What Is a Bond and When Does It Apply?

Cover Image for What Is a Bond and When Does It Apply?

| Lauren Doyle

All Irish companies, pursuant to Section 137 of the Companies Act 2014, must have at least one European Economic Area (EEA) State resident director –

137. (1) Subject to subsection (2) and section 140, one, at least, of the directors for the time being of a company shall be a person who is resident in an EEA state.

The EEA includes EU countries and also Iceland, Liechtenstein and Norway.

A Company that does not have an EEA Director is in breach of S.137 which is a Category 4 Offense, a summary offence only, punishable by the imposition of a Class A fine. A “Class A fine” is a fine within the meaning of the Fines Act 2010 (i.e. a fine not exceeding €5,000)for officers and Company and the Company may enter involuntary strike-off as unable to file returns.

Where a company does not have an EEA Resident director appointed, they have the option of applying for a Surety Bond under S.137 – 

137. (2) Subsection (1) shall not apply in relation to a company if the company for the time being holds a bond, in the prescribed form, in force to the value of €25,000 and which provides that, in the event of a failure by the company to pay the whole or part of each (if any) fine and penalty specified in the Table to this section, there shall become payable under the bond to a person who is, under subsection (4), nominated for the purpose (the “nominated person”) a sum of money for the following purpose.

The Section 137 Bond referred to as ‘the Surety’, is a guarantee, put in place by an Insurance company that is authorised under the European Communities (Non-Life Insurance) Framework Regulations, that the company will pay a specified amount of money if called upon. The Insurance company that underwrites the bond (the guarantor) will honour the obligation to pay an agreed amount if called upon with regards the below if the Company fails to pay; 

  • a fine imposed on the company in respect of an offence under the Companies Act 2014 committed by it, being an offence which is prosecutable by the Registrar of Companies and
  • a fine imposed on the company in respect of an offence under section 1078 of the Taxes Consolidation Act 1997 and
  • a penalty which it has been held liable to pay under section 1071 or 1073 of the Taxes Consolidation Act 1997.

Such amount of money becomes payable under the bond in discharge of the whole or part of the company’s liability in respect of any such fine or penalty.

This bond is different to an insurance policy, in that the Irish Government can reclaim unpaid Revenue taxation or charges incurred by a company that has left the state with an outstanding bill. The unpaid taxations are reclaimed against the Underwriter (Guarantor).

A Section 137 Bond is a surety bond provided for the amount of€25,000 and lasts for a 2-year period commencing no earlier than the occurrence of the event giving rise to the requirement for the bond.

There is an application form that needs to be completed on each renewal which is delivered to the Bond Company. On receipt of the Bond it is sent to the CRO for registration. 

S.I. No. 215/2015 - Companies Act 2014 (Bonding) Order 2015 –

(5). The period of 2 years is hereby prescribed as the minimum period to be specified in the bond as being the period for which it shall be valid, which period shall commence not earlier than—

(a) the occurrence of the event which gave rise to the requirement to effect a bond, or

(b) if an existing bond is in force immediately before the bond is effected, the day following the expiry of that existing bond.

Which type of Non-EEA Resident Bond and resulting application does my company need? 

  1. Non-Registered Company Application

As part of the incorporation process, a bond here takes effect from day the company is incorporated if the company has no EEA-Resident Director being appointed on incorporation.

Pitfalls on incorporating with a Bond;

  • With bonds on Incorporation, make sure you tick the S.137 bond at the start of the A1 Application to ensure the Form A1 is filed correctly and to ensure there are no delays, and
  • The effective date of the bond may not exceed four working days prior to the date of the company’s incorporation, exclusive of the incorporation date.

  1. Registered Company Application
  • If the bond was not put in place from incorporation date, the bond takes effect from the day the company is incorporated.
  • If there was a change in the Director’s resident address since incorporation to non-EEA, the company MUSTsubmit a B10 to detail this change, and the bond takes effect from day the change is residency was effective. 
  • TIP- Include the B10 Submission number in your note to the CRO on submission of the Bond document.
  • If Brexit resulted in a director now being deemed as Non-EEA Resident, the company MUSTsubmit a B10 to detail this change, and the bond should be dated to coincide with the date this legislation came into effect i.e., 01/01/2021. 
  • TIP - Include the B10 Submission number in your note to the CRO on submission of the Bond document.

How do I apply for a bond?

An application form is completed with the insurance company, outlining the Company and Company officers’ details, the date on which the bond is needed from and the presenter's details.

This will need to be signed by Electronic Signature or Hardcopy wet signature, depending on the insurance company’s internal process.

Once all relevant details and payment have been received by the Insurance company, they will issue the original Bond Document, which will be signed and sealed.

Each Insurance Company may have a different requirement, please ensure to liaise with the Insurance Company prior to the commencement of the Bond.

What do I need to do with the Bond?

It is important to note that the original Bond document executed under the seal must be sent to CRO to be deemed registered or effective, if not, the Company and its officer will be in breach of S.137 as detailed above.

Is there an Alternative to S.137 Bond?

Yes, a Company that can display that either the company has a person working from a location in Ireland managing the business or if it carries on trade in the State, may be eligible to apply for a Real And Continuous Link with Revenue. Previously named the S.140 certificate and while not as common as the S.137 Bond, if following incorporation, a company applies for and is granted a certificate from the Registrar Of Companies that the company has a real and continuous link with one or more economic activities that are in carried on in the State, that company will be exempted from the requirement to have at least one EEA resident director from the date of the certificate, as long as the certificate remains in force

If you require assistance or advice, please contact our Company Secretarial team on 053 91 000 00 or email [email protected]

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.

Image of Lauren Doyle

About the Author

Lauren is a key member of the OmniPro Corporate Consultants Technical Support team providing advice and support in relation to Company Law and Company Secretarial procedures. In addition, Lauren is responsible for carrying out Section 343 applications to the District Court, Annual Compliance, Company Conversions and Company Law Compliance. Lauren joined OmniPro in 2021 and quickly became an integral member of our Company Secretarial team. She started off her career in OmniPro as part of our Company Formations team building up her experience and knowledge before eventually moving into Company Secretarial. Lauren has a Degree from University College Dublin and a Diploma from The Law Society of Ireland.


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