Section 137 Bond (non-resident) for Irish Companies

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Who should read this?

This article is written for non-EEA residents who want to establish an Irish company without appointing an EEA-resident director. It's also useful for corporate service providers who assist clients with Irish company formations.

Key Takeaways

Irish companies must have at least one EEA-resident director or secure a Section 137 Bond of €25,000
The Bond costs approximately €1,600 for a two-year period
The application process is fully digital via DocuSign and takes and additional 7-10 working days
The Bond provides €25,000 coverage for company fines, penalties, and related recovery expenses

Understanding the Section 137 Bond Requirement

Irish company law requires that at least one director of an Irish registered company be resident in the European Economic Area (EEA) at all times.

This requirement can present a challenge for entrepreneurs and businesses from outside the EEA who wish to establish an Irish company.

Fortunately, Section 137(1) of the Irish Companies Act 2014 provides an alternative solution: the Section 137 Bond.

This bond effectively exempts Irish companies from the EEA-resident director requirement, making it possible for non-EEA residents to establish and operate Irish companies without appointing an EEA-resident director.

What is a Section 137 Bond?

A Section 137 Bond is basically an insurance policy taken out in favour of the Irish Revenue Commissioners.

A Section 137 Bond provides coverage of €25,000 and serves as financial security to ensure compliance with Irish company and tax laws.

The bond specifically covers:

Fines imposed on the company for offences under the Companies Act 2014, such as failure to file Annual Returns and Financial Statements on time
Penalties for failing to provide required information to the Revenue Commissioners, particularly information required on Form CRO 11F
Any penalties the company becomes liable for under Irish tax legislation
Expenses incurred in recovering these fines and penalties

Cost and Duration of the Bond

The total cost for a Section 137 Bond is approximately €1,600

This cost typically includes:

The insurance premium
Government levies
A processing fee from the insurer (often around €200)

This premium covers a two-year period with a limit of indemnity of €25,000.

It's important to note that the bond must be renewed every two years at the same cost to maintain compliance with the Companies Act.

The Application Process

The application process for a Section 137 Bond has been traditionally tedious and paper based.

Open Forest has solved this with our insurance company partner. Here's what you need to know:

Digital Application

The application is completed entirely online using DocuSign, eliminating the need for wet signatures or physical documents.

This makes the process accessible for applicants regardless of their location.

Required Participants

The application requires the involvement of three parties:

The person completing the application form
A director approving the application
Another director or company secretary also approving the application (Open Forest can be appointed as your company secretary through our incorporation process).

Timeline

Once the completed application form and premium payment are received, the bond typically takes 7-10 working days to process.

The S.137 Bond process is still a slow process - factor in an additional 10 working days just for this part of the process.
Unfortunately it’s close to impossible to speed insurance companies up.

Information Required

To initiate the application, you'll need to go through our incorporation process on our website and we will consult with you about the bond.

Alternatives to the Section 137 Bond

While the Section 137 Bond is a straightforward solution, there are alternatives worth considering:

Appointing an EEA-Resident Director

The most direct alternative is to appoint a director who is resident in the EEA.

This eliminates the need for the bond entirely.

There are professional services firms out there that will provide non-executive directors but they can cost around €4,000 per year.

Note that only individuals can be directors or Irish companies, rather than another company acting as director.

The "Real and Continuous Link" Exemption

Companies can also apply for an exemption from the bond requirement by demonstrating a "real and continuous link" with one or more economic activities in Ireland.

This requires obtaining a certificate from the Revenue Commissioners confirming this link.

Compliance Considerations

Non-compliance with the EEA-resident director requirement or failure to secure a Section 137 Bond can result in serious consequences, including prosecution of the company and its officers.

It's essential to address this requirement either by appointing an EEA-resident director or by securing and maintaining a valid Section 137 Bond.

Conclusion

The Section 137 Bond provides a practical (but somewhat expensive) solution for non-EEA residents who wish to establish and operate Irish companies without appointing an EEA-resident director.

The process is straightforward and fully digital, making it accessible regardless of your location - but it can still be slow so be sure to factor that in to your planning.

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