The Companies Act 2014 (“Act”) introduces a requirement on directors of the following types of Irish company to include an annual compliance statement (“Compliance Statement”) in the directors’ report accompanying the company's financial statements:
In the Compliance Statement, the directors must (i) acknowledge their responsibility for securing the Company’s compliance with its relevant obligations (set out below); and (ii) confirm, on a “comply or explain” basis, that the assurance measures (set out below) have been undertaken.
A Compliance Statement should be included in the financial statements relating to all financial years commencing on or after 1 June 2015. For example, if a company’s most recent financial year commenced on 1 December 2015, the first Compliance Statement which it would be required to provide would be for the financial year from 1 December 2015 to 1 December 2016.
The relevant obligations in the Act are outlined below.
1. Obligations under the Act where a failure to comply would amount to:
(a) A category 1 or category 2 offence which mainly relate to
(i) unlawful financial assistance;
(ii) unlawful acquisition of a company’s own shares;
(iii) a subsidiary holding shares in its parent company;
(iv) failure to maintain proper accounts;
(v) provision of information to an expert for their report on a statutory merger or division;
(vi) certain obligations on a winding up or dissolution; and
(vii) acting in contravention of a restriction notice from the Director of Corporate Enforcement.
(b) A serious market abuse offence.
(c) A serious prospectus offence under Irish prospectus law.
2. Obligations under tax law, including the Customs Acts; statutes relating to excise duties and the management
of these duties; the Tax Acts; the Capital Gains Tax Act 2003, the VAT Acts, the Capital Acquisitions Tax
Consolidation Act and the Stamp Duties Consolidation Act 1999.
There are three assurance measures identified in the Act which companies can use to secure compliance with their relevant obligations.
1. Drawing up a compliance policy statement, setting out the company’s policies designed to ensure material
compliance with the relevant obligations.
2. Putting in place appropriate arrangements or structures that, in the directors' opinion, provide “a reasonable
assurance of compliance in all material respects”.
3. Conducting a review, in respect of the financial year to which the Directors’ Report relates, of the
arrangements or structures referred to above.
The arrangements or structures referred to above may include reliance on the advice of persons employed or retained by the company who appear to the directors to have the requisite knowledge and experience to advise on compliance with the relevant obligations.
If the relevant statements, confirmations and reviews have not been made or carried out by the Company, the directors must specify the reasons why in the annual directors’ report.
We would recommend that directors take the steps that are listed below:
The continuing nature of the obligations and the need to establish structures and arrangements will require ongoing involvement by directors. LK Shields would be happy to assist companies and their directors in ensuring compliance with their obligations.
David Brangam is an Associate in the Corporate and Commercial Department at LK Shields Solicitors. For further information, please contact David at firstname.lastname@example.org.