Now that the United Kingdom (the “UK”) is no longer a member of the European Economic Area (the “EEA”), businesses around the world with entities incorporated in Ireland need to review their boards so as to ensure that they have at least one director who is resident in the EEA. Equally, businesses looking to incorporate or acquire new entities in Ireland should ensure that at least one newly appointed director is resident in the EEA.
This is a legal requirement under section 137 of the Companies Act 2014, a breach of which attracts a fine of up to €5,000. Previously this was not an issue for individuals who were resident in the UK and acted as directors on the boards of Irish entities. However, as of 1 January 2021, it is now important for businesses to be aware that they might be in breach of company law, particularly if they have existing directors who are resident in the UK (including Northern Ireland) sitting on the boards of Irish entities and have no other EEA resident directors appointed.
This is not to say that individuals residing in the UK can no longer act as directors of Irish entities; it is to provide an update that if businesses had previously relied on the appointment of a UK resident director to comply with the EEA residency requirement, they should take steps now to ensure compliance following the UK’s withdrawal from the EU / EEA. If it is not possible for businesses to comply with the EEA residency requirement, there are two options:
- The entity can buy a bond worth €25,000 from a financial institution and the bond must have a minimum period of validity of two years, commencing no earlier than the occurrence of the event giving rise to the requirement for the bond. The bond costs approximately €1,500 to buy depending on the financial institution; or
- The entity can apply for what is known as a “Section 140 Certificate“ from the Irish Companies Registration Office (the “CRO”) where the entity can show that it “has a real and continuous link with one or more economic activities that are being carried on in the State”. In order to get a “Section 140 Certificate”, the entity will need to obtain a statement from the Irish Revenue Commissioners (“Revenue”) and provide same to the CRO. The statement should provide that Revenue has reasonable grounds to believe that the company does in fact have a “real and continuous link”
For more information on the requirement to have at least one EEA resident appointed as director to Irish entities, please contact the Corporate Department in Leman Solicitors on 01 6393000 or visit www.leman.ie