The EU referendum on Thursday, 23 June 2016 resulted in a 52% “Leave” vote. What remains to be seen is how, when and whether the UK will leave the EU, what the UK’s future relationship with the EU will look like and what opportunities will present themselves as a result of Brexit. Brown Rudnick remains committed to advising clients through this uncertain period and is available to advise across a broad range of sectors.  We have set out below summaries of key topics that we believe are relevant to our clients - the constitutional implications in the UK, the effects on the UK property market and the opportunities arising for activist investors.

Constitutional Implications

Article 50 of the Treaty of the European Union (“Article 50”) allows a member state to withdraw from the EU “in accordance with its own constitutional requirements”. Amid the prevailing uncertainty, there remains an extensive ambiguity over whether David Cameron’s successor as Prime Minister will deliver an Article 50 notice to the European Council. As outlined in our previous update, the European Union Referendum Act 2015 contains nothing providing that the result of the referendum is legally binding on the UK Government and so it is possible that the next Prime Minister could decide not to trigger the exit mechanism.

In addition, there is a body of opinion that an act of Parliament is required to give effect to the EU referendum result, to invoke Article 50 and leave the EU on the premise that this is the same manner in which the UK initially joined the EU. This opinion gives rise to two possible implications: first, if an act of Parliament is indeed required, then MPs can potentially prevent the new Prime Minister from invoking Article 50 by voting down any such proposed act of Parliament; and second, if an Article 50 notice is delivered without an act of Parliament, then the process may be open to challenge by way of judicial review.

Against this backdrop of unpredictability, it is by no means a foregone conclusion that the UK will actually cease to be a member of the EU.

UK Property Market

As stated by the Bank of England's Governor, Mark Carney, the commercial property market is one of the biggest risks to the UK economy following the referendum. But where there is risk, there is often opportunity.

A domino effect may be sweeping the commercial property market. Already, around £20bn of UK property funds (through firms such as M&G, Henderson Global Investors and Standard life) have suspended trading following the referendum to allow for the orderly sale of assets and protect the interests of investors. These funds have closed their doors and halted trading, with commentators speculating that they will dispose of hundreds of millions of pounds worth of assets thereby flooding the market as investors pull their money out. Housing firms such as Berkleley Group, Barratt Developments and Persimmon have also seen dramatic falls in their share value (in some cases by over a third).

This overall economic situation - including liquidity concerns in the property market - will likely push interest rates down and could result in a large volume of assets coming to the market at discounted prices which will be particularly attractive to overseas investors holding their funds in US dollars or other currencies.

Shareholder Activism

The result of the referendum may present a number of potential opportunities in the UK for activist investors.  Stock market volatility, the fall in the value of the pound against the US dollar by over 10%, the Bank of England's possible cuts to interest rates and the prospective cuts to corporation tax from 20% to 15% all represent potential opportunities for such investors.

The regulatory regime in the UK is strict - certain transactions involving listed companies are governed by the Takeover Code, administered by a designated regulatory body (the Takeover Panel).  However, some regulatory concepts (for example no poison pills, no staggered boards and a 5% stake allowing a shareholder to compel a company to call a shareholder meeting) may be attractive to activist investors looking to take a stake in UK listed companies.

Brown Rudnick has a dedicated shareholder activist team in the US and London who can advise on all aspects of activism and regulation in the US and the UK.  Further details relating to the opportunities for shareholder activists and key contacts within the Brown Rudnick team, will be published on our website in due course.

About Brown Rudnick

BROWN RUDNICK LLP, an international law firm with offices in the United States and Europe, represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions. Clients include public and private corporations, multinational Fortune 100 businesses and start-up enterprises. The Firm also represents investors, as well as official and ad hoc creditors’ committees in today’s largest corporate restructurings, both domestically and abroad. Founded more than 60 years ago, Brown Rudnick has over 230 lawyers providing advice and services across key areas of the law. Beyond the United States, the Firm regularly serves clients in Europe, the Middle East, North Africa, the Caribbean and Latin America. With its Brown Rudnick Center for the Public Interest, the Firm has created an innovative model combining its pro bono, charitable giving and community volunteer efforts. 

Contact Us

In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit. The Brown Rudnick Brexit Team is available to advise on the issues across a broad range of sectors within our areas of expertise.


Mark Dorff

P: +44.20.7851.6005

F: +44.20.7851.6100

Neil Micklethwaite

P: +44.20.7851.6086

F: +44.20.7851.6100