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The vote to leave – impact on company law and regulation

6 July 2016

What is the likely impact of Brexit on company law and regulation?

As only a minority of the provisions in the Companies Act 2006 are derived from EU directives it is not anticipated that company law will be identified as a high priority area for review following Brexit – especially as it has been relatively recently refreshed.  

It is therefore unlikely that privately-owned UK companies will feel a huge impact immediately post-Brexit in terms of day to day administrative, governance or company secretarial matters. So for the time being it is a case of business as usual. More significant changes for UK companies are likely to derive from other areas, such as employment law, tax, data protection and finance – not to mention the initial changes to market conditions and currency exchange rates. 

Areas where our relationship with Europe is directly relevant are likely to be amongst the first areas requiring more detailed consideration, such as:

  • the ability to incorporate Societas Europaea (a European public limited company subject to EU-wide laws). Such entities incorporated in the UK may be affected by a Brexit and may need to relocate their registered office 
  • UK companies being able to take advantage of the process for effecting the merger of European companies under the Cross-Border Mergers Directive where the merger includes at least one UK company and at least one company from another EEA member state.

In the longer term, the precise impact generally on company law and regulation will depend on our ‘new’ relationship with the EU as negotiated during our exit (once this process has formally started), and we are in uncharted waters. In respect of regulation that has historically derived from the EU, going forward the UK will be able to reconsider the extent it is deemed appropriate and proportionate for the UK and reshape it accordingly. But this will be some way down the track. Since the enactment of new UK laws to replace EU-based law will not be practicable immediately following our exit from the EU (and in many cases may not be desirable) transitional arrangements may well be enacted. Under such arrangements, EU-derived UK law could be retained where appropriate, and directly effective EU law would be deemed to continue to have effect until the UK decides which laws should remain, or how far to diverge from the EU standard.

However, when looking at some of the more recent reporting and transparency measures that have been placed on companies or are currently being considered – for example, the requirement to have a PSC register and the proposed extension of transparency requirements to foreign companies that buy land in England and Wales or enter into public procurement contracts here – it is the UK that has been leading the charge in order to increase trust in the UK as a place to do business, and leaving the EU is unlikely to change this stance.

As the UK’s legal system has been tightly intertwined with the EU over the last 40 years any unravelling process is likely to be slow and is without precedent. At this stage it is still very unclear what the UK's post-Brexit relationship with the EU will be – and therefore the impact on company law and regulation will need to be kept under close review.

Brexit and beyond: navigating the challenges ahead

Our Brexit hub provides useful information on the key areas that are likely to be affected by Brexit, the priority issues for any business or organisation and practical guidance to help you navigate the challenges ahead.

Visit the Brexit hub >

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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