20 October 2020
Whilst the nature and timing of Brexit remain uncertain, companies may wish to consider some practical matters that could impact on their day-to-day operations following the departure of the UK from the EU.
EEA resident director requirement
The Companies Act 2014 (the ‘Act’) requires an Irish registered company to have at least one director resident in an EEA state. The EEA is comprised of all EU member states in addition to Iceland, Norway and Liechtenstein.
If the UK ceases to be a member of the EEA, then any company relying on a UK resident director to fulfil the requirements of the Act will need to consider their options to ensure ongoing compliance.
For many companies, the most obvious course of action would be to replace the UK resident director with an EEA director from outside the UK or appoint an additional director to the board who is resident in the EEA.
Alternatively, a company can avoid the need to have an EEA resident director in place where the company holds a bond to the value of €25,000, valid for a minimum of two years, obtained from a bank, building society, insurance company or credit union. In the event of the company's failure to pay a fine or penalty imposed on it in respect of any offence under either the Act or under the Taxes Consolidation Act 1997, the bond will be used to meet any amount outstanding in respect of that fine or penalty.
The bond must be valid from the date the requirements of the Act with regard to an EEA resident director were not met. [A1] It must be filed with the Companies Registration Office (CRO), as must any subsequent renewal.
A final option is for a company to obtain a certificate under section 140 of the Act ("Section 140 Certificate") to avail of an exemption from having an EEA resident director. To obtain a Section 140 Certificate, a company must make an application to the Revenue Commissioners for a written statement that there are reasonable grounds for revenue to believe that the company has a real and continuous link with one or more economic activities being carried on in the State. The application to revenue should be accompanied by a copy of the company's most recent financial statements.
Once the statement from the Revenue Commissioners has been obtained, a Form B67 should be submitted to the CRO, signed by a director or the secretary of the company and accompanied by the written statement from the Revenue Commissioners. This revenue statement must not pre-date the application to the CRO by more than two months. The exemption from the requirement to have an EEA resident director will apply from the date the Section 140 Certificate issued by the CRO.
The option of a Section 140 Certificate will only be relevant for existing companies and not companies that are newly incorporating. This is because new companies will not (at the point of incorporation) be in a position to show a real and continuous link with one or more economic activities being carried on in the State.
Exemption for subsidiary from filing financial statements
The Act exempts a subsidiary from having to file its financial statements with the CRO where there is in force an irrevocable guarantee from the parent company covering liabilities and commitments of the subsidiary in respect of the financial year in question. Where such a guarantee is in force, provided certain conditions are met, the subsidiary may file the financial statements of its parent company rather than its own.
However, this exemption only applies where the parent company is established under the laws of an EEA state. Therefore, Irish registered subsidiaries will no longer be in a position to rely on this provision to avoid filing their own financial statements if the UK ceases to be a member of the EEA.
Irish registered branches of UK companies
UK registered companies that have established a branch in Ireland may be impacted by different filing obligations with the CRO following the departure of the UK from the EEA. At present, a branch of an EEA registered company is required to file certain company information with the CRO upon establishing as a branch in Ireland, together with the accounting documents filed in the company's home member state on an annual basis. The filing obligations for non-EEA companies operating as a branch in Ireland, while similar to those imposed on EEA companies, do vary in some respects. For example, non-EEA companies are obliged to file a statement with the CRO indicating the amount of the called-up share capital of the company as of a date not earlier than two months before the date of the statement's delivery.
It is possible that provision will be made to extend certain aspects of the Act to include UK companies or residents as part of a post-Brexit legislative package. However, in the absence of any commitments on such an extension, Irish registered companies should consider whether any changes need to be made with regard to board composition and reliance on subsidiary company filing exemptions as a consequence of the UK leaving the EU. In addition, UK companies that have established a branch in Ireland should examine whether any additional filing obligations will apply.