Section 137 Non-EEA Resident Director Bond For Irish Companies

Section 137 bond

In the event where a company does not have an EEA resident director, they can use a Non-resident Director bond. This is often referred to as a Surety Bond or Insurance bond. You are not required to have an EEA resident director if you have a Non-resident Director bond. The bond must be in place for a two-year period. It must be to the value of €25,000. The requirement concerns residency rather than nationality or citizenship. For example, a company director holding an Irish passport but residing outside of the EEA would not satisfy the requirement.

For those considering establishing their business, Setting up a company in Ireland involves various compliance steps, including understanding the requirements for resident directors and bonds.

This bond provides that in the event of a failure by the Irish company to pay:

• A fine levied on the company in respect of an offence committed by it under the Companies Act 2014

• A penalty imposed on the company in respect of an offence committed by it under section 1078 of the Taxes Consolidation Act 1997, particularly for failing to deliver a statement under section 882 or to comply with a notice served under section 884 of that Act

• A penalty which it has been held liable to pay under sections 1071 or 1073 of the Taxes Consolidation Act 1997

A sum of money becomes payable under the bond to cover the whole or part of the company’s liability regarding this fine or penalty.

Does this bond apply to a UK resident Director?

In the Companies Act 2014 under section 137, it states that there is a requirement for at least one Director of an Irish company to be resident in a Member State of the EEA. If this condition is not fulfilled, then a bond must be required. 

While the UK has been treated as a member of the EEA during the period of transition, this will cease on 1 January 2021. This will affect UK companies and individuals that have a registered company in Ireland using a UK resident director. As of 1 January 2021, they will be without an EEA resident director.

 

Criminal Offence for Non-Compliance

Failing to have a Section 137 Bond in place is a criminal offence if your Irish-registered company does not have at least one EEA-resident director.

The company and any officers in default may face prosecution for this violation.

The Registrar of Companies is empowered to bring proceedings before the Dublin Metropolitan District Court for breach of the requirement to have an EEA-resident director.

New Companies - When should you apply for the Section 137 Bond

For new companies, the bond must be effective from the date of incorporation. The CRO will require the Bond number before they complete the incorporation. 

The effective date of the bond may not exceed four working days prior to the date of the
company’s incorporation, exclusive of the incorporation date.

The words “Bond Enclosed” must be written on the accompanying envelope and the relevant box on the cover page of Form A1 must be ticked.

Existing Companies - Directors resign or Brexit

When filing a bond for an existing company, it is essential to follow these guidelines:

• Ensure strict compliance with the prescribed execution requirements.
• Submit the original bond along with Form B10.
• The bond must be valid from the date the EEA-resident director resigns or ceases to qualify as an EEA resident.

Adhering to these steps will help maintain compliance with the necessary regulations and avoid potential penalties.

What is 'real and continuous link'?

 

In some situations, the Irish company may be able to show it has a real and continuous link with activities being carried out in the state. The company may not require an EEA resident Director or a Section 137 Bond. 

To get this certificate, the company will need to show Revenue (Irish tax authority) that:

1. the affairs of the company are managed by one or more persons from a place of business

   established in the State and that person or those persons is or are authorised by the company to act on its behalf;

2. the company carries on a trade in the State;

3. the company is a subsidiary or a holding company of a company or another body corporate

   that satisfies either or both of the conditions specified in paragraphs (a) and (b);

4. the company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in paragraphs (a) and (b).

An example could be a company that is a shop, restaurant or even a creche. Even if these companies have only Non-EEA resident Directors, a strong case can be made that these businesses have a real and continuous link in Ireland. 

Appoint an Irish Nominee Director

A nominee Director has the very same responsibilities as any other Director in the company. They are still legally required to act in the best interest of the company.

This service can be attractive to companies who need to fulfil the criteria of having an EEA-resident Director in order to incorporate or maintain a company in Ireland. 

A nominee Director is more expensive then a Section 137 Bond. In most cases, the Section 137 Bond is a better option for the company shareholders. 

How long does it take for the bond?

A S.137 bond generally takes up to 10 working days to process from the date we receive the signed proposal form by a company director and secretary.

It is important to note that the S.137 Bond proposal form states that the company understands and accepts its obligations to both the Revenue Commissioners and the Registrar of Companies. It also contains a statement that the company will indemnify the Bond provider in the event of any claim.

How Nathan Trust can help

As a specialist Corporate services provider in Ireland, Nathan Trust can help you with any of the below services:

• Apply for a Section 137 Bond
• Apply for a certificate of Real and Continuous link
• Source an Irish resident Nominee Director

Please Note: In certain circumstances, International Companies setting up in Ireland may want to employ the services of an Irish Resident Director in a non-executive capacity. To discuss this requirement in more detail, get in touch with our team.

Do you get back the bond fees if the company closes and we do not have any outstanding fees with the government of Ireland?

The €25000 you pay for the S.137 Bond is valid for 2 years.

It is basically the insured money of €25000 to the government. But it does not cover all the late filing penalties. For example, if you are late in filing your annual returns to the CRO, you will lose your audit exemption on your accounts and you may end up paying additional fines of up to €1200. These amounts are not covered in bond insurance. SO, it is advisable to file your annual returns on time. Contact us to take care of your Annual Returns and tax services.

Typically, in the 2 years, the company has the chance to find an EU resident director. The bond fees are not refundable.

How do you pay a non-resident director?

Non-resident directors can either take salary or dividends from an Irish limited company. Basically, there are two options for Directors to pay themselves and the one you choose can depend on your personal situation. There are different tax rules for each type and speaking to our accountants who can understand your company can help you decide how you should pay non-resident Directors.