Ireland: Corporate Governance – News And Reminders As We Approach The End Of 2020

With the end of 2020 fast approaching (to the relief of many we are sure!), we would like to take this opportunity to tell you about some welcome changes to the CRO filing system, and to remind you of a few action items raised our legal bulletins over the course of this year.

We would also like to wish you and yours a very happy and restful Christmas and every good wish for a healthy and prosperous New Year!

1. CRO's digital transformation

The CRO implemented an entirely new online filing system on 16 December 2020 and have shut down their previous filing system. The good news is this new system allows for scans of (ink) signatures instead of having to submit the original ink signatures. E-signatures (Docusign etc) will not be permitted.

This means that, unless filed by 7 December 2020, any current/past/"out for signing" filings generated through their old online system (CORE) can now no longer be filed. NOTE: This does not affect paper filings (i.e. the fillable pdf ones - B5s, B7s etc.).

The facility of being able to file scans of signatures (rather than originals) is welcome news to companies and professional service providers as it means that filings can be completed and registered much more quickly and efficiently.

2. Brexit - UK Directors of Irish Companies and EU/EEA resident director requirement

With the UK scheduled to leave the EU on 31 December 2020, with effect from 1 January 2021, every Irish registered company which relies on a UK-resident director to meet the requirement under Section 137 of the Irish Companies Act 2014 ("s137") for an EEA-resident director will need to take urgent action.

Under s137, a company registered in Ireland must have at least one director who is a resident in an EEA State or avail of one of the other options set out in s137 (see below).

The Companies Registration Office ("CRO") will have the power under Section 725(1)(a) of the Irish Companies Act 2014 to strike the company off the register if they believe the company to be in breach of s137. A further penalty for a breach of s137 is potentially a ?5,000 fine for the company concerned, and also every officer of it.

Aside from the penalties, a company being strike off listed can have negative practical implications. For example, commercial contracts will likely be at risk of termination as a result of the listing for strike off and, in fact, would terminate automatically on the occurrence of strike off itself as the company will be dissolved.

Simplest solution

If an Irish company does not have an EEA resident director post-Brexit, then the simplest solution may be to apply for a s137 Bond. This Bond acts as a guarantee in the event that the company is unable to pay a fine or charge resulting from a breach of company law or tax legislation in Ireland and it lasts for two years. The Bond premium is approximately ?1,200 to put in place.

What are my company's other options?

Every Irish registered company has three options under s137, one of which should be put in place in advance of, or as close to, 1 January 2021 as possible. The 3 options for compliance with s137 are as follows:

1. Put a Bond in place; or
2. Apply to the Revenue Commissioners for a certificate stating that the company has a real and continuous link with one or more economic activities being carried out in Ireland (update - Revenue are now no longer accepting these applications ahead of Brexit); or
3. Appoint another EEA resident director.

Act Now

As 1 January 2021 is fast approaching, taking out a Bond (option 1) may be a company's best option at this stage, as an application to the Revenue Commissioners under option 2 is now no longer viable as Revenue have shut down the service ahead of Brexit.

3. Register of Beneficial Ownership – Have you filed your company's info?

As you are no doubt aware, there has been a filing requirement for all Irish companies and legal entities since 22 June 2019 in relation to their beneficial ownership. There are severe penalties for non-compliance with this filing requirement. Further information on this topic is available here.

What you need to know

• Every company must make an initial filing within 5 months of incorporation or have made a filing by 22 November 2019 if in existence before June 2019.
• Following the initial filing, each time your company's beneficial ownership changes you are obligated to update the central register.
• A 'beneficial owner' is a natural person who owns or controls, directly or indirectly more than 25% of the issued shares; more than 25% of the voting rights of the company; more than 25% of any other ownership interest; or individuals who have the ability to control the company by other means (e.g. through a shareholder's agreement; the exercise of dominant influence; or the power to appoint senior management etc.).
• In cases where no individual meets the requirements of being a beneficial owner, details of the senior managing officials of the Company (e.g. company directors, and / or CEO) should be entered in the internal register of beneficial owners and filed with the central register.

Penalties for non-compliance

• Any company/entity that:

is liable for a ?5,000 fine on summary conviction and may also be liable to a fine not exceeding ?500,000 if convicted on indictment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.