The (European Union) EU and the United Kingdom (UK) finally reached agreement on a Free Trade and Cooperation Agreement (TCA), avoiding a hard Brexit. However, this does not change the fact that the UK has left the EU and therefore is no longer part of the EU single market and customs union and is now regarded as a third country. This creates a very real issue for a number of companies and their Directors in the UK and Ireland.
In this article, Roberts Nathan Partner Aidan Scollard reviews the potential significant changes for UK resident Directors of Irish registered companies as the UK now becomes a third country. Although there are more than 60,000 Irish Directorships of UK registered companies there are also a significant number of UK based directors of Irish companies for which Brexit now creates significant changes.
EEA Resident Director Requirement
Companies Registration Office have previously alerted service providers to the fact that under Irish company law an Irish registered company must have at least one European Economic Area (EEA) resident Director on the board on an ongoing basis or a bond in place to cover filing liabilities.
Many Directors based in the UK who are either of Irish decent or UK based companies who have established Irish entities as part of their Brexit planning will need to consider this likely change.
Where an existing Irish company has fulfilled this Director requirement by appointing a UK resident director they should now consider replacing that director or adding an additional director who is an EEA-resident.
It should be noted that this requirement is based on residency, not nationality. Thus for example, a company director of Irish nationality who lives in the UK and has done so for a number of years is unlikely to satisfy the EEA requirement in the future which is a question a number of our clients have been considering.
It is possible for a company to put in place a Section 137 Revenue Bond which is an insurance policy that CRO approve in replacement of having an EEA resident individual on the board. This insurance policy covers against fines or penalties incurred to the value of €25,000 for non-compliance and covers the company for a period of two years at which point the company will either need to renew the bond or appoint a director who meets the requirement.
The bonds are relatively easy to put in place but will have a premium cost to maintain for the two year period and we have put these in place for a number of clients recently.
The Exception to the Rule – ‘Real and Continuous link’
It is possible for the Directors of an Irish Company who have no EEA-resident directors to apply to the Revenue Commissioners for a Statement under Section 140 of the Companies Act 2014 which, if granted, will relieve the company from the requirement to hold a Bond or to have an EEA-resident director.
This Statement is granted based on the company having a ‘real and continuous link to the State of Ireland’. The successful company will need to satisfy one or more of the following two conditions:
- The affairs of the company are managed by one or more persons from a place of business established in the State and that person or those persons is or are authorised by the company to act on its behalf.
- The company carries on a trade in the State.
Furthermore, a company may be granted this Statement based on either of the following two conditions:
- 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 1 and 2.
- The company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in 1 and 2.
This Statement is granted based on retrospective activity and will generally not be granted to a company that intends to have a real and continuous link to the state.
Once the Statement is made by Revenue to the successful company, the Company Secretary can apply to the Registrar of Companies for a certificate that exempts the company from the Section 137 bond requirement or the need to have an EEA-resident director appointed to the board.
Application for this exemption to Companies registration office must be accompanied by this statement from the Revenue Commissioners made within two months of the date of the application of the Revenue Commissioners statement.
This is the common basis that we see UK parent company clients using for their Irish operating subsidiaries and we have helped a number of clients in this area where they can clearly prove that there is a real and continuous activity here in the Irish state.
Company Directors need to consider the implications since the UK has left the EU and consider their options. As with any legal or accounting issue early advice is important.
Contact us if you wish to discuss the impacts of any of these changes to your company structures here in Ireland and any structure planning requirements or to obtain a bond.