The Companies Act 2014 enters into force
The bulk of the Companies Act 2014 entered into force on Monday 1 June 2015, with the commencement of a small number of provisions being deferred.
The following six provisions will only apply in respect of financial years beginning on or after 1 June 2015:
- Section 167 - audit committees;
- Section 225 - directors' compliance statement;
- Section 305(1)(b) and Section 306(1) – disclosure of directors' remuneration and gains on exercise of share options;
- Section 326(1)(a) – list of directors of company during financial year in director's report; and
- Section 330 - directors' audit confirmation.
The transition period for conversion of existing private limited companies to either a company limited by shares (LTD) or a designated activity company (DAC) also commenced on 1 June and will run for 15 months for conversion to a DAC and 18 months for conversion to a LTD.
Central Bank issues Board / Corporate Governance Requirements for Fund Management Company Boards
The Central Bank recently published a document for Fund Management Company Boards including:
(a) Guidance on Organisational Effectiveness
The Central Bank sets out Guidance on the Organisational Effectiveness role which includes examples of the types of matters which the independent director undertaking the organisational effectiveness role will be involved in:
- Monitoring the adequacy of a fund management company’s internal resources to its day-to-day managerial roles.
- Reviewing the organisational structure of the fund management company and considering whether it remains fit for purpose.
- Considering the conflicts of interest affecting the fund management company and its investment funds under management and initiating action, such as escalation to the board, where these are having or are likely in the near future to have an adverse impact.
- Reviewing the board composition and reporting on this to the board.
- Organising periodic board effectiveness evaluations and overseeing how well the decisions taken by the fund management company and the arrangements for the supervision of delegates are working in the interests of investors.
(b) Guidance on directors’ time commitments
The Central Bank currently considers that a reasonable number of working hours available for each individual is approximately 2000 per year. This is based on a 9 hour day and 230 working days per annum. This ‘total’ time allocation should be considered by individuals when taking on new directorship roles and should include all professional commitments including other directorships and employments held. The Central Bank intends to treat high levels of directorships combined with high aggregate levels of annual professional time commitments as a risk indicator. The Central Bank believes that a reasonable number of directorships is 20 (all directorships of any nature are included in this figure).
The Central Bank intends to engage directly with individuals with these high levels of directorships combined with high aggregate levels of time commitments. In the rare case of the proposed appointment of directors who already hold in excess of the defined number of directorships and the defined number of annual hours representing aggregate professional time commitments, the Central Bank will:
- Request a letter from each board which will set out the proposed time commitment for that director in accordance with the Irish Funds voluntary Corporate Governance Code.
- Withdraw from corporate Qualifying Investor AIF which proposes such a director, the option of the 24 hour authorisation time-frame. In each such case the Central Bank will be considering additional enquiries which will not be capable of being completed within that timeframe.
Previously authorised investment funds which continue to have individual directors who hold more than the defined numbers of directorships and aggregate hours representing annual professional time commitments after 1 January 2016 will be given priority consideration for inclusion in Central Bank thematic reviews where board effectiveness is being tested in any respect.
Corporate Governance standard for Government Departments – consultation launched
The Minister for Public Expenditure and Reform has published a proposed Corporate Governance Standard for Government Department which is open for public comment as part of a consultation process.
The Civil Service Renewal Plan (2014) contains a commitment to strengthen corporate governance in the Civil Service in line with international best practice. This is to be achieved by the introduction of a common governance standard for all Government Departments.
A four week public consultation process has been commenced on the proposed standard and submissions should be sent to firstname.lastname@example.org by 26 June 2015.
The outcome of the public consultation process will be fed into a revised Corporate Governance Standard.