Corporate Law Update

• The EU’s new foreign subsidiaries regime comes into force
• The High Court provides guidance on linked substantial property transactions with directors
• The House of Commons Library publishes an updated briefing paper on the Government’s second Economic Crime Bill

EU foreign subsidies regime comes into force

The European Union’s new Foreign Subsidies Regulation (the FSR) has now come into force.

The FSR gives the European Commission a suite of new powers to tackle subsidies from non-EU countries. This will complement the EU’s existing state aid powers, which address governmental support by EU member states.

The FSR introduces a system of mandatory pre-closing notification and review for any merger, acquisition or new joint venture if:

• the target, the joint venture or a merging party is established in the EU and has an annual EU turnover of at least €500m; and
• the companies involved in the operation received aggregate foreign financial contributions of more than €50m from non-EU countries in the three financial years prior to notification.

You can read more about the FSR in this separate in-depth piece by our colleagues.

Court provides guidance on linked substantial property transactions under section 190

The High Court has held that a share sale agreement and two options to acquire shares amounted to a single arrangement between a company and a person connected with one of its directors that had required shareholder approval.

MetalNRG plc v BritENERGY Holdings LLP and others [2022] EWHC 2528 (Ch) concerned a company (MetalNRG) that carries on business as a natural resources investment company (BritNRG).

MetalNRG entered into a share sale and purchase agreement (the SPA) and an option agreement (the Option) with a limited liability partnership (the LLP) owned by private investors, including one of MetalNRG’s directors and his wife. The purpose of the agreements was to equalise MetalNRG’s and the LLP’s shareholdings in an investment vehicle.

MetalNRG later claimed that the agreements were void because they amounted to substantial property transactions involving the transfer of non-cash assets between MetalNRG and a person connected with one of its directors, for which shareholder approval was required but never obtained.

The court was required to decide various issues, including whether the grant of the Option had created a non-cash asset and whether the SPA and the Option were separate transactions or part of the same overall arrangement.

The court found that the grant of the Option did create a non-cash asset, as it gave MetalNRG a right over shares in BritNRG.

It also found that the SPA and Option, whilst separate transactions, were part of the same overall arrangement to equalise the parties’ shareholding in BritNRG and so needed to be considered together when deciding whether shareholder approval was required.

You can read more about the case in our separate in-depth piece.

Parliament publishes updated briefing on Economic Crime Bill 2

The House of Commons Library has published an updated briefing paper on the Economic Crime and Corporate Transparency Bill, which is currently making its way through Parliament.

The purpose of the Bill is to strengthen measures designed to combat economic crime, including by reforming Companies House, reforming the law relating to limited partnerships, making changes to the UK’s Register of Overseas Entities and introducing new powers to recover cryptoassets.

You can find more information on the Bill in our previous Corporate Law Update.