Capital Markets – Key Issues (March 2021)

  1. Requirement for Irish issuers to migrate to a new settlement system – Until recently, shares in all Irish listed companies that are held in dematerialised form and traded in Dublin or London have been settled through the CREST system operated by Euroclear UK & Ireland Limited ("EUI"), which acted as the required central securities depositary ("CSD") for such companies under applicable EU securities regulations.  Brexit has resulted in EUI ceasing to be an authorised CSD under these regulations (as EUI is a UK company) and Irish issuers have therefore been required to migrate to a new CSD system.  The settlement system operated by Euroclear Bank was selected as the replacement for CREST and a statutory process to allow companies to migrate to the new system has been established in consultation with a working group of Irish law firms (including William Fry).  This process requires several steps to be taken by Irish issuers, including obtaining shareholder approval for the migration and the required changes to the company's articles of association to accommodate the new system.  Provided these steps are taken companies will migrate to the new system automatically in March 2021 (until which time EUI has been approved by the European Commission to act as a 'third country CSD' on a temporary basis).  The CSD model operated by Euroclear Bank is structurally different to CREST and will result in all of the shares previously held in CREST being held by a nominee of Euroclear Bank, Euroclear Nominees Limited, who will hold these on trust for the underlying investors and issue them with contractual rights (governed by Belgian law) representing those shares.  This new structure and its implications for investor procedures will require careful explanation by issuers in conjunction with their advisers.
  2. Possible dual prospectus approval process - Prior to Brexit, the UK was part of the EU regulatory regime which allowed the passporting of prospectuses between EU Member States. As the UK is no longer an EU Member State, and no agreement has been reached to enable such arrangements to continue (e.g. a equivalence determination), the UK is no longer able to avail of this regime, meaning that Irish companies wishing to list in the UK or conduct a significant fundraise in the UK which triggers the requirement to issue a prospectus will have to obtain a separate approval from the UK's financial regulator (the Financial Conduct Authority) in addition to domestic approval from the Central Bank of Ireland.  In such circumstances it will be important to manage the dual approval process effectively to minimise the administrative burden and potential additional costs as well as reducing the risk of a delay to the raising of capital.
  3. Impact on Capital Markets Union - The most significant EU regulatory project initiated prior to the UK's Brexit vote was the Capital Markets Union ("CMU"), which promotes diversification of funding sources for the EU economy and a reduction in dependence on traditional bank lending. Following the Brexit vote, there was concern that these efforts could be undermined, given that the UK has been an important advocate of the proposed reforms.  While progress has been made in a number of areas, such as the implementation of new prospectus regime (see here) other areas of proposed reforms, such as in relation to the European Securities Markets Authority and other European supervisory authorities, have not progressed at the same rate,  There have however been recent calls from Member States, including Ireland, to accelerate the outstanding areas of the CMU project as this is seen as a means of protecting the EU's markets from the headwinds that Brexit may create.  This renewed impetus may gather further speed in the post-Brexit environment. 


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Mark Talbot

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+353 1 639 5162


Brian Butterwick

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+44 20 7571 0497