Recently, PM Theresa May indicated her willingness to pursue a “hard” Brexit, taking Great Britain completely out of the EU’s single market in order to reclaim full control of immigration and shake off the authority of the EU’s judges. The consequences of such a Brexit promise to be far-reaching, both for natural and legal persons. With respect to the latter, time has come to really start thinking about a plan B (pun intended).
A recent working paper (by John Armour, Holger Fleischer, Vanessa Knapp and Martin Winner) examines the dire consequences of Brexit for corporate citizenship. After decades of integration, guided by the case-law of the Court of Justice, national borders regain importance. Herein lay challenges for entrepreneurs, but also opportunities for national legislators who play their cards well.
Both the UK and EU27 jurisdictions thus have clear potential to gain from taking steps to avoid worst-case outcomes. Such steps could consist of unilateral actions and/or bilateral measures agreed as part of the UK’s ‘exit agreement’. Unilateral action by real seat jurisdictions could be the simplest way to avoid the disastrous consequence of denial of limited liability for owners of pre-Brexit companies. The sooner this can be clarified by legislation, the less will be the avoidance costs that need be incurred by such countries’ entrepreneurs. At the same time, unilateral action by the UK to enact into domestic law the EU law frameworks for cross-border mergers and SEs will ensure the continued viability of UK SEs and the successful UK execution of partially-completed cross-border corporate transitions where a UK entity is the desired outcome.
Corporate Finance Lab 