Brexit - Corporate law

Major implications

Cross-Border Mergers, Restructuring and Conversions

The EU has provided simplified and harmonised regulations regarding cross-border restructurings and mergers within the EU. With the UK leaving the EU, cross-border mergers between EU companies and UK companies, as well as corporate restructurings involving UK entities, might no longer be possible. However, we will have to wait for the final outcome of the Brexit negotiations to determine whether this will indeed be an issue. In any case, Belgian law provides for the possibility of a cross-border merger or demerger with a company in a non-EU country, on the condition that such a (de)merger is also permitted under the legislation of that non-EU country. Equally, Belgian law provides for the possibility to convert a Belgian company into a foreign company (emigration) or to convert a foreign company into a Belgian company (immigration) on the condition that such a conversion is also permitted under the legislation of the other country, regardless whether or not this is an EU Member State.

Establishment of branches

In accordance with the Freedom of Establishment and the Freedom of Movement within the EU, companies can freely establish branches in other Member States of the EU. It might become more difficult for EU companies to establish a branch in the UK. Looked at from the other side, UK companies hoping to establish a branch in the EU will in principle be subject to the more extensive disclosure formalities applicable to branches of non-EU companies. Again, the actual impact remains to be determined based on the final outcome of the Brexit negotiations.

European Corporate Entities

The legal form of certain types of corporate entity is based on EU Regulations, i.e. the European Company (SE), the European Cooperative Society (SCE) and the European Economic Interest Grouping (EEIG). Such entities that have been incorporated in the UK will lose their current legal basis. They may transfer their registered office to a EU Member State, provided they do this before the end of the transition period after which Brexit will be fully effective (31 December 2020). Such entities incorporated in another Member State that want to migrate to the UK, will no longer be able to do a simplified cross-border transfer after this transition period. Another possibility is to convert the EU corporate entity into another legal form.

To do

• Keep a close watch on the negotiation process and future changes that could have an impact on corporate law and be prepared to respond swiftly to any developments.
• Bear in mind that the UK will no longer be obliged to set out its corporate law in accordance with EU regulations, which means that future UK corporate law could deviate from the current regulations, leading to more complicated and costly procedures for corporate restructurings or for the establishment of companies or branches in the UK.
• Closer attention should be paid to the tax implications of EU-UK cross-border restructurings.
• Companies with a European legal form that want to migrate to or from the UK should do this before the end of the transition period.