Much continues to be uncertain about Brexit. The form of the UK’s deal with the EU (if any) needs to be agreed by the end of September if there is to be time for parliamentary, technical legal reviews and translations by 31 December 2020.
Can businesses futureproof themselves in such uncertainty? Steps can certainly be taken in readiness and this European Commission Communication - Getting ready for changes highlights the main areas of change that will take place in any event at the end of the year, whether there is an agreement on a future partnership between the EU and the UK or not.
The communication above covers seven key areas (not least trade in goods and services) and the following picks out key questions to ask yourself from a corporate group structuring perspective.
As of 1 January 2021, UK incorporated companies will be “third country” companies. This means 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. The position will be determined by that Member State’s national law or international law treaties. Worst case scenario, the UK company’s shareholders may not benefit from limited liability and will become personally liable for the business' actions and liabilities abroad.
If your corporate structure involves a place of business, branch, establishment or any similar arrangement in an EU-27 country, consider seeking advice on the legal personality and limited liability status of that arrangement from 31 December 2020.
You may need to consider other ways of “localising” that part of your business, for example by setting up an incorporated company in the relevant EU-27 country. This decision is likely to be influenced by many factors – ranging from the protection of EU domain name and trade mark registrations, a need to preserve EU market access, restrictions which may be imposed on cross-border operations (such as additional approvals to operate) and potential loss of access to EU-funded programmes.
And in the reverse? If you have EEA companies with registered establishments/branches in the UK, be aware that additional information will need to be provided to Companies House from the end of this year. Exemptions, such as those relating to the filing of accounts, will no longer be available and additional trading disclosures will need to be made in their business correspondence and on their websites.
If your group structure includes subsidiary companies properly incorporated in an EU-27 country, they will continue to be covered by all relevant EU law and should not be impacted by the above.
Any existing European Company (also called “Societas Europaea”) or European Economic Interest Groupings set up in the UK will automatically convert into a new UK corporate entity from 1 January 2021. You can make alternative arrangements if certain conditions are met, for example converting your Societas Europaea into a UK public limited company or moving their seat of registration to another EU Member State, but this must be completed by 1 January 2021.
If you have a Societas Europaea registered in the EU which has a branch or establishment in the UK, you will need to register this at Companies House by 31 March 2021.
It will not be possible to form a Societas Europaea in the UK after 31 December 2020.
Look at the directorships and other senior manager roles held across your group structure. Have you any companies incorporated in an EU-27 country which require at least one director/officer to be an EU national? If so, make sure that this condition is satisfied. This may involve appointing new officers. Any EU-27 incorporated company with a sole director based in the UK should raise a red flag.
There is no requirement for the officers of UK incorporated companies to be UK nationals. Note, however, that EEA companies acting as corporate directors of UK companies will need to file additional information with Companies House from the end of the transition period.
If your UK group runs or owns a business operation in an EU-27 country, you are likely to become subject to additional filing obligations (particularly in relation to accounts where exemptions for EEA companies will no longer apply) at corporate registries. It would be wise to check these with local law advisers.
Your business is also likely to become subject to national laws applicable to other non-EU countries. For example, different real estate requirements, greater limitations on ownership by non-nationals and approvals to operate. Again, this will be worth clarifying with local experts.
Very likely, yes. If you operate any branch or subsidiary in an EU-27 country you will need to comply with the specific accounting and reporting requirements for such businesses in the EU-27 country in which they operate. Companies Act 2006 compliance may no longer be sufficient.
Where you have parent companies or subsidiaries incorporated in an EU-27 country, certain exemptions relating to the preparation of individual accounts will no longer able available. You will need to find out if you need to prepare group accounts.
All UK incorporated companies which report under EU IAS will need to report under the UK equivalent for financial years beginning after 1 January 2021.
UK public companies with a UK listing or EEA listing will need to comply with some very specific rules. The guidance linked below provides further detail.
You will need to check that your auditor’s qualification will continue to be recognised in EEA countries from 1 January 2021.
Yes. This note does not specifically cover tax matters and tax planning often influences group structuring. Our tax team at TLT would be happy to chat this through with you.
The above provides an overview of company law questions to ideally ask yourself now and action before 31 December 2020. We know, however, this all runs alongside your much wider business considerations from a Brexit perspective.
If you have any questions about the above or the wider challenges and opportunities that Brexit will bring, please do get in touch. With our network of collaboration law firms and accountancy firms across the EU, we would be happy to work with you to support your navigation through Brexit.
TLT supports Innova Energy on acquisition of solar plant powering...Read more
Will you have to pay SDLT on your residential purchase?Read more
TLT advises Maven on Hublsoft investmentRead more
The Future Fund - one month on | Scale-up insights episode eightRead more
TLT completes Series A round for biotech startup HyrisRead more
Company general meetings under the Corporate Insolvency and...Read more
Covid-19 Future Fund: more information on support for innovationRead more
Scale-up Insights episode seven - Is the coronavirus Future Fund...Read more
TLT advises Longacre Group on investment in ProwrapRead more
Green finance is gaining speed, driven by global climate change pressures and the recognition of the vital role which sustainability plays in a resilient financial services sector.Read more
Keep on top of the employment law issues that matter most to you and your business with our new podcast.Read more
As businesses adjust to new ways of working and plan for an uncertain future, we keep track of the emerging legal and regulatory issues.Read more
Keeping you up to date with the latest guidance on regulatory change and legal impact of the coronavirus pandemic.Read more
While future trading relationship with the EU is negotiated, we will be in a 'status quo' transition period until 31 December 2020. Follow our latest updates.Read more
Our Senior Managers Regime hot topic features news and insight to help banks, building societies, investment firms and UK branches of foreign banks prepare for the new regime.Read more
The clock is ticking for firms to prepare for moving from LIBOR to sterling risk-free rates. Follow our insights and events for strategic advice.Read more
We approach a brave new world of Gigabit full-fibre fixed communications, 5G mobile technologies, data driven markets enabled by true AI, with the potential for huge commercial and social growth and benefits. Follow our...Read more
Open Banking is driving innovation in banking and customer experience but also presents new challenges around security and data protection.Read more
We're one of the fastest growing and busiest corporate teams in the UK, advising clients including entrepreneurs, multi-nationals, PLCs, private equity and overseas investors on complex corporate transactions, governance and business turnaround issues.Read more
We help businesses and individuals manage their tax risks, working with clients in the UK and internationally.Read more