How will Brexit affect UK corporate law and UK companies with EEA operations?

With the Withdrawal Agreement transition period now expired and a UK-EU Trade and Cooperation Agreement finally in place, as of 1 January 2021, EU company law no longer applies to UK-registered companies. Whilst the impact may not be as apparent as other more political aspects of Brexit, this regime change does have implications for both UK corporates that have a cross-border relationship with the EU and for EU corporates that are operating in the UK (including through a UK subsidiary or branch).

In this article, our Corporate partner Chris Bannister outlines the key implications of the new regime and its impact on UK company law and for UK corporates with EEA operations.

Cross-border mergers

From 1 January 2021, UK companies are no longer able to take advantage of the EU cross-border merger regime (pursuant to the Cross-Border Mergers Directive); any cross-border mergers implemented under that regime (typically in relation to reorganisations of corporate groups) involving any UK companies must have been completed and registered before that date.

Societas Europaea (SE)

These entities will no longer be able to be registered in the UK (or transferred to or from the UK) from 1 January 2021 and any pre-existing UK SEs that were registered in the UK as at that date have been automatically converted to a “UK Societas”. Such entities can choose either to remain as a UK Societas, convert to a (UK) PLC or be wound up.

If remaining as a UK Societas, they will need to ensure that their new legal status is clearly stated on their websites, stationery and other public-facing documents.

Any SEs registered in an EU Member State with branches or establishments in the UK will now have to register such branches or establishments with Companies House under the Overseas Company Regulations within three months and comply with those Regulations going forward.

European Economic Interest Groupings (EEIGs)

These entities will also no longer be able to be registered in the UK from 1 January 2021 and any pre-existing EEIGs registered in the UK as at that date have been automatically converted to a UK Economic Interest Grouping (UKEEIG). They must ensure that their new legal status is clearly stated on their websites, stationery and other public-facing documents.

Any UK members of EEIGs registered in any other EU Member States will no longer be able to participate in those groupings unless the contract under which such EEIG is formed allows them to do so.

New filing and disclosure requirements

There are a number of new filing and disclosure requirements that now apply both to UK companies with EEA corporate officers and to EEA companies with registered UK establishments:

UK companies with EEA corporate officers

Any UK company or LLP that has EEA corporate officers (i.e. corporate director, secretary or LLP member) will now (from 1 January 2021) need to file details with Companies House of any such corporate officer’s name, registered (or principal) office address, legal form and governing law and its register and registration number (if applicable). Any company or LLP that had an existing EEA corporate officer on 1 January 2021 must provide Companies House with the relevant information within 3 months from that date.

European Economic Area (EEA) companies with UK establishments

As the UK is no longer part of the EEA, any EEA companies (and SEs) that have registered a UK establishment are now treated as “overseas companies” (under the Overseas Company Regulations) and must now provide additional information to Companies House (including their audited accounts, where they are required to do so in their home country) and publish additional information on their business letterheads, order forms and websites. This must be done within 3 months from 1 January 2021 by EEA companies (and SEs) with pre-existing UK establishments as at that date.

Legal Implications of Brexit for UK businesses with operations in the EU

In the same way as EEA companies have now become “overseas companies” under UK company law, UK-incorporated companies have become “third country companies” for EU law purposes following the expiry of the Withdrawal Agreement transition period.

Under EU law, the legal personality and limited liability status of “third country companies” are not automatically recognised by EU Member States and will need to be carefully considered under any relevant national law or international law treaties. Certain EU jurisdictions (including Germany and Austria) apply a ‘seat’-based regime, which will mean that UK-incorporated companies and LLPs which have their central administration or principal place of business in those jurisdictions may find that their separate legal personality is no longer recognised there and that the limited liability of their shareholders is lost. This may mean that consideration needs to be given to incorporating a local entity and transferring the business to that entity or taking other steps to restructure or to localise their operations in such jurisdictions.

UK companies with branches in EEA Member States may also now face additional filing and disclosure requirements in relation to those branches in those EEA Member States and local advice should be taken to confirm the position.

Accounting and corporate reporting changes

Following the end of the Withdrawal Agreement transition period, UK companies which previously reported under EU International Accounting Standards will now need to report under the UK equivalent – which may mean loss of certain exemptions previously applicable (for example, UK-incorporated dormant companies with EEA parents will no longer be exempt from preparing or filing individual accounts).

UK companies that have a branch or other presence in any EEA Member States should check the applicable local accounting and reporting requirements in those countries to ensure that such requirements are still being met.

Conclusions

Whilst Brexit itself has not caused many immediate changes to UK company law (and the influence of EU Directives and Regulations that have now been converted into UK law pursuant to the European Union (Withdrawal) Act 2018 will no doubt remain strong for years to come), there are implications both for UK corporates with an EEA presence and for EU corporates operating in the UK that need to be carefully considered.