Companies Act and Brexit – practical considerations

UK companies need to review the impact of Brexit on their governance arrangements.

Governance rules are principally found in the Companies Act 2006 which is part of UK domestic law.  For the most part, leaving the EU will have little impact on the way UK limited companies are required to operate under this Act.  There are, however, some important changes that companies need to know.

The EU cross border merger regime, which enables a UK company to merge with a company from an EEA (European Economic Area) state, will cease to apply from 1 January 2021.

The Accounts and Reports (Amendment) (EU Exit) Regulations 2019 will amend certain accounting rules under the Companies Act 2006.  The definitions of micro, medium and large companies for determining which accounting documents need to be filed at Companies House are changing.  Accounting exemptions may no longer apply to UK companies with an EEA parent.  The ability for a UK company with an EEA parent to file dormant accounts will also be restricted.

The Companies House filing requirements for UK companies with EEA corporate directors or company secretary are also changing. Companies House will require further information for these officers, including how they are legally constituted and confirmation of the law under which they are governed.

Immediate action points for UK companies

• Those UK companies that comprise part of a group, where part of that group sits in the EEA, should take accounting advice to understand the impact of Brexit on the production of group accounts and financial statements
• Company secretaries, or directors generally, should consider their board composition to identify if any further reporting is required for their overseas corporate officers
• UK companies should check the beneficial ownership of stakeholders who hold more than 25% of the company where those owners sit in the EEA to ensure all reporting obligations are being complied with.