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Brexit update

Published: 24 November 2017
Area of Law: Brexit

Brexit update: (Un)limiting liability

With so much going on at a political level over Brexit, some small but surprisingly important details for businesses can be overlooked.

In a little publicised “Notice to Stakeholders” published this week, the European Commission has reminded businesses of the legal repercussions which need to be considered when the UK leaves the EU.

What does the notice say?

The most alarming extract points out that the EU may no longer recognise the legal status of UK companies after Brexit. This means (to quote the notice) “companies might not have a legal standing in the EU and shareholders might be personally liable for the debts of the company.”

It is unlikely that Brexit could mean shareholders become personally liable for the debts of the companies, and so the notice may have been published by the Commission for tactical reasons. It is, however, still a stark reminder of how much crucial detail remains to be resolved.

A more realistic problem concerns UK companies operating branch offices in the EU. After Brexit the regulatory regime for these branches will change and become much more onerous because UK companies will then have to comply with the rules applicable to “third countries”.

What does this mean for businesses?

Businesses operating branch offices in the EU should be looking now at their options and putting systems in place to comply with the new and more onerous legal requirements.

This is just one example of the challenges facing businesses and illustrates the need once again to have plans ready now ahead of Brexit.

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