Three things you need to know post Brexit.
Brexit headlines have focused more on the tangible aspects of the UK’s departure from the EU, and mostly on consumer issues, but there are clear and present dangers for businesses too, especially if you’re a UK subsidiary of a European group. We’ve identified three key issues that UK subsidiaries need to be aware of and act upon before it’s too late. At best, missing a deadline might cost you money in terms of late filing penalties, at worst, you may find an expensive process you have embarked upon is actually no longer possible in UK law, costing you even more money or a lost opportunity that you may never get in the future. It is important to know what the issues are before the decision is made for you; act rather than react and we’re here to help you with those decisions.
1. Audit Exemption
The audit exemption by parent guarantee (contained in s479A of the Companies Act 2006), which many UK companies with a parent in the EEA took advantage of, is going away. For periods commencing after 11pm on 31 December 2020 (1 January 2021 onwards basically), a parent company in the EEA will no longer be able to exempt its UK subsidiary from audit by guaranteeing all outstanding liabilities, preparing and filing consolidated accounts in English at Companies House and filing some administrative paperwork. While not an immediate threat, it is worth pointing out that such companies will need auditing, so the process to tender the audit should be started sooner rather than later.
2. EEA Corporate Officers
There is a significant change for UK companies with EEA corporate officers. It is standard practice to have a corporate director in UK subsidiaries, with the corporate director being either another group company or the parent. Prior to 1 January 2021 the filings for appointment were minimal but after this date, they must provide the corporate officer’s:
- registered (or principal) office address
- legal form and its governing law
- register and registration number (if applicable)
UK companies or LLPs that employed an EEA corporate officer before 1 January 2021 will need to provide Companies House with the relevant information. You have 3 months from 1 January 2021 to do this.
2. Group Reorganisation
If a European parent is considering a group reorganisation post 1 January 2021, it will need to be careful it doesn’t fall foul of the removal of the EU Cross Border Merger regime. Prior to Brexit, the UK didn’t have a domestic merger regime but could take advantage of The Companies (Cross-Border Mergers) Regulations 2007, which was the UK codified implantation of Directive 2017/1132/EU. This process allowed a streamlining of asset and liability transfer and the strike off of the redundant entity. The process will now be more complex, reverting to a more traditional process of share acquisition, asset transfer and a liquidation or strike off process.
As the above demonstrates, it’s not all about lorries sitting in car parks! Some complex issues have arisen for UK subsidiary companies with EEA parents as a result of Brexit which could be easily overlooked. If you are feeling unsure about how to proceed on any of these issues, then our experienced team of experts can guide you. Please feel free to contact Alex directly or fill out the form below and we will respond.
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