on which it was dissolved.
For further information, see LNB News 29/06/2018 62.
Financial services regulation for corporate lawyers
Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018
The Financial Services and Markets Act 2000, the CA 2006 and the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017, SI 2017/701, are amended by the Regulations to (among other things):
- give effect to Articles 1(3) and 3(2) of Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (Prospectus Regulation)
- update references following the transposition of Directive 2014/65/EU on markets in financial instruments (recast) (MiFID II) and the coming into force of Regulation (EU) 600/2014 on markets in financial instruments and amending Regulation (EU) 648/2012, and
- update a reference to the instrument implementing MiFID II and make a correction to the definition of ‘MiFID investment firm’, which was erroneously omitted during implementation of MiFID II
For further information, see LNB News 29/06/2018 104.
FCA provides update on how it is preparing for the UK leaving the EU
HM Treasury has published a paper that sets out its approach to laying financial services statutory instruments under the European Union (Withdrawal) Act (EUWA). In connection with this, the Financial Conduct Authority (FCA) has published a statement that provides stakeholders with an update on how it is preparing for the UK leaving the EU.
Among other things, HMT’s paper covers:
- the implementation period, during which common rules will continue to apply and the UK will continue to implement new EU law that comes into effect and to be treated as part of the EU’s single market in financial services
- EUWA and financial services contingency preparations, including the powers given by EUWA to ministers to prevent, remedy or mitigate any failure of EU law to operate effectively, or any other deficiency in retained EU law, through statutory instruments
- HMT’s plans to delegate powers to the UK’s financial services regulators (including the FCA) to address deficiencies in the regulators’ rulebooks and in the EU binding technical standards (BTS) that will become part of UK law, and
- HMT’s approach to fixing deficiencies in the event that the UK leaves the EU without a deal
HMT states that the government is confident that the implementation period, agreed between the UK and the EU earlier this year, will be in place between 29 March 2019 and 31 December 2020. Nevertheless, the government says it will ensure that a workable legal regime is in operation whatever the outcome of negotiations.
The FCA’s statement covers:
- HMT’s intention (outlined in HMT’s paper) to give it (and the UK’s other financial services regulators) responsibility for amending and maintaining existing BTS, so that they can operate after Brexit
- the FCA’s intention to consult on proposals to amend BTS and the FCA Handbook in autumn 2018, subject to the HMT’s statutory instrument timelines
- the FCA’s intention to consult on the rules that will apply to firms in the temporary permissions regime in due course (the temporary permissions regime allows EEA firms to continue operating in the UK for a time-limited period after the UK has left the EU, if no deal was reached with the EU), and
- the FCA’s confirmation that it will set out the details for EU entities that currently access or do business in the UK through means other than an EU passport
For further information, see LNB News 28/06/2018 159.
European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018
On 4 July 2018, various provisions of the European Union (Withdrawal) Act 2018 (EU(W)A 2018) were brought into force by the European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018, SI 2018/808 (the Commencement Regulations). The EU(W)A 2018 is to repeal the European Communities Act 1972 and make other provision in connection with the withdrawal of the United Kingdom from the EU.
The provisions that came into force were:
• EU(W)A 2018, s 5(6) (exceptions to savings and incorporation), although only in certain circumstances
• EU(W)A 2018, s 6(7) (interpretation of retained EU law)
• EU(W)A 2018, ss 12(9)–12(11), 12(13) (retaining EU restrictions in devolution legislation etc)
• EU(W)A 2018, s 15(1) (publication and rules of evidence) insofar as it relates to EU(W)A 2018, Sch 5, para 2 (publication and rules of evidence: exceptions from duty to publish) and accordingly Sch 5, para 2
• EU(W)A 2018, s 15(2) (publication and rules of evidence) insofar as it relates to EU(W)A 2018, Sch 5, para 4 (publication and rules of evidence: power to make provision about judicial notice and admissibility) and accordingly Sch 5, para 4
• EU(W)A 2018, s 19 (future interaction with the law and agencies of the EU)
• EU(W)A 2018, s 23(5) (consequential and transitional provision) insofar as it relates to EU(W)A 2018, Sch 8 (consequential, transitional, transitory and saving provision), paras 18, 20, 22(d) (for certain purposes only), 22(e) (for certain purposes only), 31-34, 36 and accordingly those paragraphs of Sch 8
• EU(W)A 2018, s 23(7) (consequential and transitional provision) insofar as it relates to EU(W)A 2018, Sch 8, para 40 (consequential, transitional, transitory and saving provision: main powers in connection with withdrawal) and accordingly Sch 8, para 40
• EU(W)A 2018, s 23(8) (consequential and transitional provision) insofar as it relates to the repeal of the certain enactments and EU(W)A 2018, Sch 9 (additional repeals) insofar as it relates to the repeals of those enactments
The Commencement Regulations also provide for certain provisions of the EU(W)A 2018 to come into force on exit day (defined in the EU(W)A 2018 as 29 March 2019 at 11pm) and for transitional provisions to be made in relation to certain enactments.
For further information, see LNB News 03/07/2018 103.
Additional news—daily and weekly news alerts
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Dates for your diary
|16 July 2018||Revised UK Corporate Governance Code (UKCG Code): The FRC is expected to publish a revised version of the UKCG Code to apply to premium listed companies with accounting periods beginning on or after 1 January 2019, following its December 2017 consultation. (Note: the source for this date is a calendar entry on the FRC website.)
See LNB News 05/12/2017 109.
|21 July 2018||EU public reporting framework: The European Commission consultation on the effectiveness of the EU framework on public reporting by companies closes.
See LNB News 21/03/2018 142.
|21 July 2018||The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018, SI 2018/786 will come into force.
See LNB News 29/06/2018 104.
|23 July 2018||Limited partnerships: The government’s consultation seeking views on proposed reforms to the regulatory regime governing limited partnerships closes.
See LNB News 30/04/2018 149.
|23 July 2018||Revised FCA Technical Note: FCA’s consultation on changes to its Technical Note on periodic financial information and inside information (FCA/TN/506.2) closes.
See LNB News 11/06/2018 115.
|24 July 2018||Audit: The International Organization of Securities Commissions (IOSCO) consultation on good practices for audit committees in supporting audit quality closes.
See LNB News 24/04/2018 113.
To track key legislative and regulatory developments, see our Trackers:
New Q&As added this week:
- What resources do you have on removing an LLP member and entering into a settlement agreement?
- How is an SPA affected where a seller holds the sale shares on trust as a trustee for another entity or individual and can the seller remain anonymous in such a situation?
- Can a company display a previous registered name as its trading or business name?
- A company has submitted dormant accounts despite continuing to trade, and now has judgment against it in relation to unpaid debts. Has it committed an offence by continuing to trade whilst dormant?
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 monthly round-up: Market Tracker monthly round-up—June 2018.