With the October deadline fast approaching much of Brexit still remains uncertain. Companies may wish to consider and prepare for the practical implications to their Irish registered companies in the event of a no-deal Brexit.
Under Section 137 of the Companies Act 2014 every Irish registered company must have at least one director appointed who is an EEA resident. The EEA (European Economic Area) is comprised of all EU member states in addition to Iceland, Norway and Liechtenstein.
In the event of a no-deal Brexit, companies relying on a UK resident director to fulfil this requirement under the Act could be in breach of Section 137.
There are three options for companies to consider in preparation to comply with Section 137:
1. Appointment of an EEA resident director
For most companies the obvious option would be to appoint an EEA resident director. Whilst it may be an obvious option, the board would need to approve the appointment and ensure the appointment complies with the company’s constitution.
2. Section 137 bond
An alternative option would be to put in place a Section 137 bond which excuses the company from needing an EEA resident director. The bond must be for the value of €25,000 and for a minimum period of two years, and can be obtained from an insurance broker. On the expiration of the bond, the company is obliged to renew and submit the bond to the Companies Registration Office (CRO) prior to the expiration of the existing bond. The purpose of the bond is to act as a form of insurance for the company to pay a fine or penalty imposed on it under the Act or the Taxes Consolidation Act, 1997.
A bond can only be entered into when the need arises, meaning that a bond cannot be put in place until a UK resident director is no longer classified as being an EEA director under the Act. This will leave companies non-compliant and in breach of Section 137 until such time that the bond is issued and delivered to the CRO.
3. Section 140 certificate
The final option to consider is obtaining a Section 140 certificate. Under Section 140 of the Act a company may apply for such a certificate exempting it from the requirement of having an EEA resident director. A company will need to make an application to the Revenue Commissioners in support of the position that it has “reasonable grounds to believe that the company has a real and continuous link with one or more economic activities being carried on in the State.”
Revenue must be satisfied of one or more of the conditions of Section 140(9) of the Act:
The option of a Section 140 certificate will only be relevant for existing companies and not companies that are newly incorporated. This is because new companies will not (at the point of incorporation) be in a position to show a real and continuous link with one or more economic activities being carried on in the State. An exception may arise where Revenue are satisfied that the proposed trading activity to be carried on by the company reached an agreement with a state enterprise or development agency in the State.
Once the statement from Revenue has been received, an application must be made to the CRO within two months of the date of the statement.
Where the Revenue Commissioners become aware that a company has ceased to have a ‘real and continuous link’ it will notify the CRO in writing of the updated circumstance. In such circumstances a company will be required to either appoint an EEA resident director or put in place a Section 137 Bond.