EEA Resident Director Requirement (Ireland)
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The 31 December 2020 marks the end of the Brexit transition period, meaning the UK will have officially left the European Union and consequently, UK resident individuals will no longer be considered residents of the European Economic Area (the "EEA").
Section 137 of the Companies Act 2014 (the "2014 Act") requires all Irish companies to appoint at least one EEA resident director. In this regard, Irish companies whose director(s) are resident in the UK have until 31 December 2020 to either:
- Appoint an EEA-resident director;
- Put in place an insurance bond to the value of €25,000; or
- Apply to the Companies Registration Office (the "CRO") for a s.140 certificate confirming that the company has a 'real and continuous link' with one or more economic activities being carried on in Ireland.
Failure to comply with the requirements of s.137 may expose a company and any officer in default to a fine of up to €5,000.
Crucially, not having at least one EEA-resident director of an Irish-registered company is also considered to be a criminal offence and subsequently, the company and any officer of the company who is in default may be prosecuted in this regard. The Registrar of Companies is empowered to bring proceedings before the Dublin Metropolitan District Court for breach of the above requirement.
Appointing an EEA Director
The appointment of a director is governed by a company's constitution and possibly any shareholders agreement, which might be in place.
Assuming the correct procedures are followed in confirming the appointment of a new director, a Form B10 must be filed at the CRO within 14 days of their appointment. It should be noted, however, that an EEA-resident alternate director does not satisfy this requirement.
Section 137 Bond
The requirement to have at least one EEA-resident director does not apply to any company, which for the time being holds a bond, in the prescribed form, in force to the value of €25,000.
The bond provides that, in the event of a failure by the company to pay the whole or part of a fine imposed in respect of an offence under the 2014 Act or the Taxes Consolidation Act 1997, or a penalty under the latter legislation, an amount of money up to the value of the bond will be paid by the surety in discharge of the company’s liability.
The process of obtaining a s.137 bond involves submitting a bond application to an insurance broker who will issue a bond certificate upon approval of the application. The original certificate, together with a copy of same, must be filed in the CRO.
Section 137 bonds are generally used at the incorporation stage of a company when it would otherwise prove difficult to evidence that a company has a real and continuous link with one or more economic activities being carried on in Ireland.
Section 140 Certificate
An alternative to the s.137 bond is a s.140 Certificate. In order to obtain a s.140 Certificate, a company must prove that it “has a real and continuous link with one or more economic activities that are being carried on in the State”. In those circumstances, a company is required to demonstrate to the Revenue Commissioners that one or more of the following conditions are satisfied by the company:
Crucially, not having at least one EEA-resident director of an Irish-registered company is also considered to be a criminal offence and subsequently, the company and any officer of the company who is in default may be prosecuted in this regard. The Registrar of Companies is empowered to bring proceedings before the Dublin Metropolitan District Court for breach of the above requirement.
Appointing an EEA Director
The appointment of a director is governed by a company's constitution and possibly any shareholders agreement, which might be in place.
Assuming the correct procedures are followed in confirming the appointment of a new director, a Form B10 must be filed at the CRO within 14 days of their appointment. It should be noted, however, that an EEA-resident alternate director does not satisfy this requirement.
Section 137 Bond
The requirement to have at least one EEA-resident director does not apply to any company, which for the time being holds a bond, in the prescribed form, in force to the value of €25,000.
The bond provides that, in the event of a failure by the company to pay the whole or part of a fine imposed in respect of an offence under the 2014 Act or the Taxes Consolidation Act 1997, or a penalty under the latter legislation, an amount of money up to the value of the bond will be paid by the surety in discharge of the company’s liability.
The process of obtaining a s.137 bond involves submitting a bond application to an insurance broker who will issue a bond certificate upon approval of the application. The original certificate, together with a copy of same, must be filed in the CRO.
Section 137 bonds are generally used at the incorporation stage of a company when it would otherwise prove difficult to evidence that a company has a real and continuous link with one or more economic activities being carried on in Ireland.
Section 140 Certificate
An alternative to the s.137 bond is a s.140 Certificate. In order to obtain a s.140 Certificate, a company must prove that it “has a real and continuous link with one or more economic activities that are being carried on in the State”. In those circumstances, a company is required to demonstrate to the Revenue Commissioners that one or more of the following conditions are satisfied by the company:
- The affairs of the company are managed by one or more persons from a place of business established in Ireland and that person or those persons is or are authorised by the company to act on its behalf;
- The company carries on a trade in Ireland;
- The company is a subsidiary or a holding company of a company or another body corporate that satisfies either or both of the conditions specified in paragraphs (a) and (b);
- 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).
An application for a s. 140 Certificate is made to the CRO via Form B67. This application must be accompanied by a statement from the Revenue Commissioners, made within two months of the date of the application to the CRO, that it has reasonable grounds to believe that the company has such a link. Given the impending deadline of 31 December, this may not be a suitable option for an immediate solution.
It is worth noting that the s.140 Certificate offers a more cost effective means of safeguarding a company's position in relation to the s.137 requirements when compared to a s.137 bond. In addition, the s.140 certificate will remain in place provided the company retains a 'real and continuous link', whereas the s.137 bond must be renewed on the expiration of the two-year period.
Please do not hesitate to contact our Corporate Team should you have any queries in relation to any of the above.
Written by Jamie Woodcock and Alice Normoyle.
It is worth noting that the s.140 Certificate offers a more cost effective means of safeguarding a company's position in relation to the s.137 requirements when compared to a s.137 bond. In addition, the s.140 certificate will remain in place provided the company retains a 'real and continuous link', whereas the s.137 bond must be renewed on the expiration of the two-year period.
Please do not hesitate to contact our Corporate Team should you have any queries in relation to any of the above.
Written by Jamie Woodcock and Alice Normoyle.