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M&A hub: Developments driving and shaping M&A
Key legal and regulatory developments driving and shaping M&A
United Kingdom | Publication | May 2023
On May 18, 2023 the Financial Conduct Authority (FCA) published its first engagement papers in connection with the reform of the UK prospectus regime. Based on the draft legislation published by HM Treasury (HMT) in December 2022 as part of the Edinburgh Reforms, these set out the FCA’s initial thinking on how (under the new regime) it might write rules in the following areas:
These form part of the FCA’s engagement process in relation to the new regime which, as discussed on its website, will also include online focus groups to be convened in due course.
Any written responses to the engagement papers are requested by September 29, 2023.
A brief summary of each of the engagement papers is set out below.
Engagement Paper 1 (EP1): Admission to trading on a regulated market
The FCA recognises there are strong arguments that it is important (for investor protection/market effectiveness) to stick broadly with existing requirements as set out in the UK Prospectus Regulation. However, EP1 sets out for discussion a number of areas where there may be opportunities to make small changes which, cumulatively, the FCA considers could represent a significant improvement on current requirements. These include:
The FCA notes its initial thinking is that changes to other adjacent regimes, such as the advertisement regime or the rules under COBS 11A (in relation to the sequencing of documents on an IPO), would not be within the scope of the current policy discussion, but that it could revisit this once the first phase of the transposition of rules under the new regime is complete.
Engagement Paper 2 (EP2): Further issuances of equity on regulated markets
The FCA sets out possible ways in which it may approach scaling back current requirements for a prospectus in connection with further issues of equity securities, but notes that its analysis is not intended to be exhaustive and that it is interested in views on other possible options not considered in EP2. Feedback is sought on a number of areas, including:
Engagement Paper 3 (EP3): Protected forward-looking statements
The reformed UK prospectus regime set out in the draft legislation published by HMT introduces a different liability threshold (based on fraud and recklessness) for certain forward-looking information in prospectuses and gives the FCA responsibility for specifying which categories of information this will apply to. The FCA notes that this revised liability treatment is intended to encourage issuers to include “protected forward-looking statements” (PFLS) in prospectuses by reducing the risk of successful investor claims compared with the existing prospectus liability standard.
EP3 sets out the FCA’s initial considerations regarding the rules it will make to specify what types of information can be considered PFLS for these purposes, any conditions as to how such information must be prepared, and how such information should be presented within a prospectus. The FCA notes that it does not intend to be unduly prescriptive around the type of information that can be considered PFLS so long as such information can be useful to investors when making investment decisions.
Particular questions on which the FCA would welcome views include:
Engagement Paper 4 (EP4): Non-equity securities
The FCA’s view is that the current regime for non-equity securities does not require major overhaul, but should be reviewed to see if there are any areas that could be improved. Topics covered in EP4 include:
Views are sought on a number of issues including:
(FCA, New regime for public offers and admissions to trading, Engagement papers, 18.05.2023)
On May 15, 2023 the Takeover Panel published a Public Consultation Paper, PCP 2023/1, proposing certain amendments to the Takeover Code (Code) in relation to Rule 21 (Restrictions on frustrating action) and other matters. The consultation closes on July 21, 2023 with final rule changes expected to be published in the Autumn. Our briefing, Frustrating action: UK Takeover Panel proposes significant changes to Rule 21 restrictions, sets out an overview of the key proposed changes, together with our thoughts on these.
On May 16, 2023 UK Finance published a report, based on research conducted by EY, which analyses the current state of the UK’s capital markets. It identifies areas that require further attention and makes a number of recommendations for consideration to enhance the UK’s competitiveness globally.
EY’s research is based on detailed quantitative analysis, supplemented with qualitative insights gathered through more than 100 interviews and survey inputs from, among others, pre-IPO companies, publicly traded companies, advisers (including investment banks, law firms, and accountancy firms), investment managers, infrastructure providers and trade bodies and industry organisations.
Key challenges identified
Four key challenges that interviewees felt needed to be addressed to maintain and enhance the global competitiveness of UK capital markets were as follows:
Influencing criteria when choosing market to trade on
Companies were asked to rank features they look for in deciding which exchange to be traded on and the following were the top five key criteria:
Recommendations
The report makes a series of recommendations under four separate themes to address the issues identified as follows:
(UK Finance, UK Capital Markets – Building on Strong Foundations, 16.05.2023)
On May 18, 2023 the House of Commons Public Bill Committee invited written views on the Digital Markets, Competition and Consumers Bill that it is now proposing to scrutinise. That Committee intends to have its first sitting to consider the Bill on June 13, 2023, with the Committee scheduled to report by July 18, 2023.
The Bill covers both digital markets and proposed competition law reforms (Parts 1 and 2 of the Bill) and proposed reforms of consumer law enforcement and new consumer rights (Parts 3 and 4 of the Bill).
(Parliament, Digital Markets, Competition and Consumers Bill, Call for written evidence, 18.05.2023)
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