Brexit….an update
Brexit….an update
As the Brexit transition period for the UK expired on 31 December 2020, the UK officially left the EU at 11pm on 31 December. On 24 December 2020, the EU and UK reached a consensus on the Trade and Cooperation Agreement. Despite this, there are a number of issues which Irish companies may face from a company law perspective and these are addressed below.
EEA-Resident Director
A company registered in Ireland is required to have at least one director who is resident in a member state of the European Economic Area (“EEA“). As the UK is no longer a member of the EEA, Irish registered companies that previously met this requirement by having an UK-resident director will now need to take action. It is extremely important that all Irish registered companies ensure that they have an EEA-resident director, or comply with one of the following exemptions. Otherwise, the Company may be found guilty of a criminal offence.
Should a company not have an EEA-resident director, the company may rectify this issue and ensure compliance with the Companies Act 2014 by utilising one of the following methods:
- Appoint an EEA-resident director; or
- Hold a non-resident company bond to the value of €25,000 – this bond acts as a guarantee against the company in the event that the company is unable to pay a fine or charge due to a breach of the Companies Act; or
- Obtain a Section 140 Certificate – a company can make an application to the Revenue Commissioners for a Section 140 Real and Continuous Link Certificate whereby the company shows that it has a “real and continuous link with one or more economic activities that are being carried on in the State”. If the Revenue Commissioners are satisfied that the requisite conditions have been met, an application may be made to the CRO for the certificate.
Subsidiaries
Irish subsidiaries of UK holding companies will no longer be able to avail of the exemption of being able to file consolidated accounts of the holding company, instead of filing its own accounts, in accordance with the Seventh Council Directive. The filing exemption only applies where the Irish registered company is a subsidiary of a holding company established in a member state of the EEA.
Irish subsidiaries of UK holdings companies will now be required to annex their statutory financial statements to their annual return for the relevant financial year.
Branches
Any UK company that has registered as a branch in Ireland will automatically become a third country company so that the rules relevant to branches of third country companies will apply. As a result, Irish registered branches of a UK company will no longer be able to rely on the accounts filing exemption that apply to branches of EEA companies.
Cross-Border Mergers
Cross-border mergers involving UK-registered companies will no longer be permitted under the Cross-Border Merger Directive (the “Directive“). The Directive requires that at least two of the merging entities are governed by the laws of EEA member states.
Cross-border mergers will still be possible however, they will not benefit from the efficiencies of the Directive. A cross-border merger under the Directive involves the automatic transfer of assets and liabilities and provides for the dissolution of the company without the need to go into liquidation. This method will no longer be permitted for cross-border mergers involving the UK.
Conclusion
All companies should undertake a thorough review of their corporate structures in order to establish whether a new legal presence may be required elsewhere in the EU.
For more information or to speak to us about this in more detail please contact Brian O’Neill or Darragh O’Dea