- Following the end of the Brexit transition period, the EU and UK regulatory frameworks impacting debt capital markets are now two separate but parallel regimes, with certain differences in some areas.
- Whilst the pan-European wholesale debt capital markets continue, the impact of the parallel regulatory regimes in the EU and UK is particularly felt when drafting transaction documentation.
- This article highlights some practical points to consider when documenting debt capital markets transactions in the EU and UK.
At the end of the Brexit transition period on 31 December 2020, existing EU law was onshored and formed part of retained EU law in the UK through the EU Withdrawal Act (EUWA), as amended. Although the UK rules broadly follow the EU rules in many areas, care is needed as there are certain differences between the rules and there will be instances where market participants will now need to comply with two regulatory frameworks. The UK is now considered a third country for the purposes of EU law and vice versa and this will impact how transactions are documented going forward. Although EU directives are not directly effective into the national law of member states, care should be taken to ensure that references to EU directives that were implemented by UK legislation prior to Brexit should refer not just to the UK implementing legislation so as to ensure any non-implemented rights are also caught.
Points to consider in documentation
Market participants will need to consider references to legislation more generally and decide if they need to refer to one or both of EU and UK law and, in the case of UK law, if references need to be updated from the EU versions in existing documents. UK law will depend on the context and location of the investors and transaction parties. Similarly, references to EU Member States or the European Economic Area (EEA) may need to be clarified as they will no longer include the UK.
Retail offers: From 31 December 2020, issuers with a prospectus approved by the Financial Conducts Authority (FCA) can no longer passport it into the EU. Such issuers that would like to trade securities on an EU regulated market or make a retail offer in the EU will need approval from an EU27 competent authority.
Similarly, it is no longer possible to passport prospectuses that have been approved by an EEA competent authority into the UK for a regulated market listing or retail offer of securities and the approval of the FCA will be required.
Any prospectuses that were approved by an EU27 competent authority and passported into the UK before 31 December 2020 will be grandfathered until the end of their 12 month validity period and can, therefore, continue to be used for an offer of securities during that time.
Supplements: As many of the changes are technical in nature, such as updating legislative and regulatory measures, market participants may conclude that a supplement is not…