Brexit: Corporate & Commercial legal implications
We have seen, in the recent years of recovery following the financial crisis, a growing market for companies in the South West to be acquired by increasingly international buyers (from both within the EU and further afield).
We anticipate that Brexit will mean a short-term decline in M&A market confidence while the implications of the vote are analysed, Brexit and new trade deals are negotiated and Article 50 is invoked. This is likely to result in an increasingly cautious attitude being taken by international buyers. With regards to the law affecting M&A in the UK, it is governed predominantly by UK, rather than EU law (subject to employment and competition, areas of which do derive from the EU). We therefore don’t anticipate a major shakeup in M&A law, the impact will be felt by way of economic conditions affecting the commercial terms of transactions.
Wider corporate market
In terms of the wider corporate market, particularly in the context of financial services, EU legislation and rules have shaped UK law. We anticipate that the majority of such EU law which has been implemented in the UK (much of which forms the foundation of UK financial services regulation), such as the Prospectus Directive and the Prospectus Regulation (both of which regulate the information which must be provided when offering securities to the public) will see limited change initially, with the UK no doubt keen to present a message of stability to the markets, investors and international businesses based here.
In the commercial world, many UK laws regulating areas such as consumer protection and unfair commercial practices stem from EU legislation. Such laws have been implemented in the UK by way of a mixture of primary legislation (such as the Consumer Rights Act 2015) and secondary legislation (such as the Consumer Contracts Regulations 2013). Primary legislation will be unaffected by Brexit as it was passed by the UK parliament, secondary legislation however could, in the absence of Government action, fall away upon Brexit. No proposals have been put forward as yet as to how this is going to be dealt with.
Force majeure provisions
One particular area in relation to contracts that businesses should now be analysing carefully are force majeure provisions in both existing and future contracts. Brexit and consequential changes to trading arrangements (whether by way of the imposition of import/export tariffs or otherwise) could lead to parties being unable to fulfill contractual obligations due to matters outside of those parties’ reasonable control. Suppliers of goods and services need to ensure that if they are unable to fulfill contractual obligations in these circumstances, they are relieved of their obligation to do so. Customers, or recipients of goods and services, need to ensure that if a supplier is unable to fulfill its contractual obligations, they will receive adequate compensation.
Sale of goods and services
Another point to note for businesses that sell goods or services within the UK and the EU and utilise a single set of trading terms and conditions is that, as time elapses, and if UK and EU law becomes more disparate, multiple sets of trading terms and conditions may be required.
Related: See Nicola Cutler's blog, Brexit: the impact on UK and cross-European disputes