Chapter 8

Eyeing Other Key Business Considerations

IN THIS CHAPTER

Bullet Looking at the implications for subsidiary businesses and branches based in the EU

Bullet Ensuring that your intellectual property is protected after Brexit

Bullet Scoping out potential changes in environmental standards

Bullet Keeping up to date on product safety standards

Bullet Being aware of other legal and regulatory changes that may affect your business

Bullet Knowing what happens to your .eu domain names

Bullet Handling the personal data of your customers in a GDPR-friendly way

Bullet Reviewing and updating your business contracts where necessary

If you've read any of the other chapters in this part, it’ll be clear that Brexit could impact businesses in lots of ways — some small, some large. This chapter outlines other miscellaneous considerations for businesses — covering those issues that don’t necessarily fall under the bigger topics already discussed, but nonetheless shouldn’t be overlooked.

Some of the topics covered in this chapter (trademarks, for instance) may not be relevant to your business, so feel free to dip into the sections that apply and skip over the bits that don’t. In a way, this chapter is like a tin of Quality Street (other assorted boxes of chocolates are available!) — go ahead and pick out your favorite chocolates and leave the unwanted coffee cremes at the bottom. We all do it… .

Tip Turn to Chapter 9 for help with conducting a Brexit impact assessment. There, you can find handy checklists to help you assess the different areas of your business and prepare for any potential effects that Brexit may have on your company.

Preparing for Changes for European Branches and Subsidiaries

At the time of writing, it’s difficult to say with any certainty how Brexit will impact British companies with European offices and subsidiaries (and European Union [EU] companies with offices and subsidiaries in the United Kingdom [UK], of course). There are a number of issues that your business may need to take into account.

To be clear on the difference between an overseas branch and an overseas subsidiary, in this instance:

  • A branch is a local office of a nonresident company. For example, a UK company may have an office in Germany, but the company itself is registered in the UK. The branch is merely an extension of the UK company, not a separate legal entity.
  • A subsidiary is a locally registered, independent legal entity that is owned by another company. For example, a German subsidiary company may be owned by a UK company.

Generally speaking, it’s easier to conduct business overseas through a subsidiary, because it’s an independent legal entity in that country and, therefore, arguably carries more weight with other service providers, registration bodies, investors, and so on that are also based in that country. But there are various tax and legal implications to both approaches.

Warning Always seek specific legal and tax advice on how Brexit may impact your company structure and tax position. Given the level of uncertainty around Brexit, the considerations outlined in the rest of this section are of a high-level nature only.

Looking at big-picture risk factors for companies with overseas branches and subsidiaries

If your company maintains a physical presence in an EU country, whether it’s a branch or a subsidiary, you’ll need to consider some big-picture risk factors, such as the following:

  • Fluctuations in exchange rates between the pound and the euro (something that you’ll already be used to prior to Brexit, but that may be compounded by Brexit)
  • Potential tariffs on goods moving between the UK and the EU (see Chapter 5 for more about tariffs and trade)
  • Increasing bureaucracy associated with doing business in another country, inevitably resulting in higher administrative costs
  • Potential supply chain disruptions and higher costs if you’re physically moving goods between one country and another (see Chapter 6 for more on this)

Assessing the impact on EU businesses owned by UK companies/citizens (and vice versa)

When the UK is no longer an EU member state, there will inevitably be some changes in how companies are registered, as well as implications for accounting, tax, and auditing.

Remember Although no one can say with any certainty how things will pan out, here are some general considerations to keep in mind:

  • UK companies may need to apply on a state-by-state basis to do business in different member states.
  • There may be difficulties in transferring funds between EU and non-EU companies. This flow of funds is extremely simple across EU member states, but after the UK is no longer a member, the flow of funds may be subject to various withholding tax arrangements. Going forward, the UK and the EU may look to agree on reciprocal arrangements to avoid double taxation, but this is an area of significant uncertainty.
  • Some member states may have slightly different rules and regulations for foreign-owned companies, leading to additional testing and certification of products or services.
  • Potential changes in consumer patterns in light of Brexit may mean that some companies see fewer benefits from having European branches or subsidiaries (for example, if UK consumers choose to focus more on home-grown products and services).
  • No more free movement between the UK and the EU could impact the efficient movement of employees across different subsidiaries. This could lead to duplicated jobs in different locations and increased costs.

The changes may be more pronounced and sudden in the (increasingly unlikely) event of a no-deal Brexit. If a no-deal Brexit occurs, the UK government has said the following:

  • UK citizens may face restrictions in their ability to own, manage, or direct companies registered in the EU, depending on the sector and country.
  • UK businesses that own or run business operations in an EU country are likely to face changes to the law under which they operate (again, depending on the sector and the country).
  • UK companies and limited liability partnerships that have their principal place of business or central administration in certain EU member states may no longer have their limited liability recognized.
  • Certain companies may need to change their UK company registrations at Companies House. This applies to European entities formed under EU law (such as Societas Europaea [SE] companies), UK companies with an European Economic Area (EEA; see Chapter 1 for key EU and Brexit definitions) corporate officer, UK companies involved in a cross-border merger, and EEA companies.
  • UK investors may also face restrictions on the amount of equity that they can hold in an EU business, depending on the sector and the country.

Warning If your business owns an EU-based subsidiary company, or has a branch based in the EU, take legal advice on what restrictions may apply.

Tip Stay up to date on the latest government advice for businesses by visiting the following websites:

Deciding whether to set up an EU subsidiary

Like many businesses, you may be considering whether it’s a smart move to set up a European subsidiary company to make trading in Europe easier in the future.

Remember Ultimately, whether this is the right move for you will depend on what sector you operate in, whether your company is big enough, whether it’s commercially viable (that is, whether you do enough business in Europe to warrant it), and whether operating overseas is tax efficient for your business. Because there’s so much uncertainty around Brexit, it may be wise to let the dust settle a little, after the UK has left the EU, and then assess the best options for your business.

Of course, this question doesn’t only apply to UK companies. If you own a business in the United States, for example, and you have a subsidiary company in the UK, you may need to consider setting up an EU-based subsidiary if you do a lot of business within the EU.

Safeguarding Your Intellectual Property: Copyright, Trademarks, Designs, and Patents

If your business owns intellectual property (IP) — specifically copyright, trademarks, designs, and patents — that IP may be affected by Brexit.

Warning The information in this section is intended as a general guide to the various IP considerations. Seek legal advice on how best to protect your IP in the UK and EU, and always stay up to date on the latest government advice by visiting the following websites:

In addition, the following government guidance covers IP in a no-deal scenario:

Looking at the bigger-picture intellectual property issues

If the UK leaves the EU under the terms of an agreed-upon withdrawal deal, with a transition period (see Chapter 3), then the UK government has said it will continue to protect all existing registered EU trademarks, registered community designs, and unregistered community designs after the UK exits the EU.

Remember For the duration of the transition period, EU law will continue to apply in the UK, so EU law relating to IP would still be relevant … for now.

In the longer term, beyond any transition period, both the UK and the EU have said they intend to maintain “current high levels of protection” for IP, as set out in the political declaration on future UK–EU negotiations (see Chapter 4). This indicates that the two parties will work together to explore IP options and cooperate to protect IP.

And what if the UK ends up leaving under a no-deal scenario? If the UK exits the EU without agreeing on a withdrawal deal, the government has still pledged to protect existing EU trademarks, registered community designs, and unregistered community designs.

The government has also said it’ll preserve EU law on patents, copyright, and exhaustion of IP rights in the event of a no-deal Brexit, but that the UK might make “minor amendments and technical fixes in UK legislation as regards the preserved EU law, to ensure we have a functioning statute book after we leave the EU.” Check out the links in the previous section to stay up to date on the latest deal-or-no-deal shenanigans and how they affect IP.

Taking action to protect your intellectual property

Whether the UK leaves the EU with a withdrawal deal or not, at some point, it’s safe to assume that the protection afforded to UK intellectual property as a member of the EU might end.

Remember Broadly speaking, when the government says it’ll continue to preserve IP rights, it means it’ll set up comparable UK rights that mirror existing EU rights. This may mean that you need to register, say, your EU trademark in the UK to ensure continued protection in the UK as well as in the EU.

In other words, you may have to “roll over” your existing EU rights to cover the UK as well, but the timetable for doing this will depend on whether the UK exits with a deal and a transition period, or no deal. Again, check out the IP links earlier in the chapter to stay up to date on these plans.

Remember The situation for patents is less complicated because European-registered patents are governed by the European Patent Office, which is a non-EU agency that already accommodates non-EU members like Turkey and Norway. In other words, patents should be unaffected by Brexit.

There is, however, a new EU system in the works called the Unitary Patent System, which was expected to go live in 2017 but has been delayed because of — you guessed it — Brexit. This is a system for patent protection that will be valid in all participating EU member states. As of this writing, there have been proposals to include the UK in the Unitary Patent System after Brexit, although in the event of a no-deal scenario, this may change.

Continuing to Comply with Environmental Standards

The UK’s environmental standards cover areas like waste, water, air quality, and the protection of habitats and species.

Pointing out that 80 percent of the UK’s environmental standards come from the EU, organizations like Friends of the Earth have been quick to raise concerns that the UK government would use Brexit to reduce environmental standards and slash investment in environmental protections. The government, however, has said that it intends to honor environmental protection standards and uphold the UK’s international agreements to protect or improve the environment.

Remember However Brexit plays out, the UK government has said that it’s committed to maintaining environmental standards after the UK leaves the EU. Theresa May’s withdrawal agreement (see Chapter 3), for example, ensures that EU environmental law continues to operate in UK law. And even if the UK leaves with no deal, the UK government has published guidance setting out how it intends to uphold environmental standards in the event of a no-deal Brexit.

To cement its commitment to the environment, the government has laid out a series of measures, including the following:

  • A 25-year environment plan to improve the environment within a generation, entitled “A Green Future”: This includes talk of a “Green Brexit” (their words, not mine) that puts an emphasis on farming and agricultural policy.
  • A new Environment Principles and Governance Bill: The government says this bill will build on the 25-year environment plan and will ensure that environmental protections are not weakened after the UK leaves the EU.
  • A new, independent statutory body to hold the government (current and future governments) to account over their environmental obligations.

Tip Read more about environmental standards and the impact of Brexit on the following web pages:

Maintaining Product Safety Standards

The UK government is under enormous pressure to ensure that current EU product safety standards are maintained after Brexit. So, although Brexit has been used by many as an argument to suggest that UK authorities may reduce product and consumer protections, this is unlikely to happen.

Looking at the big picture for safety standards

Setting aside the pressure from industry and consumers to maintain the UK’s current high safety standards, there’s also the subject of trading with the EU after Brexit.

Remember If the UK wants to agree on a close trading relationship with the EU, then it’s most likely it will need to agree on broadly similar rules, regulations, and safety standards.

In fact, part of any trade agreement with other countries around the world (not just the EU) will likely involve safety standards and consumer protection promises. Leaving the EU and then converting the UK to a lower safety standard/consumer protection landscape wouldn’t make much sense from an international trade perspective.

The problem comes if the UK finds itself under pressure to accept lower-standard goods from other countries as part of future trade negotiations. The often-quoted example of this is chlorine-washed chicken from the United States (a practice that’s currently outlawed under EU and, in turn, UK laws). If, for example, the UK accepted products that don’t meet European safety standards, then that may impact the UK’s ability to negotiate a trade deal with the EU as part of its post-Brexit relationship.

Read more about trade in Chapter 5 and circle back to Chapter 4 to read more about the longer-term UK–EU relationship.

Considering the CE safety stamp on products

In the UK and Europe, many products (such as children’s toys, household appliances, and even elevators) are marked with a safety stamp known as the CE mark. This safety stamp shows consumers that the product they’re buying or using meets EU safety requirements and has undergone safety tests.

Remember However, the CE mark is an EU safety marking, which means that after Brexit, UK products will need to have a new marking. This new symbol will be called UKCA, which stands for UK Conformity Assessed. The timeline for implementing this new stamp remains unclear at the time of this writing.

In the event that the UK leaves the EU with an approved withdrawal agreement, then nothing will change for the duration of any transition period — UK companies can continue to use the CE marking during the transition phase and will have plenty of time to prepare for the new UKCA marking.

In the event of a no-deal exit, however, the picture is much murkier. According to government advice published in February 2019, UK companies will continue to use the CE marking for products being sold in the UK for a “time-limited period unless your product requires third-party conformity assessment and if this has been carried out by a UK ‘notified body.’” In these cases, you will instead have to apply for the new UKCA marking immediately after the UK leaves the EU.

The government has said that rules for the new UKCA marking will mirror those for the CE marking — meaning, if your product is currently covered by the CE marking, it should fall under the scope of the new UKCA stamp (medical devices are the one exception to this).

Remember However, the UKCA marking won’t be recognized as a safety stamp on the EU market. So, if you sell any products in the EU that currently need a CE marking, you’ll still need a CE marking if you want to continue selling those products in the EU.

Tip Read more about the CE and UKCA markings here:

Keeping Up with Other Legal and Regulatory Changes

Those in favor of Brexit often portray the legal workings of the EU as a case of the EU setting laws and the UK having to adopt those rules with no say in the matter.

But if you take a big step back and look at the situation from a distance, it’s clear that, over the years, the UK government has been heavily involved in the creation of the EU legal and regulatory protections we all know and love (well, maybe not “know and love,” depending on which side of the Brexit fence you fall).

While the UK is a member of the EU, these European rules are written into UK law. Going forward after Brexit, the UK government will have the option to transfer, amend, or remove these obligations that result from EU rules.

Remember In reality, we’re unlikely to see any major amendments to UK legislation in the short and medium term. And even for the longer term, UK businesses and public bodies will continue to be bound by laws that are, most likely, broadly in line with EU regulations (although the UK will no longer have a say in what those EU regulations are, after it leaves the EU). If the UK and the EU want to maintain a close working relationship going forward (and both sides have so far said that’s what they want — see Chapter 4), then it’s unlikely we’ll see major legal divergences.

That’s because a close working relationship (not to mention any free-trade agreement that’s negotiated) between the UK and the EU would probably require a similar legal and regulatory framework. There may be some tweaks and changes here and there, such as the need to re-register trademarks (as mentioned earlier in this chapter), but the UK way of life has been based upon EU laws for many years now — and that’s unlikely to change in a big way.

That said, one interesting area to watch is employment law, because the UK government has indicated it may want to diverge from key EU employment protections such as the 48-hour workweek. (Indeed, the UK already allows workers to “opt out” of the 48-hour limit if they want to, but it may look to abolish the limit altogether.)

Time will tell if we do see some erosion of workers’ rights after Brexit — after all, such plans would face serious opposition from the Labour Party and trade unions — but it’s an interesting area where we may see some divergence between the UK and the EU. Head back to Chapter 7 to read more about the impact of Brexit on employment law and employing EU citizens after Brexit.

Warning Always talk to your legal advisers about any changes in UK laws that occur after Brexit, to determine how your business may be affected.

What to Do If You Have a .eu Domain Name for Your Company Website

There are around 300,000 .eu domain names registered in the UK. If your company website is one of them, you'll need to prepare for changes that’ll come into effect after Brexit.

Warning The EU confirmed in March 2018 that .eu domain names will no longer be available to parties registered in the UK (including Gibraltar) after the UK exits the EU. This means UK organizations and individuals will be banned from acquiring domains ending in .eu as soon as the UK leaves the EU. What's more, the EU will have the right to revoke their existing .eu domains that are already registered to UK entities.

Does this mean your .eu domain name will be taken away from you? Quite possibly (although there is a way around this, which I'll get to later). We’ve yet to see how strict the EU will be in practice, but we should assume they mean business. So, working on the assumption that it’s better to be safe than sorry, the question to ask isn’t if your domain could be taken away, but when… .

If the UK exits the EU under the terms of a withdrawal agreement, it will enter a transition period, and the EU will not enforce its decision until the end of the transition period. However, if the UK exits the EU without a deal (hence, no transition period), then, in theory, the EU could reclaim .eu domain names immediately.

This is a perfectly legal and legitimate move on the part of the EU (because the EU regulatory framework for the .eu domain names simply won't apply to the UK after the UK leaves the EU). But there’s no doubt it could cause a major headache for the hundreds of thousands of UK-based entities that already have .eu domains.

To help organizations get around this, many website hosting companies are now offering proxy services. Such proxy service providers will use a European subsidiary as the registration address for .eu domain names — meaning the legally registered owner and address for your .eu domain would be in Europe — and then lease the domain back to you so that you can continue to operate your website.

Tip Using a proxy service for your .eu domain is a legal and legitimate way to protect your existing .eu domain. Check out proxy services from providers like www.hosting.co.uk for more information.

GDPR and Managing the Personal Data of EU Citizens

Unless you've been living under a rock for the past couple of years, you’ll have read and heard a lot about the impact of the EU General Data Protection Regulation (GDPR), which came into force on May 25, 2018. But with GDPR being an EU regulation, will UK businesses still have to comply with GDPR rules after Brexit?

Remember The short answer is yes, businesses in the UK will still have to comply with GDPR rules even after Brexit. But, in some cases, the specifics of how your company handles data may change slightly after Brexit.

Recognizing that GDPR is enshrined in UK law

In a nutshell, GDPR is designed to give every EU citizen greater control over his or her personal data, including name, date of birth, and email address. It ensures that companies can’t store and use the personal data of EU citizens without their explicit consent, and promotes the fair, transparent use of personal data.

Remember The fact that UK citizens will no longer be EU citizens after Brexit doesn’t matter. Implementation of GDPR in the UK is covered by the UK Parliament’s Data Protection Act 2018. So, GDPR is already written into UK law, and the government has committed to maintaining GDPR compliance in the UK. This ensures that UK citizens will continue to get all the same protections as their EU neighbors, when it comes to the fair use of their data.

This means all the protocols you’ve put in place to lawfully handle the data of your customers (whether they’re in Europe or the UK) will still apply, and you should absolutely maintain compliance with GDPR.

But why continue with something that originated as EU law when so much of the rhetoric surrounding Brexit was about “taking back control”? The cynical answer is that businesses and public bodies in the UK have already spent millions ensuring their data practices were fully compliant with GDPR. If the government backtracked on GDPR now, it would mean all that expenditure was pointless. After all the time, effort, and money spent, it would be crazy to “undo” GDPR in the UK.

The less cynical answer is that GDPR is a good thing, for organizations and for individuals. Sure, it brings additional burdens in terms of compliance, but there’s no doubt it provides important protections for citizens’ private data. As technology advances and the world becomes increasingly driven by data, these protections will only become more valuable.

It’s also important to remember that any close relationship between the UK and the EU going forward is likely to be dependent upon both parties having similar regulatory systems. Therefore, GDPR is just one area where British businesses will effectively be operating in line with European businesses.

Transferring data between the UK and the EU

Broadly speaking, how UK businesses handle personal data will stay the same. But there’s a big uncertainty around what happens to businesses that transfer data between the UK and the remaining EU27 countries after Brexit (for example, if a company has offices in the UK and Europe, or if a UK business uses a cloud service provider based in the EU).

Remember Under GDPR, data cannot be transferred between the EU and third countries (non-EU countries) unless those countries have been deemed to have “adequate” data protections in place.

In the less likely event of a no-deal Brexit, the UK will immediately be considered a third country, which means that the European Commission will need to assess that the UK has adequate levels of protection in order for the smooth transfer of data to continue. (In theory, the Data Protection Act ensures that the UK does provide an adequate level of protection, but as with so much of Brexit, it’s a case of wait and see whether this plays out in reality.)

And if the UK does exit with a withdrawal agreement in place, then, for the duration of any transition period, data transfers can continue as normal.

Tip Stay up to date on the latest GDPR advice by visiting the following sites:

Reviewing Your Business Contracts

In addition to the other considerations set out in this chapter, you may also have to review your business contracts in light of Brexit.

Warning You may also need to renegotiate certain terms with suppliers and clients to mitigate the impact of currency fluctuations, changing costs relating to importing and exporting goods, and potentially longer lead times. Always work with a legal adviser before making any changes to contracts.

Generally speaking, if you own a UK business and you’re reviewing your existing contracts, the following list serves as a good starting point. However, you should always discuss these and any other contractual changes with your legal adviser:

  • From a big picture perspective, if your contract wording assumes that the UK is part of the EU (perhaps by referencing specific EU laws or obligations), this will need to be updated.
  • If a contract references specific English laws (or the laws of another country within the UK), be prepared to update this in line with any legal amendments made after Brexit.
  • If a contract states that it is subject to EU law, this might need to be updated to reflect that contracts will be covered by domestic law after Brexit.
  • If the contract is challenged, you should clarify whether it would be challenged in a UK court or EU court.
  • Pricing and delivery clauses may need updating in line with fluctuations or developments after Brexit.

Tip It’s a good idea to try to Brexit-proof your contracts as much as possible, by anticipating potential Brexit-related issues and uncertainties (such as supply chain delays; see Chapter 6) and limiting your contractual exposure to these issues.

You may also need to update your employment contracts to reflect any changes in employment law after Brexit. Circle back to Chapter 7 for more on potential changes to employment law after Brexit, and always talk to an employment law specialist to understand the full implications of any changes for your business.

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