The final EU Regulations establishing the new European supervisory structure were published on 15 December 2010. The structure includes the three new European Supervisory Authorities (ESAs) that took over from the previous Lamfalussy level 3 committees and are the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).

The ESAs are designed to have an enhanced role in European supervision and play an active part in the development of a single European rulebook. The Regulations establishing the ESAs call on them to play an active role in building a common EU supervisory culture and consistent supervisory practices to ensure uniform procedures and consistent regulatory approaches throughout the EU.

The ESAs' enhanced role has recently been mentioned by Michel Barnier (EU Commissioner for Internal Market and Services) during his inaugural visit to the EBA. Barnier has made it clear that the EBA will be a centre of activity for European regulation and that its role will be much more than coordination and co-operation. He argued that a strong and solid financial sector in the EU needs more convergence between member states both on rules and supervisory practices. In particular he said that: "We need to work together towards a single EU rulebook."

Barnier's sentiments have been echoed by Steven Maijoor, the newly appointed chairman of ESMA when he recently gave a speech at the ISDA AGM. ESMA is already responsible for the day-to-day regulation of European credit rating agencies but Maijoor expects it to have direct supervisory responsibility of trade repositories. He also repeated Barnier's sentiments that as an ESA ESMA would have a "major role" in contributing to the single EU rulebook. Maijoor also asserted that ESMA would have an important role to play in the review of the Markets in Financial Instruments Directive (MiFID) for instance drafting technical standards for the practical implementation of the revised MiFID and determining when a derivative would be sufficiently liquid so as to be traded on an organised platform.

Whilst the ESAs have only been in existence since January this year we will be seeing a lot of them this year and their importance in the European regulatory reform programme should not be underestimated.

The new European Supervisory Authorities, which came blinking into the sunlight on 1 January 2011, were created with supervisory powers and regulatory roles. The day-to-day supervision of financial market participants will be carried out at the national level, the European Supervisory Authorities (ESAs) supervising indirectly by facilitating coordination and cooperation between national authorities. In relation to their regulatory role, the ESAs have been given the power to draft technical standards and issue guidelines and recommendations to the European Commission.

The only current exception to this is ESMA and the CRAs.

The European Securities and Markets Authority (ESMA) has been granted direct supervisory powers over credit rating agencies (CRAs), and Steven Maijoor (Chair of ESMA) announced recently that he viewed it as essential that ESMA builds effective supervision of CRAs, partly because this will "set the benchmark for the future".

As part of this building process, ESMA has published a Consultation Paper on the interpretation of Article 4(3) of the Regulation on CRAs (the Regulation), which provides that ratings issued outside the EU can be used inside the EU if they fulfil the endorsement regime under Article 4(3).

The current market interpretation of Article 4(3) is that to fulfil the endorsement regime the conduct of a third country CRA must be such that the issuing of the credit rating fulfils EU-equivalent requirements, with the emphasis on conduct and fulfilling. So far so good. ESMA's recent consultation, however, proposes that Article 4(3) should be interpreted such that any third country CRA must operate within a regime of enforceable rules that are as stringent as the ones that exist in Europe.

The responses to this consultation make interesting reading. Of the 15 respondents, 13 challenged ESMA's interpretation. The two non-dissenters accepted ESMA's interpretation, but with the caveat that ESMA's current timescale – to bring its new interpretation into force by 7 June 2011 – was unworkable, and should be extended by a year to 18 months. The dissenters based their objection largely on the fact that nowhere in the world – with the exception of Japan – has there been found a regime of CRA regulation that is equivalent to Europe's. As such, they felt, to require third country ratings to be issued in such a regime was "too stringent".

It was surprising to see the regulator and the market participants take such contradictory stances and it will be interesting to see the final interpretation of Article 4(3) adopted by ESMA. However, it may be even more interesting to see if, in its regulatory role, ESMA takes such a hard line in the interpretation of third country provisions in other EU legislation, such as the Alternative Investment Fund Managers Directive.

On 6 April 2011 the Supreme Court handed down its decision on the appeal from the Court of Appeal in the case of Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16.

The Supreme Court dismissing the appeal, has supported the findings of the Court of Appeal, in December 2009, that when a shareholder transferred its shares in its subsidiary (Enviroco) to a lender in connection with the taking of security and the lender entered its (or its nominee's) name in the register of members, Enviroco ceased to be a subsidiary of the holding company within the meaning of section 736(1)(c) of the Companies Act 1985 (now replaced by section 1159(1)(c) of the Companies Act 2006 but without change in form).

As a matter of English law, shares in an English company are generally secured to a lender by way of a charge which does not require outright transfer of ownership in the shares. Instead, the lender has a right following a default under the lending arrangements, to sell the shares and take the proceeds to discharge the loan. An English law charge will not have the effect of taking a company outside its corporate group as defined by the Companies Act 2006.

The Enviroco case involved a Scots law share pledge where title to the shares was transferred to the bank at the time the security was created, and the bank was registered as a shareholder in the register of members of the company. Shares in an English company can be also be secured in this by way of share mortgage, although it is uncommon to do so.

Even if a mortgage is granted, so that the lender is the member of record, it is common to leave the voting rights with the security provider until the security becomes enforceable. Where voting rights remain with the security provider, the parent and subsidiary status is preserved, regardless of whether the holding company is also a shareholder in practice.

A ground-breaking scheme of arrangement has been approved by the High Court. The innovative restructuring of the pension liabilities of Uniq plc allowed the company to dispose of its defined benefit pension liabilities in the first pension debt-for-equity swap of a listed company in the UK.

The restructuring took place by means of a scheme of arrangement and a regulated apportionment arrangement, under which pension liabilities in excess of £480 million were transferred to a special purpose vehicle (SPV). The SPV was incorporated and managed by Capita, with the SPV holding over 90 per cent of Uniq's share capital on charitable trusts for the benefit of the pension fund. The transaction involved negotiation with all stakeholders including the trustees, the Pensions Regulator and the Pension Protection Fund.

Although the scheme of arrangement diluted the existing shareholders' equity to 9.8 per cent, the Court accepted that the restructuring represented the only viable means for the company to avoid insolvency and that it did not offend the statutory prohibition on financial assistance.

Uniq plc subsequently had its shares admitted to the Alternative Investment Market, and the SPV also plans to trade its shareholding.

While other employers may wish to consider a similar arrangement to manage their defined pension scheme liabilities, Uniq was able to gain approval for this restructuring since the Court accepted that it represented the only viable way of avoiding insolvency, taking into account the relative sizes of the pension deficit and the company's business. In addition, the transaction did not compromise the scheme's eligibility for admission to the Pension Protection Fund.