Following a succession of deadlines in 2016 and new requirements from the Companies Act, we look forward to our first full year under the new governance regime.
Key topics include:
Companies Act 2014 company conversion deadlines
The Companies Act 2014 (the “Act”) introduced new company types, among them LTDs and DACs (Designated Activity Companies).
The LTD structure allows for companies to incorporate using a constitution without an objects clause to say what the company can and cannot do. The DAC is a private limited company set up for a specific purpose with specific objects clauses contained in its constitution. There are other differences.
The deadlines for converting companies to DACs and LTDs were the 31 August 2016 and 30 November 2016, respectively. If a conversion did not take place before the relevant deadline, companies were converted automatically to LTDs. This may not have been the correct structure for all companies and automatically-converted companies may have provisions in their constitutions that conflict with the mandatory rules provided under the Act.
New requirement to maintain a beneficial ownership register
The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the "Regulations") came into force on 15 November 2016 and impose an obligation on the majority of Irish companies to create and maintain a beneficial ownership register.
It is envisaged that a central register of beneficial owners will be kept by the Central Bank of Ireland from June 2017. In the meantime, the Regulations are designed to give companies the opportunity to ascertain and contact individuals who may be beneficial owners before then.
Companies, beneficial owners or other natural persons who fail to comply with their obligations under the Regulations may be liable to a fine not exceeding €5,000.
Company directors’ compliance statements
Section 225 of the 2014 Act introduced a requirement for a compliance statement to accompany financial statements of a private limited company for the periods commencing after June 2015 where that company has a balance sheet value of more than €12.5m and turnover of more than €25m. 2016 was the first year in which most eligible companies were required to prepare these statements.
Compliance statements must confirm that the directors have:
- drawn up a statement covering compliance by the company with certain obligations of company and tax law;
- put in place appropriate arrangements or structures designed to secure material compliance with those obligations; and
- conducted a review, during the relevant financial year, of those arrangements and structures or explain why they have not done so.
Directors may rely on the advice of company employees or advisers with requisite knowledge and experience.
Failure to do so is a category 3 offence and on summary conviction, the director responsible is liable to up to €5,000 in fines, up to 6 months’ imprisonment or both.
What’s on the horizon for 2017?
We expect to see continued Companies Act 2014 related governance and compliance activity.
The requirement for information held on beneficial ownership registers to be collated onto a central register, expected to be put in place in June 2017, will require action for most Irish companies.
The Companies (Accounting) Bill is expected to be enacted in 2017, which will among other things have an effect on the use of unlimited companies in relation to non-filing structures.