Prosecutions for UK based Directors of Irish companies

Aidan Scollard, Partner at Roberts Nathan: We have seen a number of prosecutions of UK based Directors of Irish registered companies recently where there is no EEA resident Director.

Where an Irish registered company does not have, on its board, a Director who is resident in the European Economic Area. (The EEA consists of the EU + Norway, Liechtenstein, and Iceland) it must put in place an insurance company bond, commonly referred to as a ‘S137 Bond’.

UK Resident Directors

Where an existing Irish company had fulfilled this Director requirement by appointing a UK resident to the Director role up until 31st December 2020 this will no longer qualify. They should consider replacing that Director or adding an additional Director who is an EEA-resident unless exempted. The Director requirement is based on residency, not nationality and so, a company Director of Irish nationality who lives in the UK will not satisfy the EEA requirement.

S137 Bond

These bonds were required effective from the Brexit date of 1/1/2021 and in general the bonds are for a 2-year period. Thus, many of the currently active bonds have recently expired on 31 December 2022 and should be renewed. The company must ensure it has continuous bond cover in place as otherwise it will be in breach of the Companies Act.

Prosecutions

We recently assisted a Scottish based Director who did not have a bond in place and had ignored the warning from Companies Registration Office (CRO here in Dublin, the equivalent of Companies House in the UK). As a result of the prosecution, he had to appoint a Solicitor to appear on his behalf in court, incur legal fees and court fees of €250 together with a fine of €250, so a very costly experience (companies that did not make an appearance were fined €2,500).

The solution

We have previously assisted many companies putting these bonds in place and especially for UK companies with Irish subsidiaries without a locally based Director. However this can take a few weeks to arrange and a copy must be filed in CRO when completed.

Final Word

Company Directors need to consider the implications on their Irish companies since the UK has left the EU. As with any legal or accounting issue early advice is important as failure to deal with this is a company law offence, category 4, with a fine of up to €5,000 for the company or its officers.