Brexit - Corporate Governance
Critical issues for businesses to consider in the event of a no-deal Brexit or where transitional arrangements fail to ensure continuity in the treatment of UK companies as EEA undertakings:
- EEA-Resident Director Requirement: All types of companies in Ireland are required to appoint one director, at a minimum, who is resident in a member state of the EEA. Where this requirement is currently being met only by a company’s director or directors being resident in the UK, then, post-Brexit, both the company and any officer in default may be liable to a fine ranging from €4,000 to €5,000. Companies can avoid falling foul of this requirement by taking any of the following remedial steps: by appointing an EEA-resident director, by putting in place an insurance bond to the value of €25,000 which must be valid for a minimum of two years, or by applying to the Companies Registration Office for certification that the company “has a real and continuous link with one or more economic activities that are being carried on in the State”.
- Foreign Company Branches: Registration and compliance requirements for UK companies with Irish branches will be subject to the registration and compliance requirements for non-EEA companies. Irish branches of UK companies already registered will not need to be re-registered.
- Filing Group Financial Statements: Any Irish subsidiary companies of UK parent companies currently availing of the exemption from filing entity financial statements with the CRO will need to ensure they are compliance with the disclosure requirements for financial statements in advance of their next annual return date.
- Aligning Financial Year End: Usually, a company’s financial year end date can only be changed once in every 5 years unless the company is a subsidiary or holding company of another EEA company. Time is rapidly running out for any company with a UK parent or subsidiary seeking to align its financial year end dates.
- Group Structuring: It is advisable that any group with both UK and Irish companies immediately takes stock of its existing operations to identify problematic areas such as finance, tax, employment, human resources, IP, logistics and so on. Optimising operations post-Brexit may range from developing new group policies to a corporate restructure in order to mitigate risks and capitalise on opportunities presented by Brexit.
- Statutory Auditors: Auditors in Ireland and the UK currently enjoy broad mutual recognition which facilitates cross-border audits. The Irish Auditing and Accounting Supervisory Authority (IAASA) has expressed doubt as to whether this arrangement will survive post-Brexit. Should the UK become a third country, then UK-based auditors would not meet eligibility criteria to be approved as EU statutory auditors and not be entitled to hold audit appointments for Irish companies.
- Liquidation and Insolvency: Irish company law allows a person qualified under the laws of an EEA country to act as a liquidator in insolvency proceedings. UK-qualified liquidators previously operating under this provision will no longer be able to do so. A practising member of certain UK-based accountancy bodies recognised by IAASA in theory could still be able to act as a liquidator but such recognition to practice may not survive post-Brexit. Another issue to note is that the Insolvency Regulation which currently applies across all members states and assures mutual recognition of insolvency proceedings and bankruptcies will cease to have effect in the UK.