Brexit update

1. Extension of the withdrawal period

On 10 April 2019, further to multiple rejections by the UK Parliament of the withdrawal agreement endorsed by the European Council on 25 November 2018, the European Council agreed to extend the withdrawal period for the UK to leave the EU.

More information on this point can be found in the EU law, competition and antitrust section of this Newsletter.

2. New Luxembourg laws (in case of a no-deal Brexit)

On 8 April 2019, two new laws in relation to the Luxembourg financial sector were adopted, in the event that the UK leaves the EU without a withdrawal agreement ("a no-deal Brexit").

• The first law aims at amending various Luxembourg laws, including the Law of 17 December 2010 on undertakings for collective investment, as amended ("UCI Law") and the Law of 12 July 2013 on Alternative Investment Fund Managers, as amended ("AIFM Law")
  
  A dedicated article on the Bill of Law which preceded the new law was included in our previous Newsletter February 2019.
  
  As a result of the amendments brought to the UCI Law and to the AIFM Law by this new law, a grandfathering regime of contractual arrangements existing at the date of a no-deal Brexit is provided for a period of 21 months from that date.
  
  During that grandfathering period, management companies ("UK ManCo(s)") and AIFMs ("UK AIFM(s)") duly authorised by the UK financial supervisory authority and appointed respectively as management company of Luxembourg UCITS or as AIFM of Luxembourg alternative investment funds, may continue to provide their services in Luxembourg.
   
• The second law relates to the treatment of breaches of investment policies/rules resulting from Brexit and to the marketing of UK UCITS in Luxembourg.
  
  This law treats breaches of investment policies, rules or investment restrictions, as set out in the prospectus, the constitutional documents or the law, and that result from the UK no longer being a Member State of the EU, or otherwise from Brexit (irrespective of a "hard" or "soft" Brexit), as "passive" breaches that need to be remedied within a period not exceeding 12 months. The law provides that the remedial action must be taken as soon as possible (within the 12-month deadline) taking into account the stability of the financial markets and the interests of the shareholders. The 12-month period for taking remedial action is only accorded in relation to breaches resulting from positions held prior to the UK leaving the EU. The law provides for a similar regime for Specialised Investment Funds.
  
  The same law provides that UK UCITS managed by a UK ManCo, that are currently authorised for marketing to retail investors in Luxembourg, may continue marketing to retail investors in Luxembourg for a period of 12 months from the date the UK leaves the EU. Where a UK UCITS is managed by a UCITS ManCo established in another EU Member State (i.e. not the UK), marketing to retail investors in Luxembourg remains possible only if the UCITS ManCo is also authorised as an AIFM.