The Companies (Amendment) Bill 2009 will be debated at Seanad Committee tomorrow, Wednesday 27 May 2009. Among the proposed amendments to be considered by the Seanad Committee is a proposal to bring forward the introduction of a directors' compliance statement for some companies.

The concept of a directors' compliance statement first appeared in Section 45 of the Companies (Auditing and Accounting) Act 2003. Section 45 required directors of public companies and qualifying large private companies to prepare a compliance policy statement and a directors' annual compliance statement. The statements were to contain detailed information about the company's policies in respect of compliance with its relevant (legal) obligations, the company's financial and other procedures for ensuring compliance with its relevant obligations and the company's arrangements for implementing and reviewing the effectiveness of its policies and procedures. The company's auditors were required to review the statements annually and give an opinion on whether they were fair and reasonable.

Section 45 drew considerable criticism from companies and directors at the time and was never commenced, on the grounds that its provisions were potentially costly, burdensome and anti-competitive. The Company Law Review Group ("CLRG") reviewed the provision in 2005 and proposed a considerably less prescriptive and less onerous single directors' compliance statement, removing the need to have auditor approval. This revised provision was subsequently approved by the Government and it was intended that it would be included in the planned Companies Consolidation and Reform Bill, due for publication next year.

Rather than merely adopting the revised CLRG model, the proposed amendment to the Companies (Amendment) Bill 2009 is a combination of the original Section 45 and the revised CLRG version of directors' compliance statement. Of significance is the re-introduction of one of the most controversial aspects of the original Section 45, which would see directors opining on the compliance of the company with "any other enactments that provide a legal framework within which the company operates and that may materially affect the company's financial statements". This requirement was criticised as being unnecessarily vague by the CLRG who removed it from their revised version. Additionally, and significantly, the proposed amendment re-introduces the need for auditor approval of the directors' compliance statement.

Comment: this proposed amendment may prove to be unpopular and there may be considerable opposition to its introduction. However, it may be seen that it is appropriate to include this provision now, as a measure to improve business practice, rather than waiting a number of years for the Companies Consolidation and Reform Bill. Whatever the outcome of the Seanad Committee deliberations tomorrow, the issue of directors' compliance statements is back in the spotlight.