While the exact nature of Brexit is still not yet known, the transition period will end on 31 December 2020 and the UK will cease to be a member of the EEA, having left the EU on 31 January 2020. As a result, companies should consider some practical matters that could impact on their day to day operations following this date.
EEA-resident Director Requirement
The Companies Act 2014 (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 as well as Iceland, Norway and Liechtenstein. This means that a company relying on a UK resident director to fulfil the requirements of the Act will need to make changes 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 or appoint to its board an additional director who is resident in the EEA.
Alternatively, a company can avoid the need to have an EEA resident director in place if 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. The bond 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 the Revenue Commissioners to believe that the company has a real and continuous link with one or more economic activities being carried on in Ireland. To have a "real and continuous link" a company must satisfy one or more of the following conditions:
- the affairs of the company are managed by one or more persons from a place of business established in Ireland and those persons are authorised by the company to act on its behalf;
- the company carries on a trade in Ireland;
- the company is a subsidiary or a holding company of a company or other body corporate that satisfies either or both of the conditions specified in paragraphs (1) and (2);
- the company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in paragraphs (1) and (2).
The application to the Revenue Commissioners for its written statement 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 within two months of the date of the Revenue Commissioners Statement. The exemption from the requirement to have an EEA resident director will apply from the date the Section 140 Certificate is issued by the CRO.
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 of a UK parent company will no longer be in a position to rely on this provision after the end of the transition period on 31 December 2020.
Financial Year End Date
The Act allows a company to change its financial year end date only once in every 5 years. However, this does not apply if the company is changing its financial year end date to align with a subsidiary or holding company of the company incorporated in another EEA member state. This exemption will no longer apply to companies that are a subsidiary or a holding of a company incorporated in the UK after 31 December 2020.
Irish Registered Branches of UK Companies
UK registered companies that have established a branch in Ireland will 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 when 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 2 months before the date of the statement's delivery.
Cross Border Mergers
The EU cross border merger regime, which facilitates the merger of companies established in different EEA states will no longer apply to UK registered companies after 31 December 2020. For the relevant legislation to apply, two or more of the merging entities must be established in an EEA state.
Irish registered companies should consider if any changes need to be made to their board composition or their reliance on subsidiary company filing exemptions before the end of the transition period. In addition, UK companies that have established a branch in Ireland should examine whether any additional filing obligations will apply from 31 December onwards.