5 min read
Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a five-minute read of the latest developments which we consider relevant to corporate counsel. Please get in touch with your usual contact if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue
NEWS
European Parliament adopts position on Corporate Sustainability Due Diligence Directive
On 1 June 2023, the European Parliament announced that it has agreed its position for negotiations with EU Member States on the proposed Corporate Sustainability Due Diligence Directive. The Directive sets out rules requiring in-scope companies to conduct due diligence on, and take responsibility for, human rights abuses and environmental harm throughout their global value chains. Negotiations will now begin on the final text of the legislation. The Directive is intended to have extra-territorial application to non-EU (including UK) companies.
European Commission announces measures relating to EU sustainable finance framework
On 13 June 2023, the European Commission announced a package of measures to strengthen the EU sustainable finance framework. The measures include the approval in principle of two draft Delegated Regulations relating to the EU Taxonomy Regulation, the first of which will set technical screening criteria for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, and the second of which will amend the EU Taxonomy Climate Delegated Act to add certain activities contributing to climate change mitigation and adaptation objectives. Other measures include a proposal for a Regulation on the transparency and integrity of ESG rating activities.
Rules made in relation to financial promotion of cryptoassets
Following the introduction of the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 (the Order) which extended the scope of the financial promotions restriction to most cryptoassets, the Financial Conduct Authority (FCA) has, on 8 June 2023, published its Policy Statement 23/6: Financial promotion rules for cryptoassets (PS 23/6). The Policy Statement sets out the FCA’s policy position and near final rules to regulate the financial promotion of certain cryptoassets. Provisions in the Order empowering the FCA to make rules and issue guidance came into force on 8 June 2023. All other provisions, along with the final FCA rules, will come into force on 8 October 2023.
LEGISLATION
Insider Dealing (Securities and Regulated Markets) Order 2023 made
The Insider Dealing (Securities and Regulated Markets) Order 2023 (the Order) has been published together with an explanatory memorandum. There were no substantive changes to the draft published in April 2023. Broadly, the Order aligns the types of securities and markets on which a criminal insider dealing offence may be committed under Part V of the Criminal Justice 1993 with those that apply to the civil market abuse regime. The Order comes into force on 15 June 2023.
MARKET INSIGHTS
ONS publishes Q1 2023 data on UK M&A activity
The Office of National Statistics (ONS) has published its latest bulletin on UK M&A activity for of the first quarter (Q1) of 2023 (January-March). The provisional estimates suggest lower mergers and acquisitions (M&A) activity at the start of 2023, following fairly consistent activity levels in 2022. Both monthly domestic and cross-border M&A have declined since November 2022, although these numbers may be subject to upward revision until early 2024.
CASE LAW
Re Avanti Communications Ltd [2023] EWHC 940 (Ch)
High Court considers the characteristics of fixed and floating charge security
In this case, the High Court (Edwin Johnson J) considered an application by the administrators of a company, Avanti Communications Ltd, for directions on whether charges granted over certain of its assets were fixed or floating charges. After analysing the application of the House of Lord’s decision in Re Spectrum Plus Ltd [2005] UKHL 41, the Court rejected the argument that a charge will only be fixed if the chargor is completely prohibited from using or dealing with the charged assets without the consent of the chargee.
The Court’s approach in this case suggests that it will look at the terms of the particular financing arrangements and the specific assets in question, as well as how the exceptions have been and could realistically be used in practice to determine the nature of the charge.
THJ Systems Limited v Sheridan [2023] EWHC 927 (Ch)
Court considers whether member of LLP has been validly expelled under LLP agreement
In this case, the High Court decided that a member had been validly expelled for committing a serious and persistent breach of the limited liability partnership (LLP) agreement governing their business venture. Mr Andrew Mitchell and Mr Daniel Sheridan had decided to enter into joint business venture using an LLP vehicle, with the Initial Members and Designated Members of the LLP being THJ Systems Limited (a company owned by Mr Mitchell and his wife) and Mr Sheridan. The commercial relationship between the two individuals had broken down. The main issue in these proceedings is whether the notice served on Mr Sheridan expelling him from the LLP was valid or not.
The Court accepted that references to "the LLP" being able to expel a member should be read as "the LLP (acting for this purpose by the Members other than the Member concerned)" as to construe otherwise would be absurd.