Under S 137 of the Companies Act 2014 Irish companies are required to have at least one Director that is resident in the EEA. The EEA stands for the European Economic Area, which comprises all EU member states, and also Iceland, Liechtenstein and Norway.
On Friday 31st January 2020 the United Kingdom is leaving the European Union and the UK will fall outside of the EEA. However, there will be a transitionary period in place until 31st December 2020. During this period, the UK’s trading relationship with the EU will remain unchanged as the UK will stay within the single market and customs union. The UK will also continue to follow all EU regulations and any updated regulations. This transitional period will also mean that Irish companies with only UK-based directors can continue to operate as normal for the time being.
However, after the transitional period has lapsed, these companies will need to either appoint an EEA resident director or put in place a Section 137 Revenue Bond in order to comply with the Companies Act 2014. A third possibility is proving a ‘Real & Continuous Link’ to the state.
To summarise, where an Irish company currently has only UK resident Directors, the company will have three choices before the end of 2020:
1. Appoint an EEA-resident Director; or
2. The company may take out an insurance bond in a prescribed form to the value of €25K which provides for situations where the company fails to pay any penalty imposed under the Companies Act 2014 or the Taxes Consolidation Act 1997. This bond lasts for 2 years and costs approximately €750 p/a to put in place; or
3. The company may apply to the Irish Revenue Commissioners for a ‘real and continuous link’ certificate, on the basis that the company’s affairs are managed by one or more persons from a place of business established in the State
It is also important to note the following:
Under S 299 of the Companies Act 2014, an Irish company is exempt from preparing consolidated financial statements where it is itself a subsidiary of a company registered in the EEA which prepares consolidated financial statements. It follows that where an Irish company is a subsidiary of a UK company and is relying on this exemption to avoid preparing consolidated financial statements in Ireland, it may no longer be in a position to avail of this exemption after the Brexit transitional period lapses.
Under S 357 of the Companies Act 2014, providing certain conditions are met, an Irish company can claim an exemption from filing its financial statements with the CRO, and instead file the consolidated financial statements of its parent company with the CRO, providing the parent company is registered in an EEA state. It follows that where an Irish company is a subsidiary of a UK company and is relying on this exemption to avoid filing its financial statements with the CRO, it may no longer be in a position to avail of this exemption after the Brexit transitional period lapses.
If you require any further information on the above, or are interested in establishing an Irish subsidiary, please don’t hesitate to contact Donagh Waters at McInerney Saunders.
E: [email protected]
T: +353 1 8404029
W: www.mcinerneysaunders.ie
This article does not purport to be a comprehensive analysis of the legal implications of Brexit. No responsibility is accepted by McInerney Saunders or the author for any loss arising from actions taken or not taken as a result of material contained in this article.
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