Brexit and the Requirement to have an EEA Resident Director
Under Section 137 of the Irish Companies Act 2014 (the ‘Act’), every Irish registered company must have at least one director appointed who is an EEA resident.
Some companies have a UK resident director in place to fulfil this requirement which, following Brexit, may deem a company to be in breach of Section 137.
There are three steps a company can take in order to rectify this:
- Appointing an alternative or supplemental director
- Section 137 Bond; or
- Section 140 Certificate.
Appointing an alternative or supplemental Director
The first option is to appoint an alternative or supplemental director who is a resident in another EEA member state. This is perhaps the simplest option and, given the short time-frame, the most practical. The board should approve the new appointment and ensure the appointment complies with the company’s Constitution. A Form B10 must be filed with the Companies Registration Office.
Section 137 Bond
An alternative to appointing an alternative or supplemental director is a Section 137 Bond. The requirement to have an EEA resident director does not apply if the company has in place a “Section 137 Bond”. This must be to the value of €25,000 and for a minimum period of two years. 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.
However, the bond can only be entered into when the need for it actually arises, meaning it could not be put in place unless and until a UK resident director no longer satisfies the EEA director requirement under the Act.
Section 140 Certificate
The third option is a “Section 140 Certificate”. Under Section 140 of the Act a company may apply for a Certificate exempting it from the requirement to have at least one EEA resident director. In order to obtain such an exemption, the application must be accompanied by a statement from the Revenue Commissioners which must state that the Revenue Commissioners have “…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”.
The Revenue Commissioners must be satisfied that either
- the affairs of the company are managed by a person from a place of business in the State, or
- the company carries on a trade in the State, or
- the company is a subsidiary of a company that satisfies (i) or (ii), or
- the company is a subsidiary of a company, another subsidiary of which satisfies conditions (i) or (ii).
A Section 140 Certificate is not a suitable option for a newly incorporated company which has not yet traded and for any non-trading company.
Consequences of non-compliance
Non compliance with section 137 of the Act is a Category 4 offence which can result in a fine of up to €5,000 against the company and the officers of the company.
The Registrar also has the power to strike a company off the register if the company is in breach of Section 137.