Lawyers Say Organisations Need To Review Operations Before End Of Year
Lawyers at Irwin Mitchell are reminding companies with cross-border structures to review their operations from a company law perspective and make any necessary changes before the end of the year.
The UK withdrew from the European Union at 11pm on 31 January 2020 and has been a “third country” since then, subject to a transition period that will end on 31 December 2020.
An agreement on a new partnership is being negotiated between the EU and the UK but, as a Notice to Stakeholders issued by the European Commission on 3 July 2020 recognises, it is uncertain whether an agreement will be reached by the end of the transition period and the terms of any market access conditions would be very different.
The Notice highlights that from 1 January 2021, EU company law will no longer apply to the UK, which means that:
- UK companies will be third country companies and no longer automatically recognised in the EU. This could impact UK companies that have their central administration or principal place of business in the EU as Member States will not be obliged to recognise their legal personality or limited liability. The position will instead be governed by the individual Member State’s national law and could mean that companies do not have legal standing or that shareholders might be personally liable for the debts of the company.
- Branches of UK companies located in the EU will be branches of third country companies to which associated rules will apply.
- It will no longer be possible to rely on EU rules when dealing with a UK company.
- EU cross-border merger rules will no longer apply to the UK.
- EU rules on shareholder rights and engagement will no longer apply to companies whose registered office is in the UK or which are only listed on a stock exchange in the UK.
- The Takeover Directive (Directive 2004/25/EC) will no longer apply to securities traded in the UK.
- European Companies (SEs) which have their registered office in the UK will no longer have the same status and will be treated on the same basis as other UK incorporated companies.
- European Economic Interest Groupings (EEIGs) and European Cooperative Societies (SCEs) registered in the UK will no longer have the same status.
Expert Opinion“Businesses have been dealing with significant disruption over recent months and although Brexit provides additional challenges, UK companies which have their central administration or principal place of business in the EU should act now to ensure that they are ready for the changes.” Bryan Bletso - Partner