15 July 2016 by

Brexit: implications for owner-managed businesses

Following the outcome of the referendum on 23 June 2016 and while the exit arrangements are negotiated, there is likely to be ongoing uncertainty for most SMEs and owner-managed businesses.

The impact on commercial contracts

The outcome of the vote is unlikely to have a significant direct impact on most existing contracts. Your contracts will remain in force and on the face of it the parties’ legal rights and obligations should be unaffected.

However, some agreements may refer to EU law or include provisions referring to the EU itself. Also, for example, changes to applicable laws, import/export charges and taxes and the interpretation of jurisdiction, governing law and dispute resolution provisions may need to be reviewed.

EU law has been widely incorporated into UK law and so will not disappear overnight, but some of it could be repealed in due course. This may be seen by some as a good thing; however, it may also make the use of standard form agreements across Europe more difficult. For example, if consumer protection laws change, the impact on UK supply contracts will be different to that in Europe.

It is also possible, although probably unlikely, that Brexit could trigger any ‘material adverse change’ or ‘force majeure’ provisions in your contracts; however, that is likely to be a matter of interpretation. In any event any long-term commercial contracts should be reviewed over the course of the next year to assess the possible effect of Brexit on how those contracts will operate going forward.

The impact on corporate transactions

The most likely impact on corporate transactions will result from volatility in market conditions/currency exchange rates and the uncertainty this creates. Any long-term fall in the value of the pound could be good news for overseas businesses importing from the UK or looking to invest in the UK, but not for overseas businesses exporting to the UK or UK firms looking to invest abroad.

Overseas businesses often establish offices in the UK to access the EU market. Brexit may affect decisions to set up in the UK or even lead to the relocation of some firms’ European headquarters.

However, the majority of our corporate law is not derived from EU legislation. Some parts of the Companies Act 2006 are borne out of EU Directives, so it is possible the Government will re-evaluate those provisions but significant changes to UK company law, post-Brexit, are not expected.

What next?

The ‘Article 50’ exit procedure has not yet been invoked and there will be a two (2) year period (at least) before Brexit is properly implemented. So there will be some uncertainty for a while yet. However, we will do our best to update you on the relevant developments and how they will impact your business over the short and long-term.

In the meantime, if you have any immediate questions on the legal implications of Brexit, in terms of your business or your commercial contracts, please contact Adam Forder on 0207 288 4717 or at AdamForder@boltburdon.co.uk.

You can also contact one of our other solicitors in the Corporate and Commercial team here.

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