Preparing for Brexit: key steps for companies to take
The European Commission wrote to stakeholders reminding them that preparing for withdrawal from the EU is not just a matter for EU and national governments, but one also for private parties. The European Commission states that as of the withdrawal date, EU rules in the field of company law will no longer apply to the UK.
What can British companies do to prepare for Brexit?
UK incorporated companies:
Member states will not be obliged to recognise the legal personality and limited liability of companies which are incorporated in the UK but have their central administration or principal place of business in the EU. UK incorporated companies may be recognised in accordance with each member state's national law or international law treaties. As a consequence, depending on the applicable national or international law rules, such companies might not have legal standing in the EU and shareholders might be personally liable for the debts of the company. Consider whether to establish a subsidiary in an EU member state through which you conduct your business. Lloyds Banking Group has applied to convert its Berlin business into a subsidiary so that Lloyds can continue to serve clients after Brexit.
Set up a customs system:
Post-Brexit, if your business exports goods to EU markets or plans to you will need to complete customs declarations for those goods. You will need to update your business operations software (which can take considerable time) and recruit and train new staff. The EU requires 8 copies of each customs declaration. Or to avoid these issues, you could consider establishing an EU subsidiary to carry on the export business.
Consider whether to use a bilateral trade agreement:
This can save tariff costs but will increase bureaucracy as you must prove that each good is sufficiently British to qualify for zero rates. So you need to weigh up compliance costs versus the tariff savings.
Intra-EU trade is currently exempt from VAT but post-Brexit, UK trading companies will be charged VAT at the border when importing goods and services so this will present a cash flow problem for British companies. You could consider applying for the Duty Deferment Scheme which allows VAT to be paid in arrears, but requires a bank guarantee. Or you could try to replace EU-based suppliers with alternative UK-based ones.
Develop contingency plans:
In case border systems and procedures fail post-Brexit.
Know your employees' nationalities:
So that you ensure you are employing them legally post-Brexit. Consider what additional support your employed EU nationals need. You may face staff shortages; some businesses are already suffering from lack of experienced EU workers.
Query whether the current EU-wide intellectual property protection such as trademarks, registered designs and copyright (all of which are governed by EU legislation) will continue post-Brexit. The government says that European patents (which are dealt with under a separate system) will still apply in the UK but that the UK is exploring options in the other IP areas.
Even if you have no direct dealings with the EU, you still need to consider the potential impact of Brexit. If the costs of your UK suppliers are affected by Brexit, these may well be passed on to you.