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As Brexit negotiations continue, directors need to be mindful of a number of issues potentially facing their companies from a Corporate and Company law perspective. Here is a helpful checklist of issues and Matheson recommendations to guide them in this process.
Area Key Issue Matheson Recommendation
Directors’ Duties Directors of Irish subsidiaries of international companies need to be fully advised of and briefed on all necessary
business restructuring steps needed to meet the challenges of a hard Brexit, should it occur.
This is particularly the case where any such restructuring will have a regulatory dimension for the company and will
necessarily impact on companies operating in certain sectors more than others. From a regulatory perspective,
the transfer of personal data to a UK affiliate will be considered to be a third country transfer under GDPR. In terms
of specific sectors, in the context of the distribution of pharmaceutical products directors will need to be aware
of their obligations, where the Irish company becomes the group’s EU authorised entity for European Medicines
Other issues which may have implications include the ability for employees based in Ireland to travel to the UK
post-Brexit, if for example they are not Irish citizens, as well as other operational consequences.
As directors of the Irish subsidiary, the duty lies with the board to ensure all necessary preparatory steps are
taken to protect the business and assets of the company from the adverse implications of a hard Brexit.
To the extent they have not been completed to date, the board of directors of the Irish companies should convene
a board meeting and arrange for a full briefing on all legal issues that have been identified as part of the company’s
Brexit diligence exercise and discuss and approve the proposed steps to be taken in advance of a hard Brexit to
mitigate the potential adverse consequences for the company.
The directors will want to demonstrate that they have taken active steps to ensure the Irish subsidiary has taken
all steps possible to prepare the company for the challenges that Brexit will bring for the company. The directors
should therefore meet to approve and authorise all actions that are needed as the process unfolds and to ensure
the company continues to obtain all required professional advice in relation to such actions.
M&A Deals Many market commentators and economists have predicted that a hard Brexit could lead to a recession in the
UK, which could affect other parts of Europe in a contagion like reduction in growth across the region. Any
significant economic slowdown will likely impact investor confidence more widely, which may result in a reduction
in corporates undertaking M&A activity. On the other hand, this may give rise to greater opportunities for financial
buyers where there is less buy side competition for assets.
On transactions where the target has UK operations, buyers should be undertaking thorough due diligence on
the target’s Brexit contingency planning and, where appropriate, specific Brexit related warranty cover should be
included in the relevant transaction documents. Similarly, where the acquisition is being partly funded by a third
party lender, buyers will need to consider the impact a no deal Brexit may have on the availability (and terms) of
Cross-Border Mergers Cross-border mergers will no longer be permitted between Irish registered and UK registered companies under
the European Communities (Cross-Border Mergers) Regulations 2008 (the “Regulations”) because under the
Regulations at least two of the merging entities must be governed by the laws of different EEA member states.
It is also worth noting that in determining whether reconstruction and amalgamation of companies relief under
section 80 of the Stamp Duties ConsolidationAct 1999 (the “SDCA”) can be validly claimed, the acquiring company
must be a limited liability company incorporated in an EEA member state.
Cross border mergers involving a UK company that are currently in progress should be completed before the UK
leaves the EEA as, in the absence of transition arrangements, the relevant court will not have jurisdiction to make
the necessary orders to give effect to the merger after that date. The requisite legal framework will not exist. From
a practical perspective, if an Ireland/UK cross-border merger was to commence before the final outcome of the
Brexit negotiations are confirmed, then it would need to be established that both the Irish and the UK High Courts
would agree to start the process without certainty as to its outcome.
Cross Border Mergers and the Impact of Brexit
Section 56 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill
2019 the (“the Brexit Omnibus Bill”), amends section 80 of the SDCA and extends the relief to apply to UK
incorporated companies that acquire Irish incorporated companies pursuant to a scheme of reconstruction or
amalgamation. It is hoped that these legislative provisions are retained in the final text of the Brexit Omnibus Bill
should a hard Brexit become a reality.
Directors’ Checklist for a “No-Deal” Brexit