Section 137 Bond Explained: Irish Company Law Guide
A Section 137 bond is required when Irish companies have no EEA-resident directors. Here's what it costs, how long it lasts, and how to get one.
Who should read this
This article is for foreign entrepreneurs and business owners setting up an Irish company without any directors living in the EEA.
If you're wondering why you need a Section 137 bond, how much it costs, or whether appointing an EEA-resident director might be simpler, this guide covers the bond requirements, costs, application process, and your alternatives.
Key takeaways
- Irish companies without EEA-resident directors must post a €25,394 bond, costing approximately €1,600 every two years.
- The bond must be renewed before expiry; letting it lapse creates serious non-compliance and potential enforcement action.
- Appointing an EEA-resident director eliminates the bond requirement and is often more cost-effective long-term than biennial renewals.
- UK residents no longer qualify as EEA residents post-Brexit; Switzerland is also excluded from the EEA definition.
- The Corporate Enforcement Authority can claim against your bond for failures like missing annual returns or statutory breaches.
What Is a Section 137 Bond?
A Section 137 bond is a financial guarantee required when Irish companies have no EEA-resident directors.
The bond serves as security ensuring the company complies with Irish company law.
The Companies Act 2014 requires every company to have at least one EEA-resident director.
Section 137 provides an exemption allowing non-EEA companies to operate by posting a bond instead.
Why Does This Requirement Exist?
Irish law wants at least one director physically present within the European Economic Area.
This ensures regulatory authorities can enforce compliance and serve legal documents.
Directors outside the EEA create practical enforcement challenges for Irish authorities.
The bond provides financial security if the company breaches their statutory obligations.
Enforcement Rationale
- Physical presence enables authorities to serve notices and enforce judgments.
- Compliance monitoring becomes easier with EEA-resident directors.
- Legal recourse exists through the bond if directors cannot be reached.
- Deterrent effect encourages proper governance through financial consequences.
The requirement balances foreign investment encouragement with regulatory oversight needs.
When Do You Need a Section 137 Bond?
You need a bond when none of your directors are EEA residents, the requirement applies from incorporation if no EEA-resident director exists. Set out below are the EEA countries that are covered.
EEA Countries Covered
- The European Economic Area includes all 27 EU member states.
- It also includes Iceland, Liechtenstein, and Norway.
- Switzerland is not part of the EEA despite being in Europe.
- UK residents no longer count as EEA residents post-Brexit.
What Is the Bond Amount?
The bond amount is currently €25,394, this figure is set by ministerial order and can change.
The bond guarantees payment of fines, penalties, and costs if the company breaches company law.
What Does the Bond Cost?
The bond itself costs approximately €1,600 for a two-year term.
This is the premium paid to the bond provider, not the bond amount.
You pay this fee every two years to maintain the bond.
Additional setup costs may include legal fees for arranging the bond.
How Long Does a Section 137 Bond Last?
Bonds are typically issued for two-year periods, you must renew before expiry to maintain compliance.
Letting the bond lapse while lacking an EEA-resident director creates serious non-compliance issues. The step-by-step renewal process is outlined below.
Renewal Process
- Six months before expiry contact your bond provider about renewal.
- Renewal premium must be paid for the next two-year period.
- New bond documentation must be submitted to Companies Registration Office.
- Continuous coverage is essential to avoid compliance gaps.
Missing renewal deadlines can trigger enforcement action by the Corporate Enforcement Authority.
How Do You Obtain a Section 137 Bond?
Specialist insurance brokers and bonding companies provide Section 137 bonds.
The process typically takes 2-3 weeks from application to CRO approval. The bond application process is detailed below.
Bond Application Process
- Contact a bond provider specialising in company law bonds.
- Complete the application with your company and director details.
- Pay a premium for the bond period.
- Receive the bond documentation from the provider.
- Submit documents to CRO for approval and registration.
- Await CRO approval before the bond becomes effective.
The bond cannot be backdated, so apply early in the incorporation process.
Can You Appoint a Director Instead?
Yes, appointing an EEA-resident director eliminates the bond requirement entirely.
This is often simpler and cheaper for long-term operations. Below we have undertaken a director versus bond comparison.
Director vs Bond Comparison
- Cost: Directors may charge annual fees but eliminate recurring bond premiums.
- Simplicity: One-time appointment versus biennial bond renewals.
- Governance: Real director involvement versus passive compliance mechanism.
- Flexibility: Can remove director if circumstances change.
- Long-term: Director appointments often more cost-effective over five+ years.
Many companies initially use bonds but switch to EEA-resident directors later.
What About Nominee Directors?
Professional nominee directors provide EEA residency without active involvement.
These directors fulfil the residency requirement while founders still retain control. Nominee Directors have the same legal responsibilities and liabilities as any director.
However, the founders maintain operational control through governance structures.
Nominee directors must be carefully selected from reputable providers.
Can the Bond Be Claimed?
Yes, the Corporate Enforcement Authority can claim against the bond.
Claims arise when companies breach their statutory obligations.
This may include failure to file annual returns or required documents, director misconduct breaching fiduciary duties or statutory violations of company law requirements.
The bond provider pays valid claims, then seeks recovery from the company and directors.
What Happens When You Add an EEA-Resident Director?
The bond requirement ends when you appoint an EEA-resident director. You can seek return of any unused bond premium.
- Appoint EEA-resident director through proper board procedures.
- File Form B10 with Companies Registration Office.
- Notify bond provider of the status change.
- Request premium refund for unused bond period.
The bond provider typically refunds pro-rata premium for the unused period.
Do All Irish Companies Need This?
No, only companies without any EEA-resident directors need bonds.
The vast majority of Irish companies have EEA-resident directors naturally.
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Frequently asked questions
Here's everything you need to know to get started, manage your account, and troubleshoot the most frequent issues.
Yes, if your Irish company has no directors residing in the European Economic Area, you must obtain a Section 137 bond. This bond serves as financial security ensuring your company complies with Irish company law, and it's required from the moment of incorporation if no EEA-resident director exists.
The bond itself costs approximately €1,600 for a two-year term, which is the premium you pay to the bond provider. This is separate from the bond amount of €25,394, which is the security guarantee. You'll need to pay this €1,600 fee every two years to maintain the bond, plus any additional legal fees for arranging it.
Yes, appointing an EEA-resident director eliminates the bond requirement entirely and is often simpler and cheaper for long-term operations. Over a five-year period, a director appointment is typically more cost-effective than paying biennial bond premiums, and you avoid the hassle of regular renewals.
No, UK residents no longer count as EEA residents following Brexit. The EEA includes all 27 EU member states plus Iceland, Liechtenstein, and Norway, but excludes both the UK and Switzerland.
The process typically takes 2-3 weeks from application to Companies Registration Office approval. The bond cannot be backdated, so you should apply early in the incorporation process to ensure continuous compliance from day one.
Letting the bond lapse while lacking an EEA-resident director creates serious non-compliance issues and can trigger enforcement action by the Corporate Enforcement Authority. You must renew before expiry to maintain compliance, ideally contacting your bond provider six months before the expiration date.
Yes, the Corporate Enforcement Authority can claim against the bond if your company breaches statutory obligations, such as failing to file annual returns, director misconduct, or other company law violations. The bond provider pays valid claims and then seeks recovery from the company and directors.
The bond requirement ends immediately when you appoint an EEA-resident director, and you can request a refund for the unused portion of your bond premium. You'll need to file Form B10 with the Companies Registration Office, notify your bond provider of the status change, and request a pro-rata refund for the unused period.
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