A Fly In The Ointment: How Banking Red Tape Undermines Irish Startup Environment
By: Alexey Rashevskiy
Tags: Startup, Ireland, Banking

In the last few years Ireland has taken enormous efforts to make the country more attractive for startups. Low corporate tax, R&D tax credits, support offered by Enterprise Ireland, talent availability (given the presence of huge multinational companies like Google, IBM, Microsoft and many more) and the English language make the country very attractive for startups. Ireland even took the lead in the World Bank “Doing Business” 2012 ranking in the EU for “ease of doing business”, but now we have lost the leadership and I assume banking is one of the reasons behind this drop.

Our Adventure of Opening a Bank Account

In early 2015 together with a couple of friends I started working on a startup. At the end of February we decided to go forward with the launch and we needed to incorporate and open a bank account. It wasn’t my first company in Ireland and I expected the banking part to take a bit longer than the incorporation.

Incorporation went really smoothly — we received certificates in a couple of days, but then banking kicked in… There is not that much of a choice in Ireland: Bank of Ireland, Ulster Bank and AIB are pretty much the only 3 options available for SME. We decided to go with Ulster Bank as in my experience they have the best internet banking and handy connection to Xero accounting.

We probably don’t have the most typical ownership model for a startup: 2 co-founders and one minor shareholder with one of the co-founders residing in Russia. We filled in printed forms, signed them (our co-founder from Moscow posted me forms and document copies by DHL) and I went to the bank.

The first surprise was that Ulster bank just didn’t have any business customer service in their branches. You communicate with regular customer service employees, who forward your application to the business department. That’s it.

The second surprise was that in order to verify directors’ identities both directors have to show up to the branch in person with original ID. Basically that means that our second co-founder/director has to travel all the way from Russia just to open a bank account. Notary public verified ID apparently wasn’t enough.

We thought we found a workaround for that — to replace our company’s director based in Russia with the locally based one who joined the project. Brilliant! Not really…

We came with our new Irish director to the Ulster Bank branch to open an account and were told that our documentation wasn’t good enough. So they rejected:

Ulster bank private account statements as my proof of address. Any other bank’s statement would work but not their own.

Printed PDFs of private account bank statements from AIB for one of the directors (he opted out from receiving paper statements and had PDFs only). According to Ulster Bank, those are “not originals”.

So the Saga continues. For our next visit to the bank we brought another proof of address (which was fine for Ulster Bank now) and the same AIB bank statements but stamped with an AIB stamp as a verification that they were genuine. Again. Not good enough. We asked a consultant to send them anyway as AIB was unable to produce any other kind of statements in the case when a person has only opted into online statements (apparently, we’re not quite in a paperless world yet!).

In the end Ulster Bank accepted those printed versions of statements. But if you think that was the end of the story, you’re wrong. Ulster Bank replied to us saying that we had a major shareholder in Russia (our initial director) and we needed a set of documents from him anyway. Luckily for us shareholder’s certified copies of the documents did just fine. We were nearly there! Or not quite. Our Moscow-based director was on vacation in Sweden at that point and wanted to visit the public notary there but Ulster Bank urged us that only the public notary in Russia would be acceptable. Fair enough. By now we’ve been trying to open an account for about two months, so 10 extra days wouldn’t make any difference. We’re doing business here, what’s the rush?

When our co-founder/shareholder finally returned from vacation, he made a copy verified by public notary just next day, posted by DHL and … it took another 10 days for Ulster Bank to answer. They were quite surprised that notary public from Moscow had a seal in the Russian language. Indeed.. Why would that be the case? Suspicious Russians are suspicious in everything!

So we were told that the public notary seal must be in English, which is obviously impossible as per Russian legislation. We still haven’t opened a bank account up to date and it has been over 3 months now. You may think that we must go to another bank, but we tried and the application document set they require is even bigger.

Summary

It is really easy to register business in Ireland, but if you have a co-founder, director or major shareholder who lives abroad, you should expect meeting some obstacles. The only option we see now is to ensure everybody is physically based in Ireland, at least for the banking docs submission.

It might seem to you that we have quite a unique company set up with co-founders based in different countries etc. and hence — all the troubles. But in fact, it is not so uncommon these days. And should physical location really matter anyway? Aren’t we living in a global world, where people are connected across the borders and business operations can be done online? I guess, Ireland is just not that place quite yet. Well that’s too bad, because when we could be busy growing business, creating jobs and paying taxes, we’re being busy trying to fight the red tape.