EU Exit And Company Law - GOV.UK

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EU EXIT AND COMPANYLAWGuidance covering legislative and practicalchanges to the UK’s Company Lawframework as a result of Brexit in a No DealscenarioOctober 2019

Crown copyright 2019This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated.To view this licence, visit e/version/3 or write to theInformation Policy Team, The National Archives, Kew, London TW9 4DU, or email:psi@nationalarchives.gsi.gov.uk.Where we have identified any third-party copyright information you will need to obtain permission from thecopyright holders concerned.Any enquiries regarding this publication should be sent to us at:enquiries@beis.gov.uk

ContentsIntroduction 5General company law requirements after Brexit 6Filing and disclosure changes for companies 6Cross-border mergers 7SEs and EEIGs 8Removal of benefits for certain UK companies only listed on an EEA market 9Shareholder approval of political donations 10Other amendments to the UK company law framework 10Accounting requirements after Brexit 12Accounting requirements for UK incorporated companies 12Preparing annual accounts using international accounting standards (IAS) 12Operating as a UK company with EEA listing 13UK subsidiaries and LLPs with an EEA-registered parent 13Operating as a UK company with cross-border presence in the EEA 14Accounting requirements for EEA companies 14EEA companies with a UK listing 14EEA subsidiaries of UK-registered parent companies 15Adoption of International Financial Reporting Standards (IFRS) after Brexit 15Requirements for auditors and firms after Brexit 17UK auditors and firms 17Recognition of UK Auditors 17On-going audits 18Third country auditors 19Group audits 19Application of the EU Audit Regulation 19Blacklisted non-audit services 20Firm ownership 21EEA auditors and firms 21New and existing registrations with UK recognised professional bodies 21Firm ownership 22Audit Committees 22Annex A- Additional Information 24Statutory Instruments 24Guidance 253

Companies House Guidance 264

EU Exit and Company LawIntroductionTo help your company prepare for Brexit you should familiarise yourself with the contents ofthis Guidance that covers changes as they relate to the Companies Act 2006 and the widerframework of corporate law and accounting and audit regulation in a No Deal scenario1. Innearly all cases the changes will only impact businesses that have a cross-border relationshipwith the EU – either through conducting business operations in the EU, by being an EUcompany or individual operating in the UK, or by being a UK subsidiary or branch with an EEAparent. In most cases the changes will be minimal. There are more detailed requirements inrelation to auditors that are covered from page 17 onwards.This document collects into one place all guidance previously published that relates to EU Exitrelated changes to the UK’s company law framework. These documents should be read in fulland can be found through the following itThe Government has now laid, or is in the process of laying, all necessary StatutoryInstruments that will ensure the UK’s company law framework is up to date and reflects theUK’s status outside of the EU. You should also refer to the specific legislative changes made inthe relevant Statutory Instruments, and the accompanying explanatory memorandum, for eachinstrument. The links to these documents can be found in Annex A, ‘Additional Information’.In addition, you should also refer to relevant updated Companies House guidance. These canalso be found in Annex A, ‘Additional Information’.You can direct any questions or feedback on this guidance document to:companylaweuexit@beis.gov.uk1In a Deal scenario the changes will take effect after the implementation period and subject to any transitionalperiod that applies to specific changes.5

EU Exit and Company LawGeneral company law requirements afterBrexitFiling and disclosure changes for companiesThe UK’s departure from the EU has created the need for various aspects of the CompaniesAct 2006 and Regulations made under that Act, as they relate to filing requirements andcertain company processes, to be updated to reflect the UK’s position outside of the EU.These changes will impact only a small number of companies. The changes will be broughtinto effect on exit day via the Companies, Limited Liability Partnerships and Partnerships(Amendment etc.) (EU Exit) Regulations 2019 (2019/348).In the main changes to filing requirements will only impact UK companies who appoint or whohave appointed the services of an EEA corporate officer (director or secretary) and EEAregistered companies which have registered a UK establishment. It also removes access to EUprocesses and systems so that after exit day UK companies will no longer be able to use theEU cross-border merger regime (implemented in the UK through the Companies (Cross-BorderMergers) Regulations 2007).Who the changes affect: UK companies who employ an EEA corporate officer (director or secretary) EEA-registered companies which have registered a UK establishment (including newlyregistered UK Societas and UK EIGs)What companies need to do:a) UK company with an EEA corporate officerUK companies which currently have a corporate officer which is a (non-UK) EEA registeredlimited company will have to provide additional information to Companies House2. Theadditional information3 is: legal form and its governing lawb) Changes for registered overseas companiesEEA companies which have registered a UK establishment will need to provide additionalinformation to Companies House and publish additional information on customer-facingmaterial.4 The additional information required by Companies House is: Information on the law under which the company is incorporated The address of its principal place of business or registered office2Amendments to Sections 164 and 278 of the Companies Act 2006.Alongside existing information which is: name; registered (or principal) office address and register andregistration number (if applicable).4 Amendments made to the Overseas Companies Regulations 2009 (Regulations 6 and contents/made)36

EU Exit and Company Law The company’s purpose (its ‘objects’) The amount of share capital issued The company’s accounting period and period of disclosure (for companies that arerequired to disclose accounts under their parent law).The additional information required to be published on public facing material such as websites,letterheads and order forms is5: the location of its head office the legal form of the company its limited liability status and if applicable, notice that the company is being wound up, or is subject to insolvencyor any other analogous proceedings. And for companies that choose to refer to their share capital on order forms etc., theymust do this by reference to paid up capital.Companies affected will have three months from exit day to provide Companies House with theadditional information required. They will need to provide the additional information toCompanies House by filling in and sending Companies House the relevant form. Updatedforms will be available electronically from exit day.Cross-border mergersAfter exit day UK companies will no longer be able to make use of the EU cross-border mergerregime, implemented into UK law through the Companies (Cross-Border Mergers) Regulations2007. The Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EUExit) Regulations 2019 will revoke these Regulations on exit day.This means that any cross-border merger involving a UK and EEA company (or partnership)that has not been completed before exit day may fall.Who these changes affect: Any UK company taking part in a cross-border merger with an EEA company under theCompanies (Cross-Border Mergers) Regulations 2007 that has not been completed byexit day.What companies need to do: If a company is undergoing a cross-border merger under the EU cross-border mergerregime they should seek urgent legal advice on the status of their merger.Alongside existing information which is: the company’s country of incorporation, the identity of the registry, if any,in which the company is registered in its country of incorporation and if applicable, the number with which thecompany is registered in that registry.57

EU Exit and Company Law After exit companies seeking a merger with another company outside of the UK willneed to transfer assets and liabilities using contractual arrangements (as happens nowbetween UK and non-EEA companies).SEs and EEIGsOn exit day Societas Europaea (SEs) and European Economic Interest Groupings (EEIGs) willno longer be available as company structures to UK companies. UK companies that usedthese company structures before exit day have been given the opportunity to convert to a newform of UK corporate entity or move their registered office outside of the UK.Any entities that have either not completed the conversion process or have not converted ortransferred out of the UK before exit day, will automatically be converted to a new UKcorporate entity. The European Public Limited-Liability Company (Amendment etc.) (EU Exit)Regulations 2018 (2018/1298) and the European Economic Interest Grouping (Amendment)(EU Exit) Regulations 2018 (2018/1299) brought these changes into effect.The new corporate entities will preserve many of the features of the SE and EEIG frameworkbut there will be no ability to transfer their registered office out of the UK.As the UK will no longer be part of the EU framework for SEs, those entities with a presence inthe UK will be subject to the same requirements as other companies currently qualifying asoverseas companies under the Overseas Companies Regulations and will need to fileinformation with Companies House in line with these regulations.Who these changes affect: Societas Europaea registered in the UK. European Economic Interest Groupings registered in the UK. Societas Europaea registered in EU Member States who have a branch orestablishment in the UK.What companies need to do:6 Any entities that did not transfer before exit day will automatically be converted to a newUK corporate entity: a UK Societas or a UKEIG. These entities do not need to take anyaction. UK Societas and UK EIGs will need to ensure that the new corporate identifier isreflected on their websites, stationery and other public facing documents. The newcorporate identifier, UK Societas or UKEIG, must be used in placed of SE or EEIG. UK Societas who have made use of the employee involvement provisions in the SEframework should familiarise themselves with the new requirements6 (see particularlyregulations 48-82 and 146-159). These are similar but not identical to those for SEs. SEs registered in the EU with branches or establishments in the UK will have to registerthese branches or establishment with Companies House under the Overseas 8/contents/made8

EU Exit and Company LawRegulations (see Schedule 3 of The International Accounting Standards and EuropeanPublic Limited-Liability Company (Amendment etc) (EU Exit) Regulations 2019 (SI No.2019/685) for post exit requirements).The companies affected by the above changes will have three months from exit day to makethe changes. Further guidance on the actions that new UK Societas and UK EIGs need tocomplete can be found on gov.uk7.Removal of benefits for certain UK companies only listed on anEEA marketLeaving the European Union necessitated an update to the definition of ‘regulated market’ as itappears in the Companies Act 2006 (and related legislation). The definition covers financialregulated markets: an exchange for buying and selling interests in financial instruments8.There are two changes of the definition that will affect certain groups of companies. In bothcases the amendment was required to ensure that all non-UK entities are treated in the sameway after exit day so that the UK complies with World Trade Organisation rules9.The change removes preferential treatment for entities listed on EEA regulated markets so thatafter exit day only entities listed on UK regulated markets benefit from certain benefits.Who these changes affect: Intermediaries who deal in securities that are listed on an EEA regulated market - anddo not have access to a UK regulated market - and who own shares in a parent holdingcompany10. Investment companies listed on an EEA regulated market - and not on a UK regulatedmarket - and that currently make use of relaxations on controls on their distribution ofprofits11.What companies need to do: Intermediaries who deal in securities, who do not have access to a UK regulatedmarket, do not need to do anything – as they can continue to hold the shares- but theywill no longer be able to exercise the voting rights attached to those shares. UK investment companies listed on an EEA regulated market and not a UK regulatedmarket will no longer be able to make use of relaxations on controls on their distributionof out-a-dealThe definition is amended in the Accounts and Reports (Amendment) (EU Exit) Regulations 2018 in line with thechanges made to definition in the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018(which separates the regulated market definition into “UK regulated market” and “EU regulated market”).9 For further information: https://www.wto.org/english/thewto e/whatis e/tif e/fact2 e.htm10 Section 136 of the Companies Act 2006 prohibits subsidiaries from having shares in their holding company.Section 141 of the Act offers an exemption for a subsidiary company if they are intermediaries who deal insecurities, hold the share in the ordinary course of its business and meet certain conditions including membershipof or access to a regulated market. Section 141 is being amended to replace “regulated market” with “UKregulated market”.11 In section 832 of the Companies Act 2006, investment companies are permitted to make distributions undercertain conditions which includes (section 832(5)(a)) that the company’s shares must be admitted to trading on aregulated market. Section 832 is being amended to replace “regulated market” with “UK regulated market”.89

EU Exit and Company LawShareholder approval of political donationsAmendments to Part 14 of the Companies Act 2006 have been made to reflect the UK’s statusoutside of the EU. This part of the Companies Act sets out the shareholder authorisation(s)required to allow a company to donate to political parties, organisations and candidates forelectoral office. After exit these authorisations will only apply to donations and expenditurerelating to UK based political parties, organisations and candidates for electoral office. Politicaldonations to non-UK parties, organisations and candidates will be covered by the rules in therelevant country, as is the case in the UK under the Political Parties, Elections andReferendums Act 2000.Who these changes affect: UK companies who wish to make donations to an EEA political party, organisations andcandidates.What companies need to do: Check the requirements and rules relating to political donations in the relevantjurisdiction.Other amendments to the UK company law frameworkTwo other changes were also required to the company law framework to reflect the UK’s statusoutside of the EU. These have been grouped together below and cover: naming controlsapplied to non-UK companies after exit12, as applied by Companies House, and restrictions onwho Companies House can send sensitive information to, relating to UK directors13. In relationto naming controls, after exit, the UK will have no ability to make sure that namingrequirements have been followed by EEA companies. The change therefore ensures that afterexit day the same naming rules are applied to all non-UK companies. In relation to CompaniesHouse only being able to share data with UK based credit reference agencies, the change is inline with non-EEA disclosure requirements now - where Companies House cannot, forexample, send protected information outside of the EEA.Who these changes affect: EEA companies registering a UK establishment under the Overseas CompaniesRegulations.12Section 1047 (Registered name of overseas companies) amended so that that after exit day the provisions inPart 5 of the Companies Act (a company’s name) that apply “checks” to the company name that is submitted toCompanies House for registration will apply to EEA companies in the same way that it applies to all otheroverseas companies.13 The following Regulations permit disclosure of certain protected information (date of birth and address ofcompany directors) from the Companies Registrar to specified public authorities, and to EEA (including UK) creditreference agencies, credit institutions and financial institutions, and the use by those agencies and institutions ofEEA (including UK) data processors to process that information: Schedule 2 to the Overseas CompaniesRegulations 2009; Schedule 2 to the Companies (Disclosure of Address) Regulations 2009; Schedule 2 to theCompanies (Disclosure of Date of Birth Information) Regulations 2015; Schedule 4 to the Register of People withSignificant Control Regulations 2016; and Schedule 5 to the Scottish Partnerships (Register of People withSignificant Control) Regulations 2017. There is no change to public authorities receiving this information.10

EU Exit and Company Law Credit reference agencies who receive personal data relating to UK directors fromCompanies House.What companies need to do: The companies themselves do not need to do anything. Companies House will applythe checks to the name14. Credit reference agencies need to note that they will only be able to receive informationrelating to UK directors from Companies House if they are based in the UK. There is aone-year transitional period before this change comes into effect.After exit day

EU Exit and Company Law 7 The company’s purpose (its ‘objects’) The amount of share capital issued The company’s accounting period and period of disclosure (for companies that are required to disclose accounts under their parent law). The additional information required to be published on public facing material such as websites,

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