Brexit "no deal" – implications for UK companies
The only certainty we currently have with Brexit is that the UK will cease to be a member of the EU on 30 March 2019 if the UK government does not finalise a withdrawal agreement with other member states (or agree an extension of time with the European Council) by midnight on 29 March 2019.
It was hoped that withdrawal negotiations would by now be well underway and businesses would have a clear idea of the likely landscape in March as regards staffing, exports, cross-border services and intellectual property etc. As we currently stand though, people are starting to think more about the "no deal" scenario.
If there is no deal, the UK will become a "third country" from 30 March 2019. From a company law perspective this would mean that the legal personality and limited liability of UK companies which have their central administration or place of business in one of the remaining 27 EU member states may not be recognised. Confusingly, however, such companies may be recognised by a member state's national law or international law treaties. So, depending on the laws that apply, it is possible, in a worst case scenario, that such UK companies will not have legal standing in the EU and shareholders might be personally liable for the debts of the company.
This European Commission's notice to stakeholders outlines additional company law areas impacted if the UK was to become a third country. For example, branches of UK companies operating in the remaining 27 EU member states will become subject to the rules applicable to third country branches, and the European company (also known as Societas Europaea or SE) will no longer be available in the UK.
Is this really going to happen? As with everything Brexit-related, companies need to try to be prepared for the unexpected. A "no deal" could happen, indeed recent general opinion is that this is becoming more likely. However, there is still time for the UK to negotiate withdrawal arrangements, even if only slim in content, sufficient to maintain much of the status quo until the agreed transition period ends in December 2020. When this transitional period ends, there will hopefully be much greater clarity as to the terms of our exit and the rights that the UK will or will not then be able to enjoy.
If you would like to receive insights on corporate legal issues, including those arising through Brexit, sign up to news and events and tick the Corporate area of law, along with any other areas or sectors that interest you.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.