This article addresses one of the concerns about what a “hard” Brexit could mean in practice for Irish registered companies and how they can mitigate these implications in relation to the requirement for such companies to have an EEA resident director. This article then explores some practical solutions to assist in the mitigation of the risks associated with this Brexit issue.
What are the requirements?
The Companies Act 2014 (the “Act”) requires every Irish registered company to have at least one director who is resident in an EEA member state failing which an insurance bond (a “Bond”) is required or a certificate (from the Registrar of Companies (the “Registrar”)) that the company has a sufficient economic link is necessary (a “Certificate”). Having an EEA resident alternate director does not satisfy this requirement.
It is a criminal offence not to have at least one EEA resident director of an Irish registered company unless the company can satisfy the exemption requirements by providing either a Bond or a Certificate. The company and every officer of the company who is in default may be prosecuted in this regard by the Registrar of Companies.
An Irish company relying on a UK resident director will need to consider whether a Bond or a Certificate needs to be secured or whether the director should be replaced with or supplemented by another director who is resident in an EEA member state.
In a hard Brexit situation, companies who are left without an EEA resident director should either lodge a Bond with the Form B10 (fillable online only) notifying the Companies Registration Office (“CRO”) of a change in directorships, or obtain a Certificate from the Registrar.
This article will look at each option in turn.
Obtaining a bond
Companies who choose not to replace the UK resident director with another director who is resident in an EEA state may choose to put a Bond in place to avail of an exemption to the rule. A bond must be in place to the value of €25,000 and provides that in the event of a failure by the company to pay fines or penalties incurred under the Act or the Taxes Consolidation Act 1997, a sum of money becomes payable under the bond in discharge of the whole or party of the company’s liability. The premium is respect of the Bond is typically in the region of €1,500 and will need to be paid upfront in order to secure the Bond.
Once the Bond is received by the company, the original Bond, together with a certified copy, should be submitted to the CRO with the Form B10.
The minimum period for the validity for a Bond is two years and this period may commence not earlier than the occurrence of the event which gave rise to the requirement to effect a Bond. If the company has not appointed an EEA resident director by the time it lapses, the company must renew the Bond for another two years and every two years thereafter.
Obtaining a Certificate
It is possible for the directors of an Irish Company who have no EEA resident directors to apply for a Statement under Section 140 of the Act which, if granted, will relieve the company from the requirement to have an EEA resident director. In order to obtain a Statement, the company in question must satisfy the Irish Revenue Commissioners (“Revenue”) that one or more of the following conditions are satisfied by the company:
(a) 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;
(b) the company carries on a trade in the State;
(c) the company is a subsidiary or a holding company of a company or another body corporate that satisfies either or both of the conditions specified in (a) and (b); or
(d) the company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in (a) and (b).
The Statement is usually issued from the Revenue within 7 – 10 working days, once they are satisfied that all criteria have been met. Application for the Certificate is then made to the CRO on a Form B67 and must be accompanied by the Statement from Revenue, made within two months of the date of the application to the CRO, that it has reasonable grounds to believe that the company has such a link. The Certificate is usually issued from the CRO within 2 – 3 working days, provided that the required documents have been included in the submission. A company will remain exempted from the requirement to have at least one EEA resident director from the date of the Certificate and for as long as the Certificate remains in force.
It is worth noting that the Certificate 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.
While both the Certificate and the Bond are potential solutions for an Irish company relying on a UK resident director, given the tight timeline companies are faced with prior to Brexit, we recommend that the director should be replaced with or supplemented by another director who is resident in an EEA member state (where possible) or, in the alternative, a bond should be obtained.