Retained EU Law (Revocation and Reform) Bill

Written evidence submitted by Professor Charlotte Villiers, Professor of Company Law and Corporate Governance, University of Bristol Law School (REULB01)

Written Evidence Submitted to the Public Bill Committee in response to the call for evidence on the Retained EU Law (Revocation and Reform) Bill

This Bill is likely to have the reverse effect to what it aims to achieve: economic growth [1] and business certainty [2] through clarification/simplification of UK law post-Brexit. Indeed, researching the potential impact of this Bill has been, quite frankly, like wading through mud. Not only is there a lack of clarity, requiring lawyers and business advisers to search through layers of material to establish which "retained laws" are being targeted, but then also, identifying each specific relevant law has been no easy task. The Retained EU Law Dashboard presented by the UK Government’s Cabinet Office in July of this year [3] is not easy to navigate and nor does its list of relevant legislative instruments correspond to other official publications such as that of the House of Commons Library Briefing Paper, Legislating for Brexit: Statutory Instruments Implementing EU Law. [4] In addition, the sunsetting deadlines for the targeted retained laws are likely to force the relevant departments to experience the dilemma of causing laws to expire without consulting the public fully, applying full Parliamentary scrutiny, or restating retained laws with inadequate resources to make such restatements sufficiently effective. [5] The resulting uncertainty that businesses will endure from this Bill and the regulatory gaps it is likely, at least in the short term, to leave one wondering as to the value of the rush to legislate in this way.

This written evidence will focus on the company law impacts as an example of the complexities and problems likely to arise, not just in the company law arena but in other important areas the development of which has been influenced significantly by European legislation, such as environment law.

Modern company law in the UK has been significantly shaped by EU developments since the UK joined the European Economic Community in January 1973. Moreover, the UK was also influential in the design of many of the harmonization directives and other EU company law and corporate governance related developments. [6]

Beside some of the potential post-Brexit barriers (eg to cross-border mergers) and complications that may arise in cross-border trade activities because UK companies are now viewed as being incorporated in a third country, losing the freedom of establishment and protection from discriminatory treatment by an EU host state [7] , disentangling our company law from any unwanted "retained" provisions will also likely be a challenge because many of the EU law-related items of secondary legislation have effectively been woven into the application of the primary legislation, the Companies Act 2006. For example, the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, identified in the Retained EU law Dashboard, [8] amended Part 15 of the Companies Act 2006 and were in turn further amended by the Companies (Miscellaneous Reporting) Regulations 2018. It is difficult to see how the 2008 Regulations could be subjected to a sunset expiry without causing considerable confusion and uncertainty as to the application of the Companies Act that will remain in place. Presumably, the Regulations would have to be restated by the Department for Business, Energy and Industrial Strategy. Yet the Bill does not clarify this. The proposed Bill and Dashboard ought to give greater explanation about how any such secondary legislation is likely be treated. If it is the case that the Regulations will be revoked or fall by way of a sunset expiry, a regulatory gap will arise.

One reason for having decided to "retain" the relevant laws in 2018 was to avoid the creation of regulatory gaps and, given the large amount of legislation potentially affected by this new Bill, surely such gaps (albeit possibly smaller following passage of time) will still arise at the end of 2023 expiry date unless those laws are, on or before that date, deliberately reinstated to become "assimilated" or replaced with new regulations. The time scale of little more than a year for such replacements presents a considerable challenge across the broad spectrum of laws affected by this Bill. Where such replacements are not possible, keeping the retained laws, rather than allowing them to disappear under the sunset arrangement, might be the best solution to facilitate continued transactions between UK-based companies based and the EU-based entities. This approach would ensure a degree of continued harmony between UK law and EU law with comparable legal requirements [9] at least whilst the two different regimes stay relatively aligned and comparable. Furthermore, this could assist UK-based companies if they find themselves subject to the legal requirements of host EU states in which they might be active through their trading relationships. More closely aligned legal requirements will also allow for consistency of approach for regulatory compliance, which should help to reduce compliance costs for such entities as well, rather than them having to fulfil two different compliance approaches.

As time passes, it is likely that any existing alignment between the UK’s legal requirements and those developed at EU level will fade away, with or without the sunset arrangement. In the company law arena, this is especially the case with the accounting and reporting requirements. In both the EU and the UK, there has been adherence to the International Financial Reporting Standards, and in the immediate post-Brexit period UK companies have thus been able to report according to the UK’s national accounting rules, arguably with little divergence from the requirements found in the relevant EU accounting directive [10] . This has meant also that those UK companies with established branches in other EU jurisdictions have also been able to disclose their full financial statements according to UK law. However, branches in third countries, such as the UK, might be required by EU Member States to draw up their accounts and disclose according to EU directives or practices alongside their other accounts, leading then to the need to provide additional explanations and footnotes and, in some cases, requiring a restatement of their accounts. [11] Moreover, as the EU institutions make progress with projects such as the Sustainable Finance Initiative [12] and the Sustainable Corporate Governance Initiative [13] the UK will find itself potentially left behind in the updating of the legal requirements with risk of problematic results for continued trade in Europe. The new reporting Directives arising out of these initiatives, such as the proposed Corporate Sustainability Reporting Directive [14] and the proposed Directive on Corporate Sustainability Due Diligence [15] will give rise to significantly broader reporting demands than did the previous Non-Financial Reporting Directive [16] , the scope of which was smaller, covering fewer entities and which gave a fair amount of discretion to Member States and to reporting entities as to what and how they might disclose. Moreover, the Corporate Sustainability Reporting Directive will require third country companies (such as those based in the UK) with substantial activity in the EU market - any with a net turnover of more than €150 million in the EU at consolidated level - and with at least one subsidiary (large or listed) or branch with a net turnover of more than €40 million in the EU, to present, via their EU-based branch or subsidiary company, a sustainability report at the consolidated level in accordance with EU-level sustainability reporting standards or equivalent. [17]

Thus, for UK-based companies to be able to comply with these requirements, as well as making sure that they will be able to attract trade and investment going forward, the UK will need to catch up with the EU’s level of reporting standards. It makes sense, therefore, at least to try to ensure the provision of equivalent reporting requirements in the UK. The general aim of the Retained EU Law Bill, however, will not encourage such efforts. Instead, the goal seems to be one of deregulation or reducing the so-called burden of the regulatory requirements that have been developed at EU level. This approach misses the point that there is a real and urgent need for some of the regulatory provisions being created at the EU level, not least in the face of challenges such as climate change. The EU’s regulatory efforts seek to tackle those challenges for the benefit, not just of humanity and the planet, but also for business and continued economic activity. The direction being encouraged for the UK with this Retained EU Law Bill indicates a failure to appreciate the value of regulation in some circumstances. It is not always merely an unnecessary cost or burden but an essential support system for successful markets.

Even with retained law continuing in force, from the perspective of the EU, "EU law on disclosure, incorporation, capital maintenance and alteration, and cross-border mergers will no longer apply to the United Kingdom." [18] However, since many of these issues are covered by the primary legislation (the Companies Act 2006) the relevant provisions will remain in place but as UK law. Thus, "stakeholders, including employees, creditors and investors dealing with UK companies will have to rely solely on the national rules of the United Kingdom for adequate safeguards." [19] Therefore, whilst the Companies Act provisions that were originally integrated with EU law will continue to be applicable, Brexit means there is no guarantee that those UK provisions will continue to apply in a way that is consistent with interpretations made within the EU. Moreover, such divergence appears to be encouraged by the Bill with Clause 7 seeking to provide courts in the UK opportunity to depart from retained case law. Again, for businesses looking to trade within the EU, such divergence of approach will create yet more uncertainty.

Finally, without going into detail, for a company lawyer who recognises the relevance of employment law as a key regulatory dimension for good business practice, it is also worrying that this Bill threatens many existing protections for employees that are necessary for relationships built on trust and cooperation.

Overall, it is necessary to rethink this proposed legislation. At the very least, the sunset expiry date of end 2023 is far too soon. A longer timescale is required to reduce the risk of damaging regulatory gaps. Careful thought should also be given to ensuring that any revocations or reforms of the retained laws do not weaken the fabric of the UK’s company law system. It will also be important for the Department for Business, Energy and Industrial Strategy to be mindful of the need to develop regulations that keep pace with the progress being made by the EU legislature to ensure that challenges such as climate change will be met just as strongly within the UK. Similar progress will be necessary for encouraging and facilitating continued trade and investment in companies based in this country.

November 2022

[1] Growth was strongly emphasised as part of the benefits of Brexit policy agenda: See The benefits of Brexit: how the UK is taking advantage of leaving the EU (HM Government, Cabinet Office, January 2022), see eg at p.20. T he Explanatory Notes to the Retained EU Law (Revocation and Reform) Bill state that the Bill will give effect to the policies set out in that January 2022 report, see para 2.

[2] See Explanatory Notes, paragraph 18.


[4] Vaughne Miller, Legislating for Brexit: Statutory Instruments Implementing EU Law, House of Commons Library Briefing Paper (No. 7867, 16 January 2017)

[5] Travers Smith: The Retained EU Law Bill: another Brexit cliff edge looms? Legal Briefing, October 2022.

[6] See eg Charlotte Villiers European Company Law: Towards Democracy? (Ashgate, 1998); Daniel Kinderman, ‘The challenges of upward regulatory harmonization: The case of sustainability reporting in the European Union’ Regulation & Governance 14.4 (2020): 674-697.

[7] See European Company Law Experts, ‘The consequences of Brexit for companies and company law’, March 2017, available at

[8] The Dashboard similarly identifies the Small Companies and Groups (Accounts and Directors’ Reports) Regulations 2008.

[9] European Company Law Experts, ‘The consequences of Brexit for companies and company law’, March 2017, available at

[10]  See eg Accounting Directive 2013/34/EU, as amended by the Non-Financial Reporting Directive: Directive 2014/95/EU

[11] European Company Law Experts, ‘The consequences of Brexit for companies and company law’, March 2017, available at

[12] European Commission, Sustainable Finance,

[13] European Commission, Sustainable Corporate Governance,

[14] Proposal for a Directive Of The European Parliament And Of The Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, COM/2021/189 final. The Directive is likely to be adopted in December 2022

[15] Proposal for a Directive Of The European Parliament And Of The Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937 COM/2022/71 final

[16] Directive 2014/95/EU

[17] See Peter Wollmert and Andrew Hobbs, ‘How the EU’s new Sustainability Directive is becoming a game changer’ EY (1 August 2022) at

[18] European Commission, Directorate-General Justice and Consumer Affairs, Notice To Stakeholders: Withdrawal Of The United Kingdom And EU Rules On Company Law, Brussels, 21 November 2017.

[19] Ibid.


Prepared 9th November 2022