As the Brexit negotiations between the EU and the UK continue to be open and the outcome remains uncertain, the provisions of the accountability and dispute settlement mechanism need to be carefully considered. Article 55 of the EU Bank Default Recovery and Resolution Directive requires EU Member States to ensure that EEA financial institutions incorporate contractual recognition of the language of depreciation and conversion into most agreements creating non-EEA liabilities. Before Brexit (since the UK will no longer be part of the EEA), some parties preemptively introduced the bailout into English legal funding documents. Only a few existing facilities agreements contain specific Events related to Brexit. Those who do should be evaluated individually. On the other hand, most facility agreements have a “major negative change event.” Could Brexit, or even the Brexit referendum itself, trigger them? Significant changes in the event of insolvency of facility agreements generally relate to the borrower`s position and activities, not to increased political or economic risk in general. So it seems unlikely that Brexit itself will trigger this kind of clause (and the Brexit referendum seems even more unlikely). But of course, the analysis will always depend on the development of the specific clause, referring to the particular circumstances. A separate issue is whether a Brexit event will cause a significant deterioration in the borrower`s financial situation, resulting in a material adverse change. However, under these circumstances, it is likely that this would also lead to a breach of a federal financial state or an insolvency event. Stamp duty: Stamp duty clauses in credit documentation should not be affected by Brexit. While stamp duty is a UK tax, the UK is currently subject to the Capital Duties Directive (69/335/EEC), which prevents the UK from collecting a 1.5% SDRT levy on issues of shares and securities on issuers and clearing services for the means of receiving depositors (although this levy is in UK law).
Outside the EU, the UK will be free to impose these and other capital duties after the end of the current transitional period. However, the government has stated that it intends not to reintroduce the charge. The LMA will closely monitor developments in this area and address any issues that may affect the credit market. The LMA will continue to work closely with and on behalf of its members throughout EMEA and beyond on issues that could adversely affect the credit market. A Brexit without a deal will also have implications for the market and the wider economy, and there could be a number of sectoral or sectoral challenges that will affect market documentation and practices. Until alternative rules that do not depend on passing are integrated, there will be potential repercussions on the liquidity of European credit markets and related prices. It is now more important than ever to ensure the financing needs of companies in the short and medium term. We can also see that the agreements are structured so that unauthorized financial service providers are lenders as part of the facilities documentation.
Institutions may participate in a facility without becoming lenders. There is a well-established market for credit participation. This structure would allow partial participation in loans that could avoid regulated activities in EU-27 countries. Essentially, in this case, lenders would foreshadow the loan agreements, while the risk for those loans would fall to the sub-participant. The effectiveness of this measure in meeting regulatory requirements depends on local rules that should always be taken into account. There are also commercial factors to consider. For example, the lender replaces the borrower`s risk with the risk of the