Companies Registered in Ireland with Directors living in Northern Ireland
29 April 2021
Many companies registered in the Republic of Ireland (the “State”) with its directors living in Northern Ireland might not be aware that since Brexit, they have now to comply with additional requirements prescribed by the Companies Act 2014 (“CA2014”) and if they fail to do so, both the company and the officer in default commit a category 4 offence.
Company laws in Ireland impose strict requirements to companies regarding the residence of their directors, in particular Section 137(1) CA2014 requires that at least one of the directors of the company is resident in an EEA state. Residency in the State for the purposes of the CA2014 is defined in Section 141 and EEA-resident director means tax resident in a member state of the EEA, in accordance with section 137(7) CA2014. If, however, the residency test cannot be fulfilled by the director of the company, the following alternatives might be explored by the company to comply with such requirement.
- Relocate a director from Northern Ireland to the State or appoint a director resident in an EEA state. In general, this option is not feasible for many directors or companies, but it could be a suitable alternative for companies that for different reasons cannot comply with any of the following options.
- Hold a bond to the value of €25,000 for the purpose of providing payment in case a fine and/or a penalty is issued against the company by the Registrar of Companies and/or by the Revenue Commissioners for offences committed under the CA2014 and/or the Taxes Consolidation Act 1997. It also acts as a way of discharging the company’s liability for such payments.
The Companies Act 2014 (Bonding) Order 2015 sets the main terms the bond must have to be valid and as a result of having the bond into place, the company is exempted from having to have a director resident in an EEA state.
The bond has to (1) be produced in the prescribed form; (2) have a minimum period of 2 years from (i) the occurrence of the appropriate event requiring the bond to be put into place, or (ii) if another bond is in force following the expiry of the existing bond; (3) have the surety under the bond of a bank, building society, insurance company or credit institution and (4) be submitted to CRO at the correct time.
- Obtain a certificate from the Registrar of Companies saying that “the company has a real and continuous link with one or more economic activities that are being carried on in the State”, in accordance with Section 140 CA2014.
The link to the State for this purpose can be established by the fulfilment of one or more of the following conditions:
- the company’s affairs are managed from the State with that person(s) authorised to act on behalf of the company;
- the trade of the company is carried out in the State;
- the company is a subsidiary or holding company of another corporate entity complying with either or both conditions specified in a) and b);
- the company is a subsidiary of a company, another subsidiary complying with either or both conditions specified in (a) and (b);
However, complying with any of the above conditions is not enough by itself and proof of such connection to the State shall be provided by producing a statement in writing from the Revenue Commissioners in which it is stated that there are reasonable grounds to believe that such activities are being carried on in the State. Applications can be sent to the Revenue National Companies Unit and should include full details on the background to the request, together with supporting documentation, where appropriate.
When applying to the Registrar of Companies for the certificate, it is important to know that for the statement from the Revenue Commissioners to be valid, it has to be given within the period of 2 months ending before the date on which the application to the Registrar of Companies is made.