This article looks at the impact of Brexit on Irish registered companies from a corporate and company law perspective, outlining some of the issues potentially facing Irish companies.
Requirement to have an EEA-resident director
Under the Companies Act 2014 (the Act) a company registered in Ireland is required to have at least one director who is resident in a member state of the European Economic Area (EEA). This requirement does not apply where the company:
- has a statutory bond (Bond) in place which acts as a guarantee in the event the company is unable to pay a fine or charge resulting from breaches of the Act or tax legislation; or
- has obtained a certificate from the Registrar of Companies stating that the company has a real and continuous link with one or more economic activities that are being carried on in the State (Certificate).
The UK has left the EU and is no longer a member of the EEA. As a result, Irish companies relying on a UK-resident director as their EEA-resident director will need to take action to ensure that they continue to comply with this requirement by doing one of the following:
- appointing another EEA-resident director; or
- putting a Bond in place; or
- obtaining a Certificate from the Registrar of Companies.
It is a criminal offence for an Irish registered company not to have at least one EEA-resident director unless it satisfies one of the exemption requirements.
Cross-border mergers
A legal framework for cross-border mergers between two or more limited liability companies within the EEA was brought into EU law by Directive 2005/56/EC (the Directive). Since May 2008 the Directive, as transposed by Irish and UK implementing legislation, has enabled mergers between Irish and UK companies through a prescribed procedure which involves obtaining authorisation by the High Court in Ireland and the High Court in the UK.
From 1 January 2020, cross border mergers involving a UK company will no longer be possible as the Directive only applies to mergers of EEA registered companies. While in any case it will still be possible to effect a cross-border merger by way of a traditional business transfer whereby all of the assets and liabilities of the transferor company are acquired by the acquiring company, this method would not have the benefits of the procedure under the Directive, which involves the automatic transfer of assets and liabilities and the dissolution of the transferor company without going into liquidation. Note also that in order to claim relief from stamp duty on an reconstruction or amalgamation under section 80 of the Stamp Duties Consolidation Act 1999, the acquiring company must be a limited liability company incorporated in an EEA member state.
UK branches
A UK company that has registered as a branch in Ireland will automatically become a third country company so that the rules relevant to branches of non-EEA member state companies will apply. In particular, from 1 January 2021 branches of UK companies will be required to file accounts, which is not required for EEA companies.
Irish subsidiaries of EEA holding companies: exemption from filing statutory accounts
Where an Irish registered company is a subsidiary undertaking of a holding undertaking established in an EEA Member State, the company can, instead of filing its own accounts, file the consolidated accounts of the holding undertaking which are drawn up and audited in accordance with the Seventh Council Directive or in accordance with IFRS. To avail of this exemption, the company's shareholders must consent and there must be in force, in respect of the relevant financial year, an irrevocable guarantee by the holding undertaking of all amounts shown as liabilities in the statutory financial statements of the company in respect of that financial year.
As the UK will cease to be a member of the EEA, it will no longer be possible for Irish subsidiaries of UK holding companies to avail of this exemption and such companies will be required, under the Act, to annex their statutory financial statements to their annual return for the relevant financial year.
UK qualified auditors
The situation with regard to UK qualified auditors remains unclear. Although Chartered Accountants Ireland (CAI) have indicated that UK based auditors will remain on the Irish register for the time being, they have also indicated that if there is a change in Irish company law or a legally binding regulatory instruction , they may have no choice but to withdraw the Irish audit registration of UK auditors and audit firms. If UK qualified auditors do have their registrations in Ireland withdrawn, they would then be subject to the same assessments as auditors from non-EEA member before they would be recognised to act as auditors to Irish companies. As a result, Irish companies with UK based auditors should consider changing to an Irish registered auditor.
For more information or to discuss any Brexit related issues impacting your business, please get in touch with Damian Maloney, Emer Moriarty Crowley, Shaun O'Shea (Corporate and Commercial), or Maureen Daly (IP and Data Protection), Dorit McCann (EU, Competition & Procurement), Barry Cahir (Litigation and Insolvency), Sandra Masterson Power (Employment), or you usual Beauchamps contact.