The UK left the European Union as of 31st January 2020 but transitionary provisions continue in place up until 31st December 2020. Over the course of this year, the UK's trading relationship with the EU has remained the same. The UK has continued to follow EU rules, has remained under the jurisdiction of the European Court of Justice and has stayed within the single market and the customs union.  

However, if no agreement is in place by the end of the transition period, UK resident directors of Irish companies will be required to comply with section 137 Companies Act 2014.  

Non - EEA Director 

Section 137 Companies Act 2014 relates to the requirement for Irish companies to have an EEA-resident director serving on the board. The EEA (European Economic Area) is defined as comprising all EU member states plus Norway, Lichtenstein and Iceland.   In the absence of an agreement in advance of 31st December 2020, UK resident directors will fall outside the scope of that definition. 

The consequences of non-compliance with this requirement will give rise to a Category 4 offence carrying a maximum fine of €5,000. This situation may also present difficulties in filing an Annual Return in the Companies Registration Office (CRO) which must be filed in good time each year to avoid late filing penalties arising and importantly to avoid loss of audit exemption for preparation of financial statements in situations where the company was previously eligible to claim this. 

Possible options 

Irish companies in this position need to consider their options to ensure compliance with the legal requirements. A director resident in another EEA country could possibly replace a UK resident director or alternatively an additional EEA resident director could be appointed to the board. However, in the event where these options are not possible, there are two other options that may be available to a company. 

1. Insurance Bond - A company can acquire a bond to the value of €25,000 valid for a minimum of two years which must be obtained from a bank, building society, insurance company or credit union. The purpose of the bond is that in the event of a company’s failure to pay a fine or penalty imposed on it in respect of any offence under either the Companies Act 2014 or under the Taxes Consolidation Act 1997, the bond will be used to meet any amount outstanding in respect of that fine or penalty. The bond must take effect from the date on which the EEA resident director requirements lapses and it must be publicly filed in the CRO as should all subsequent renewals of the bond. 

1. Real and Continuous Link – A company may obtain a certificate from the Revenue Commissioners under Section 140 of the Companies Act 2014 that it has a real and continuous link with economic activity being carried out in the State subject to meeting one or more of the following conditions:- 

1. 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; 

1. The company carries on a trade in the State; 

1. The company is a subsidiary or a holding company of a company or other body corporate, that satisfies either or both of the conditions specified in (a) and (b) above; 

1. The company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in paragraphs (a) and (b). 

The decision to grant the certificate rests solely with the Revenue Commissioners. Once the certificate is obtained, it must be filed with the CRO together with a Form B67 signed by a director and the company secretary. The exemption from the requirement to have an EEA resident director under Section 137 would then apply from the date of issue of the certificate by Revenue. 

Should you require any assistance in dealing with these requirements please contact Mary Flanagan or Louise Edwards of our Business Services Department.