What Impact Will Brexit Have Upon a Company’s Governance?
Brexit comes into force on 1 January 2021 as the transition period ends. The precise impact upon UK trade, jobs and the country’s growth prospects remain unclear as discussions continue.
However, amongst this uncertainty, companies and their boards, will be considering the likely impact Brexit will have upon their business and ongoing governance function. For example, from 1 January 2021, businesses who are a EU entity formed under EU law, UK companies with an EEA (‘European Economic Area’) corporate officer, a UK company involved in a cross-border merger or a EEA company, may need to change their company registration processes.
According to ICLG.com, “The full effect of Brexit on UK corporate governance remains to be seen, but the impact on companies was clear in the 2019 reporting season, with 37% of 350 FTSE companies referring to Brexit in the viability statements in their 2019 annual reports, compared with 14% in 2018.” So, while adapting their business model to changing circumstances is nothing new, what are the key areas boards should consider post-Brexit?
A major area for firms will be to ensure the identification of a wide-range of risks. These should be recorded within their risk register, mitigated and most importantly, managed in the new trading environment. Risks might, for example, relate to imports and exports from the EU, and the ensuing consequences from a tax or currency exchange perspective.
Regulatory change will, of course, vary by sector and it will be important for businesses to keep up to date with their industry bodies who will work with the UK government on transition rules and trade deals.
There will be a whole host of other risk management issues that will impact businesses –too many to list! Employment and employee’s rights with reference to EU members coming to work in the UK, and data sharing to and from the EU, are likely to feature heavily.
The UK government have provided guidance for businesses, particularly if they are importing or exporting goods to or from the EU. They can create a personalised action list on how to respond from 1 January 2021, to take into account the change in the relationship with the EU.
Boards should consider what effect Brexit will have on their firm’s previously agreed strategies, business plan, vision and mission. Timeframes for strategic decisions or roll-outs, for example, are likely to be severely impacted as the new rules are digested and firms reconsider the operational decisions needed to implement them.
Brexit law changes
After the Brexit transition period comes to an end, EU law in the UK will be described as “retained EU law” – a new legal principle for the UK legal system. It will however continue to be, or will form part of the UK’s domestic law – which will remain open to interpretation.
The UK government has already published post-Brexit updates to specific areas of law that will affect businesses, such as copyright, it’s likely there will be many more to come.
As the 31 December deadline rapidly approaches, boards should consider taking specialist advice, in relation to complex areas such as tax, currency and employment law, where appropriate. Ensuring they act in the best interest of their companies, will be of critical importance to directors and their boards, as they enter the post-Brexit landscape on 1 January 2021.
Bridgehouse Company Secretaries has a team of industry experts that offer a range of company secretarial advice to suit businesses of all sizes and types. Contact us on 0845 055 8260 or email firstname.lastname@example.org to see how we can help.