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Directors’ knowhow is a monthly article, which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.

UK confirms decision to raise prospectus exemption threshold to €8 million

The UK government has confirmed that, from 21 July 2018, issuers are no longer required to publish a prospectus for offers of securities to the public with a total consideration where the total consideration of such an offer is €8 million or less over a 12 month period. The previous exemption threshold was €5 million.

The decision forms part of the implementation process for the new Prospectus Regulation, which seeks to make it easier for small and mid-size quoted companies to access capital, in order to support their growth and development. It replaced the Prospectus Directive on 20 July 2017 and applies to all prospectuses approved on or after 21 July 2019.

Among other things, the Regulation includes provisions which give discretion to individual EU Member States to exempt “domestic-only” offers to the public that seek to raise up to a maximum €8 million. Following a period of consultation, during which the Quoted Companies Alliance played an active part in campaigning for a raise in the threshold, the government has confirmed the new, higher limit. Had the government not acted, the default provision would have meant the threshold falling to €1 million.

Therefore, this decision will support early stage investors in small and mid-size quoted companies during these companies’ initial stages of growth and access to capital markets.

You can read:

  • The Statutory Instrument making consequential amendments to the Financial Services and Markets Act 2000 (FSMA) here; and
  • The Explanatory Memorandum here.

European Commission publishes advice on preparing for Brexit

The European Commission has issued a communication urging all citizens, businesses and administrations in both the UK and the EU to prepare for the range of possible scenarios that they could be forced to confront, as the UK prepares to leave the EU on 30 March 2019.

The communication notes that while the UK and the EU continue to negotiate the withdrawal agreement, companies must be prepared for all potential negotiation outcomes. This means:

  • If a deal is successfully negotiated between the UK and the EU – There will be a transition period between 30 March 2019 and 31 December 2020, in order to allow sufficient time for companies to prepare for the realities of the new relationship agreed between the UK and the EU. EU laws would in general apply in the UK, but the UK would no longer participate in the governance or decision making of the EU institutions, bodies or agencies, such as the European Parliament, the European Commission or ESMA.
  • If no deal is negotiated between the UK and the EU – There would be no transition period, as discussed above, which would mean that EU law would no longer apply to and in the UK from 30 March 2019 onwards.

The communication is accompanied by a factsheet advising businesses in the EU27 of things they must do or consider before 30 March 2019. They include:

  • Making appropriate contingency plans for both ‘No deal’ or ‘Negotiated Deal’ scenarios;
  • Companies trading the Understanding their responsibilities under EU law regarding their supply chains and data protection;
  • Taking steps to transfer any certificates, licences or authorisations issued in the UK to the EU27, or obtain new ones; and
  • Understanding the EU procedures on customs and excise duties.

Giving oral evidence at Parliament’s Liaison Committee meeting on 18 July 2018, the prime minister confirmed that the UK government will be following suit, issuing up to 70 technical notices over the course of August and September 2018 to advise what UK companies and citizens need to do in the event of a no-deal.

FCA issues statement on its role in preparing for Brexit

The Financial Conduct Authority (FCA) has published a statement on its role in preparing for Brexit.

In it, the FCA explains that it continues to prepare for a range of scenarios, including one in which the UK leaves the EU on 29 March 2019 without a withdrawal agreement and implementation period having been ratified between the UK government and the EU.

The EU (Withdrawal) Act will transfer and convert existing EU law at the point of exit into UK law. The Act also gives ministers the power to amend existing EU law, so that it can continue function effectively when the UK leaves the EU.

Accordingly, the FCA’s role is to amend and maintain EU binding technical standards, which sit underneath EU regulations and directives, and provide the technical detail of how those requirements must be met.

The FCA will also make amendments to the Handbook, which will be consulted on in autumn 2018, to ensure that it is consistent with the changes the government is making to EU law, so that it functions effectively when the UK leaves the EU.

FRC reminds company chairs of their corporate governance responsibilities

Sir Win Bischoff, Chair of the Financial Reporting Council (FRC), has written to chairs of companies to remind them of their corporate governance responsibilities, in light of the publication of the revised UK Corporate Governance Code.

Summarising the main features of the new UK Code, Sir Win advises chairs to ensure that companies do not take a tick-box approach to corporate governance disclosures. He adds that, in the circumstances where companies are unable to comply with certain provisions of the UK Code, chairs must make sure that their company provides clear explanations for the actions they are taking.

You can read the QCA’s review of the revised UK Corporate Governance Code here.

Sir Win has also written to investors and proxy advisors.

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