Queens Speech: UK company law Brexit and beyond

by Dentons


As widely expected, Brexit-focused legislation dominates the legislative programme outlined in the Queen's Speech on 21 June.


The centrepiece will be the European Union (Withdrawal) Bill (the Bill), which will:

  • repeal the European Communities Act 1972 (ECA) and convert EU-derived law into UK law from the day the UK leaves the EU (Brexit day);
  • create temporary powers to make secondary law, enabling corrections to laws which do not operate appropriately from Brexit day;
  • allow changes to domestic law to reflect any withdrawal agreement under Article 50; and
  • reproduce the common EU frameworks created by EU law in UK law.

Other legislation dealing with specific areas such as customs, trade and international sanctions will supplement the Bill.

Most of the law governing the establishment and operation of companies in the UK, although influenced by successive EU minimum harmonisation directives, has remained a matter of domestic law. It is contained mainly in the Companies Act 2006 and the secondary legislation made under that Act rather than the ECA, and so will largely fall outside the scope of the Bill and other Brexit legislation.

In contrast, pan-EU/EEA entities and regimes such as the European public company (Societas Europaea or SE), the cross-border merger regime and the passporting of prospectuses have been given effect in English law through secondary legislation made under the ECA. When the ECA is repealed, that secondary legislation will fall away, except and to the extent that it is saved.

Given that the main benefits of these entities and regimes come from mutual recognition across EU/EEA member states, their post-Brexit status is closely linked to whether the UK remains part of the single market. That in turn will drive the legislative changes necessary to reflect their post-Brexit status. For example, if mutual recognition is no longer available, it might be appropriate for the legislation to require UK incorporated SEs to convert to UK plcs. So, although some legislation will clearly be necessary to avoid legal "black holes", what that legislation will eventually look like is, at this stage, far from clear.

Beyond Brexit:

The government also announced that it intends to bring forward proposals to consolidate and strengthen its powers to protect national security. This is to ensure that foreign ownership of companies controlling important infrastructure does not undermine British security or essential services. The UK government will have the power to scrutinise significant foreign investment and to intervene in those transactions that raise national security concerns. No detail has yet been given, so it remains to be seen how far these powers will go beyond the government's current powers in the Enterprise Act 2002 to intervene in certain mergers where there is a national security interest.

The Queen's Speech and associated background briefing


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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