The last year has been one in which we have seen some major changes to Irish company law. The Companies Act 2014 (the 2014 Act), which entered into force on June 1 2015, condensed 17 previous Companies Acts and related company law provisions into a single comprehensive code of company legislation. At 1,448 Sections, 17 schedules and over 1,100 pages, it is also believed to have been the biggest single enactment made in the history of the State.
We have previously alerted you to the fact that a number of technical amendments to the 2014 Act have already been made, since June 2015. However, a wave of yet further changes to the 2014 Act, and company law generally, are already drafted or in the pipeline, and (subject to a Government being elected and agreed) will be upon us in the course of the next 18 months.
The key changes which we can expect are as follows:
- Companies (Accounting) Bill 2016 – publication of this legislation has been expected since last year, and we understand that it will now be published as soon as practicable after the formation of a new Government. It will transpose the EU Accounting Directive of 2013 (as amended) into Irish law. This will make changes to the existing law, relating in particular to the accounting requirements for small companies, and will also eliminate the current exemption from filing accounts for unlimited companies with a non- EU/EEA shareholding structure. The precise nature of the possible changes will not be known until the Bill is published.
The new Bill is also expected to correct a number of unintended errors in the 2014 Act. These are understood to be mainly of a technical nature, but a few are of more practical significance to Irish companies and have been the subject of submissions by the Law Society of Ireland and others, in which this firm has been closely involved.
- Statutory Audits Bill 2016 - this Bill will transpose the amended EU Statutory Audits Directive of 2014. The transposition date for the Directive is 17 June 2016. However, there is no indication yet of whether this date will be met. There is also a related EU Statutory Audits Regulation, which applies to "public interest entities" (PIEs) such as regulated market listed PLCs. The amending Directive however applies to all statutory audits. The new Bill will tighten up the law relating to the conduct of audits, including the independence of auditors, auditor appointment, ability of shareholders to take legal action to dismiss auditors, and mandatory rotation of auditors for PIEs.
- Transposition of 4th Anti-Money-laundering Directive - this is expected to include radical new provisions requiring disclosure of beneficial ownership of shares in Irish companies. Transposition was originally scheduled for sometime in 2017, but there have been some recent indications of a desire at Government level to bring this forward, so that it would be implemented before the end of 2016. With the current political uncertainty in Ireland concerning the formation of a new Government, however, it is unclear if this date will be met.
In the UK, new transparency and reporting rules have already come into force, requiring most UK companies and LLPs to, amongst other things, identify and record the people who own or control them on a special register.
It is unclear at present what form these changes relating to beneficial interests will take in Ireland, but they could be a serious headache for private, as well as public, companies, and add to "red tape" and compliance costs. Concerns have been expressed about the practical aspects of the disclosure of such interests, including the onerous proposal in the Directive that member states must ensure that corporate and other legal entities must obtain and hold “adequate, accurate and current” information on their beneficial ownership, and that this is held in a "central register" in Ireland (probably the Companies Registration Office). It could be particularly difficult for many Irish companies to comply with this requirement, as they will often be unaware of any changes in beneficial ownership, as distinct from legal ownership.
- Reform of the Market Abuse regime – new EU laws, known colloquially as "MAD II", consisting of a new Market Abuse Regulation, and a Directive on criminal sanctions for insider dealing and market manipulation (known as CSMAD) will come into force from 3 July of this year.
Ireland currently has two distinct and separate legal regimes for insider dealing. The current Irish market abuse regime, which prohibits insider dealing and market manipulation, applies only to PLCs whose securities are traded on EU/EEA "regulated markets"- in Ireland, this is currently the Main Securities Market of the Irish Stock Exchange.
Part V of the Companies Act 1990, on insider dealing, was to have been repealed by the 2014 Act, but instead was kept in existence on the coming into force of the 2014 Act. This older body of law is separate to the market abuse regime, and applies to PLCs whose securities are traded on the Enterprise Securities Market (ESM) and Global Exchange Market (GEM), which are ISE- regulated “multilateral trading facilities”. The Government’s intention is, we believe, to update the existing market abuse law, to reflect amendments made at EU level to the MAD, and also finally repeal Part V of the 1990 Act and extend the MAD regime to all such traded PLCs.
The new MAD regime will impose new obligations on PLCs with securities traded on the ESM and GEM, including a new obligation to maintain “insider lists” of persons with access to inside information, new rules relating to the disclosure of inside information, and a requirement to disclose transactions in securities by “persons discharging managerial responsibilities” (PDMRs) and their associates. For PLCs whose securities are traded on the Main Securities Market of the Irish Stock Exchange, the new regime will result in a noticeable tightening up of the existing rules. For all companies affected by the new regime, there is also expected to be a significant increase in the civil and criminal sanctions that can be imposed for insider dealing, market manipulation, and the unlawful disclosure of inside information.
- New Prospectus regime - the EU Commission has proposed a significant overhaul of the current prospectus regime, in the light of feedback it has received indicating significant shortcomings in the 2003 and 2010 Prospectus Directives. The principal concern is that there is a lack of flexibility under the current regime for businesses seeking to raise capital from the public. The proposals are still in draft, but are likely to introduce helpful new exemptions (and increase the thresholds of other exemptions) from the requirement to publish a prospectus. The new regime may come into force at EU level later in 2016 or early 2017. Implementation here will follow probably later in 2017 or 2018.
Companies which may be planning equity fundraisings in the next 12-18 months should bear these proposed reforms in mind.
Note: The above information is a summary, for information purposes only, of some changes to be made to Irish company law in the areas described above. Specific advice should always be sought before taking any action.