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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | April 2019
On March 29, 2019 the European Securities and Markets Authority (ESMA) published its final guidelines to assist competent authorities in their review of the specificity and materiality of risk factors and of the presentation of risk factors across categories when approving a prospectus following the full implementation of the Prospectus Regulation (Regulation (EU) 2017/1129) in July 2019.
ESMA published a consultation paper in July 2018 containing draft guidelines on risk factors and this Final Report provides an overview of the feedback received during the consultation as well as ESMA’s responses, with the final guidelines being presented in Annex II.
The primary purpose of including risk factors in a prospectus and/or a supplement is to ensure that investors can assess the relevant risks related to their investment and so make informed investment decisions in full knowledge of the facts. As a result, risk factors should be limited to those risks which are material and specific to the issuer and/or its securities and which are corroborated by the content of the prospectus. The guidelines in the Final Report aim to encourage appropriate, focused and more streamlined disclosure of risk factors, in an easily analysable, concise and comprehensible form and the following guidelines are provided
The guidelines will become effective two months after their publication on ESMA’s website in all EU official languages.
(ESMA, Final Report – ESMA Guidelines on risk factors under the Prospectus Regulation 29.03.19)
On March 29, 2019 the European Securities and Markets Authority (ESMA) published its Final Report on the technical advice on the minimum information required in documents describing a merger, division or takeover necessary to apply an exemption from the obligation to publish an approved prospectus under the Prospectus Regulation (Regulation EU) 2017/1129).
Under the Prospectus Regulation, issuers may offer or admit securities in connection with takeovers, mergers or divisions without publishing a prospectus, provided that a document is made available to investors describing the transaction and its impact on the issuer. The technical advice sets out the minimum information content of this document in relation to the offer of securities to the public or the admission to trading of securities on a regulated market, and the description and impact that a takeover, merger or division may have on the issuer’s operational and financial activities.
ESMA consulted on draft technical advice in July 2018. It notes that it only received five responses to the consultation and none of these represented the interests and views of investors. In light of this and the lack of specific evidence to ease ESMA’s concerns about investor protection, ESMA considers that it does not have a sufficient basis to significantly change the approach in its technical advice and so has only made limited changes to the draft technical advice. It will now need to be endorsed by the European Commission.
On March, 29 2019 the Financial Conduct Authority (FCA) published Handbook Notice No. 64 describing changes to the FCA Handbook, Binding Technical Standards and other material made by the FCA in February and March 2019 to deal with the situation where the UK leaves the EU without a deal or an implementation period.
In relation to corporate aspects, instruments published include the following
These Instruments will commence on exit day, as defined in the European Union Withdrawal Act 2018, rather than at 11pm on March 29, 2019 as was specified in Policy Statement 19/5 published in February 2019.
The FCA has also published guidance on its approach to existing non-Handbook guidance where it relates to EU law or EU-derived law, such as technical notes, “Dear CEO” letters and the procedural and technical notes within the UK Listing Authority’s knowledge base. That non-Handbook guidance (guidance published outside of the FCA Handbook) will continue to be relevant in relation to matters that occur before exit day and will also be relevant, and should be taken into account, in relation to matters arising on or after exit day where the EU or EU-derived provisions to which it relates become or remain UK law.
In addition, the FCA has published guidance on its approach to non-legislative material produced by the EU, and in particular, the European Supervisory Authorities which include the European Securities and Markets Authority (ESMA).
The FCA notes that under the European Union Withdrawal Act 2018, the broad range of non-legislative material produced by bodies such as ESMA, or their predecessor bodies (for example CESR) has not been incorporated into UK law but the EU-derived law to which the non-legislative material relates has largely been retained. As a result, the FCA considers that the EU non-legislative material will remain relevant post-exit day to the FCA and market participants in their compliance with regulatory requirements, including provisions in the FCA’s Handbook. Accordingly, the FCA will expect firms and market participants to continue to apply ESMA’s guidelines and recommendations (and those of the other European Supervisory Authorities ) to the extent that they remain relevant, as they did before exit day, interpreting them in light of the UK’s withdrawal from the EU and the associated legislative changes that are being made to ensure the regulatory framework operates appropriately. In addition, the FCA will continue to apply such guidelines and recommendations in respect of its own functions in the same manner as before, interpreting them in light of the UK’s withdrawal from the EU and the associated legislative changes.
(FCA: Brexit: The FCA confirms final rules for firms, 29.03.19)
On March 29, 2019 the European Securities and Markets Authority (ESMA) updated its Questions and Answers (Q&A) document regarding the implementation of the Market Abuse Regulation (MAR).
The updated version of the Q&A document includes an update of the Q&A clarifying the scope of firms subject to the MAR provision to detect and report suspicious orders and transactions, together with new detailed answers in relation to emission allowances market participants (EAMPs). In this context there are new detailed answers on
On March 29, 2019 the Department for Business, Energy and Industrial Strategy (BEIS) published an updated version of its guidance on environmental reporting. It now includes guidance to help companies comply with the Government’s new policy on streamlined energy and carbon reporting, including greenhouse gas reporting. The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (2018 Regulations) implement this policy and introduce new legal obligations from April 1, 2019.Under changes introduced by the 2018 Regulations, for financial years commencing on or after April 1, 2019, large unquoted companies and large limited liability partnerships are obliged to report their UK energy use and associated greenhouse gas emissions as a minimum relating to gas, electricity and transport fuel, as well as an intensity ratio and information relating to energy efficiency action, through statements in their directors’ report. Quoted companies of all sizes will continue to be required to report their global greenhouse gas emissions and an intensity ratio in their directors’ report, but they are now also required to report their total global energy use and information relating to energy efficiency action, alongside the methodology used to calculate the new and existing disclosure requirements.
The guidance is designed to help those companies and limited liability partnerships in scope of the new requirements. The updated guidance sets out steps to be taken when companies and limited liability partnerships are considering their environmental impacts and which key performance indicators to report on. It also provides guidance on the new streamlined energy and carbon reporting requirements and outlines additional voluntary information.
On April 2, 2019 the Business, Energy and Industrial Strategy Committee of the House of Commons published a report on the future of audit, following an enquiry that it launched in November 2018. The object of the enquiry was to examine how the three separate reviews of different aspects of the audit market, namely the Kingman review of the Financial Reporting Council (FRC), the Competition and Markets Authority market study into the supply of statutory audit services and the independent Brydon review of the quality and effectiveness of audit, would complement each other.
The BEIS Committee makes a number of recommendations in its report, including the following
(BEIS Committee, The future of audit, 19th report of Session 2017/19, 02.04.19)
On March 27, 2019 the European Parliament resolved to adopt, with amendments, the European Commission’s 2016 proposal for a directive to amend the Accounting Directive (Directive 2013/34/EU) as regards disclosure of income tax information by certain undertakings and branches.
The changes to the European Commission’s 2016 proposal include the following
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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