19th July 2019
Minister for Finance and Public Expenditure and Reform, Paschal Donohoe and Minister for Business, Enterprise and Innovation, Heather Humphreys obtained Government agreement on Wednesday to draft legislation that could facilitate the longer term transition of the Irish securities market from its current settlement system based in London to the industry selected settlement system operated by Euroclear Bank, Belgium. The outline of the future Migration of Participating Securities Bill is also being published at this preliminary stage so as to facilitate market participants engagement in this complex process.
This legislative measure is a part of the longer term response to the direct impact of the decision of the United Kingdom to leave the European Union. Brexit means that the Irish market will no longer be able to access the current UK settlement system called CREST. After considering a number of alternative options to replace CREST, the Irish market selected Euroclear Bank as its preferred long term settlement solution. The migration of securities from CREST to the new system must be completed and be fully operational by March 2021.
In the event of a “Hard Brexit”, the European Commission has adopted a temporary and conditional equivalence decision for UK based Central Securities Depositories (CSDs). This equivalence decision for UK based CSDs expires at the end of March 2021.
This equivalence decision along with the amendments to Ireland’s Settlement Finality Framework introduced in Part 7 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019, have resolved the short term implications for Irish equities and Exchanged Traded Funds (ETFs) listed on the Dublin and London stock markets in a “Hard Brexit” scenario. The proposed legislation, approved by Government yesterday, seeks to support the Irish market as it moves to its longer-term solution of ensuring settlement continues within the EU as is required.
The Irish Authorities have been clear that the Irish capital market will be supported in this important project by the State, where it is possible and necessary for the State to do so.
Welcoming the Cabinet approval, Minister Donohoe said: “The transfer of the entire Irish market to a new settlement system is without precedent before in Europe and is as a direct result of the UK’s decision to leave the EU. The timelines to complete this move are extremely tight and mean that Irish companies must complete all the required legal and shareholder approval over the course of 2020, in order for the market to be able to complete its move to a new settlement system and be fully operational by end March 2021.
"While the Irish Authorities are today, again publicly supporting this transition, there remains a significant amount of work to be completed to bring this legislation to a position where it can be introduced into the House. While this work is underway it is important that all the market participants – issuers, registrars, Euronext Group and Euroclear along with their advisers - as a whole work together to ensure that they play their extensive part in ensuring the migration is successful."
Minister Humphreys commented: “The proposed legislation, when enacted, will provide an alternative mechanism, to Schemes of Arrangement under the Companies Act 2014, for issuers to migrate securities to the settlement system of Euroclear Bank Belgium. The provision of such a mechanism is a clear demonstration of Government support for the market to facilitate a smooth transition to a new settlement system within a challenging deadline.”
Both Ministers noted that the Government approval is a signal by Ireland of the importance of maintaining an active market for equity and ETF listings, which allows Irish and international companies’ access capital, and in turn help deepen Europe’s capital markets. It is also a signal that the Authorities will support the Irish market in its move to a new settlement system where is it is deemed necessary and possible for us to do so.
General Scheme of the Migration of Participating Securities Bill 2019
Note to Editors:
Following the approval by Government, the two Departments, supported by the Attorney General’s Office, and where appropriate outside Counsel, will develop further the technical specifications of the legislation so that the published Bill will provide for:
the specific conditions that issuers must meet to participate in the migration including the issuing of a circular and passing of a Special Resolution;
what information to be contained in the circular that will have to be issued to all shareholders prior to the Special Resolution;
the quorum for the Special Resolution - to be at least 3 members present in person or by proxy, representing at least one third in nominal value of the issued securities of the Participating Issuer;
a filing provision under the Companies act and to dis-apply the requirement for share certificates to be issued to Euroclear Bank or require an instrument of transfer under the Companies Act;
participating issuers to file a statement with the Companies Registration Office and the Listing Authority that the conditions for transfer have been met and to make it an offence not to comply with this requirement;
a requirement that the Participating Issuer shall also provide a copy of the above statement to the Listing Authority as set out in S.I. 286 of 2007 (European Communities (Admissions to Listing & Miscellaneous Provisions) Regulations, 2007) in advance of the “live migration date”, and that the Listing Authority shall make the list publically available on its website; and
to empower the Minister to make Regulations for the purpose of setting a migration date or migration dates.
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