Compliance Statements

Compliance Statement Requirement.

The Companies (Auditing and Accounting) Act, 2003  provided for directors’ compliance statements.  The directors’ compliance statements required under the 2014 Act, are in more modest form than had previously been provided for under the 2003 legislation, which was not commenced due to significant opposition on cost and efficiency grounds.

The 2014 Act provides for directors’ compliance statements and other specific compliance obligations, in the case of larger scale companies. If default is made in complying with the obligations, each director to whom the default is attributable, is guilty of a category 3 offence.

The obligation applies to public limited companies, other than investment companies.  It applies to all limited companies, designated activity companies, and companies limited by guarantee, whose balance sheet size exceeds a specified size and whose turnover exceeds a specified amount annually.  It does not apply to unlimited liability companies.


Companies Covered

The requirement for directors’ compliance statements applies to  private companies with

  • a balance sheet total of more than €12.5 million; and
  • an annual turnover of more than €2.5 million.

The amounts may be varied by Ministerial order.

An exemption may be granted for “Section 110” investments holding companies and other classes of companies and undertakings, if the extent to which or the manner in which they are or may be regulated under any other enactment makes it, in the Minister’s opinion, unnecessary or inappropriate to apply those provisions or that provision to them.


Obligations Covered

The compliance statement is limited to compliance with companies and taxation legislation. “Relevant obligations” are

  • obligations, breach of which under the Companies Act,  would be a category 1 and 2 offences;
  • serious market abuse, prospectus and  transparency offences; and
  • obligation relating to taxation.

The requirement, therefore, applies only to the more serious companies law obligations,  tax law and legislation in relation to the integrity of regulated markets.

Tax law refers to taxes legislation including the Taxes Acts, the Capital Gains Tax Acts, the Income Tax Acts, the Corporation Tax Acts, Capital Acquisitions Tax, stamp duties, customs, excise and tax management legislation.


Confirmations in Report

Directors must acknowledge in the directors’ report, that they are responsible for securing compliance with the “relevant obligations” as set out above.  They must confirm that a compliance policy, setting out the company’s policies (as are in the directors’ opinion appropriate to the company) in relation to compliance by the company, with its relevant obligations has been prepared or if it has not been prepared, why it has not been prepared.

Directors must confirm that there are in place appropriate arrangements or structures that are in the directors’ opinion designed to secure material compliance with the company’s “relevant obligations”.  If this has not been done, it must be explained in the directors’ report, why this has not been done.

The director’s report must confirm that the directors have undertaken a review of the relevant arrangements and structures for compliance within the financial year. If a review has not been conducted during the relevant financial year, it must specify the reasons why this has not been done.

The director’s report is required to acknowledge that they are responsible for securing the company’s compliance with its relevant obligations. It must confirm that the directors have undertaken their below obligations or if they have not been done, specify the reasons why it has not been done.


Compliance Policy

Directors are to prepare compliance policy statements.  They are to set out policy regarding compliance by the company with its obligations.  If they are not prepared, the directors must explain why this has not been done.

The directors’ compliance statement must confirm that appropriate arrangements or structures are in place, which in the directors’ opinion, are designed to secure material compliance with the company’s relevant obligation. It must set out the company’s policies (that, in the directors’ opinion, are appropriate to the company) respecting compliance by the company with its relevant obligations.


Compliance Arrangements

The directors must put in place appropriate arrangements or structures that are, in the directors’ opinion, designed to secure material compliance with the company’s relevant obligations. They must conduct a review, during the financial year to which the report relates, of any arrangements or structures that have been put in place.

The arrangements or structures, may if the directors in their sole discretion so decide, include reliance and advice provided by external professional advisors or employees. In each case, such persons must have the requisite knowledge and experience to advise the company on compliance with its relevant obligations.

The arrangements or structures are regarded as being designed to secure material compliance by the company concerned with its relevant obligations provided that they provide reasonable assurance of compliance in all material respects with those obligations.


References and Sources

Primary References

 

Companies Act 2014 S.225 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)  Ch.15   Courtney

Keane on Company Law 5th Ed. (2016) Ch. 27 Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Palmer’s Company Law