Companies (Accounting) Bill 2016: Report and Final Stages

Amendments Nos. 1, 19 and 20 are related. Amendment No. 19 is a logical alternative to amendment No. 20. Amendments Nos. 1, 19 and 20 will be discussed together.

I move amendment No. 1:

In page 7, line 17, to delete "This Act" and substitute "Subject to subsection (2) of section 78, this Act".

Amendment No. 1 is a technical amendment that is related to my Amendment No. 20. As Deputies know, Irish company law offers people the choice to establish either limited liability companies or unlimited companies. One consequence of creating a limited liability company is that the assets of the owners of the company are not necessarily available to meet any debts of the company. As a result, the only security that a limited company offers to third parties is the assets that the company owns itself. Therefore, the only way that a supplier, creditor or employee can know the financial position of the company is if the company is transparent about its finances. That is why the law requires limited liability companies to file financial statements in the Companies Registration Office.

The vast majority of people forming companies in Ireland choose to establish limited liability companies and, accordingly, the vast majority of companies in Ireland disclose their financial statements in public. They conduct their business in a transparent manner. The situation is different for unlimited companies. In the case of unlimited companies, the assets of the owners of an unlimited company are available to meet the debts of that company. Therefore, a supplier, creditor or employee can look to the owners of the company to pay any amounts that are owed to them by that company for the supply of goods or for fees, loans or wages. In that context, the Companies Act 2014 provides an exemption for unlimited companies from the general rules of transparency. Therefore, unlimited companies are not required to file financial statements with the Companies Registration Office.

It is important to recall that the Bill before us maintains that exemption. However, the current scope of the exemption has allowed it to be used in ways that are not in line with the principles underpinning company law and that have raised concerns with regulators. One of those concerns relates to the transparency of groups of companies. As a rule, company law requires group financial statements because they are an important part of the picture. Group financial statements are important as they add to the entity statements that the members of a group file by giving a clearer picture of the overall business of a group. Also, the picture of any one subsidiary given by its filed financial statements may well not correspond to economic reality. For example, all the staff might be formally the employees of one company, while most of the property might be in the name of another.

Without group financial statements, only part of the picture is available. However, the exemption for unlimited companies permits unlimited holding companies of groups not to file group financial statements. If all the companies in the group are unlimited, then the case for that is reasonable. However, the exemption applies even if the group conducts some or all of its trading through limited liability companies. In other words, once the holding company qualifies for the exemption, third parties will not have access to financial information on the business of the group as a whole even though they may be doing business with a group of companies that is virtually identical to a group of limited liability companies. In some cases, the only difference between this structure and any other group of limited companies is that the holding company is an unlimited company, yet this group is not obliged to file group financial statements as it would if the holding company was a limited liability company.

Given the importance of group financial information for protecting third parties, the Government considers that all groups with limited liability members should be treated equally and be required to file group financial statements. Therefore, one of the new criteria that section 76 introduces in order to qualify for the exemption is that the unlimited company is not a holding company of one or more limited liability subsidiaries. The new requirement is an important transparency measure. Nevertheless, I accept that it will be significant for those companies that are affected by it. Moreover, I have heard the concerns of some of those companies about the timing of this change. Many Deputies present will have heard the same concerns. I acknowledge that we are in uncertain times and that companies may need time to assess how various international developments will impact on their business.

Some companies have told me the exemption for unlimited companies is key to their ability to meet the challenges that they are facing in the next few years. They may need to restructure to meet the new rules if they wish to continue to use the exemption. That type of restructuring takes time. I believe a transitional period would be fair and appropriate in the circumstances. Accordingly, I have tabled an amendment to defer application of this particular provision until 2022. That will give the relevant companies nearly five years to put any restructuring in place in order to meet the new requirements for the exemption.

For those unlimited holding companies that do not own limited liability subsidiaries, they will continue to be able to avail of the exemption without making any changes to their corporate structures. Once the transitional period ends, any unlimited holding company that does not meet this new requirement and has not used the transitional period to restructure in order to qualify for the exemption, will start filing financial statements for years beginning in 2022 and those statements will show comparable figures for years beginning in 2021.

As I have said, I accept that will be a change for some companies so the transitional period also allows time for those companies to adapt to the new rules. I should point out that company law is kept under regular review by the Department and this change to the exemption for unlimited companies is no different in that regard.

Officials in the Department are always interested to hear the views of stakeholders.

I do not support Deputy Collins's approach on his amendment No. 21. The amendment would remove an important new transparency measure and if the amendment was accepted, people doing business with some groups of limited liability companies would not have access to the same protections as they would if they were doing business with other groups of limited liability companies. My amendment No. 20 proposes a fair transition period for companies to decide whether they wish to continue to avail of the exemption and, if so, whether they need to reorganise their affairs in any way. It is the appropriate solution to the genuine concern of the companies affected.

I will make a general comment on the amendments as I see them before me. I will come to the Minister's amendment in a moment but I am really astonished to see Deputy Alan Kelly's amendment ruled out of order. I am speaking to amendments Nos. 3 and 28, which try to deal with the outcome of what happened with Clerys and the Duffy-Cahill report.

We are not addressing amendment No. 3 now.

I know we are not addressing it as it has been ruled out of order. Why was it ruled out of order? I would have thought it was obvious for the Government to use the opportunity of this legislation for the Minister to legislate on the back of the Duffy-Cahill report and not allow another incident like what happened in Clerys. Will the Minister address that question?

I spoke to Deputy Collins earlier, who is withdrawing his amendment in favour of the Minister's. I see they are both on the same page but on the other hand I wonder what is the point of the legislation at all. The Minister is giving a very generous period to suspend the implementation of the rules about limited and unlimited companies; it is extraordinarily generous and I assume that when she refers to the "uncertain" period in which we live, she is referring to Brexit. We expect the Brexit negotiations to be completed and the changes to be on the road within two years but the Minister is allowing five years for companies to make up their minds about what way they want to restructure, declaring themselves unlimited and not showing profits and accounts in this country. I have a real problem with that. I strongly argue that if we allow this amendment to go through, there has been no point in this exercise and the Bill has been negated.

I refer to an issue we raised last summer in this Parliament regarding bin charges and specifically the standing charge being raised by something like 200% for citizens for bin collection throughout the State. When it became a big political issue on the floor, we discovered a group of companies were unlimited and registered offshore. We considered whether waste management companies have an issue with the amount they could charge per lift or per standing charge per year as they were declaring poverty and argued they were nearly broke. We could not find out their financial condition when we looked for it. Panda Waste Management had moved to the Isle of Man, The City Bin Company was in Jersey, Oxigen was in the Isle of Man, Killarney Waste Disposal was in New Zealand, Country Clean Recycling was in the British Virgin Islands, as was Clean (Ireland) Refuse and Recycling, and Greyhound - one of the biggest operators - was in the Isle of Man.

I see a real problem with allowing this to continue, even taking into account the argument that we are in uncertain times. The Minister might clarify whether she is referring to Brexit or the general uncertainty of the financial and capitalist world in which we live, which seems to continuously throw everybody into turmoil. The Minister is allowing five years of delay or suspension, so she might not be sitting in the chair opposite. That may be in the next Dáil or perhaps the one after it. God knows.

We should object to the amendment as five years is an extraordinary and overly generous period to allow companies to restructure in line with Brexit, if that is what the Minister is referring to. She can explain if it is not Brexit to which she refers. I object to the amendment as if we do not, we negate the purpose of the Bill.

Given what Deputy Smith alluded to, it is important that the Minister in her reply outlines the difference between an Irish-registered company and a company registered, for example, in the Isle of Man? Will she differentiate the two so people will understand there is a difference between Irish-registered companies and those registered offshore? That is very important.

I will withdraw amendment No. 19 in support of amendment No. 20 from the Minister, as she outlined. It is very important that people understand and appreciate that there are many good Irish companies that are good employers and treat their employees very well. They operate through the structure that will be affected by the change brought by this legislation. It could potentially threaten people's jobs because these companies are in competition with many other businesses around the globe in selling into the global market. Irish companies are put at a commercial disadvantage because they must disclose their financial information and make their margins available publicly but they are not able to see the same type of information from competitors. They would be susceptible to commercial disadvantage in that respect. That point has been well made by the people talking to me and others.

The Minister's amendment goes a long way towards dealing with the concerns brought to my attention. It has been said to me that the amendment should include the fact that in 2022 there will be a ministerial order; that was the message from the Department. Perhaps the Minister could outline that to us in her reply. The important point is that the country is facing challenges and we are dealing in a global market. We must be able to protect the indigenous industries that have grown in this country that compete on a global scale. They must have a level playing pitch. That is exactly what this is about. There must be a reasonable lead-in time and I am happy with what has been specified. I am happy to support the Minister's amendment at this point.

Amendment agreed to.

I move amendment No. 2:

In page 8, between lines 8 and 9, to insert the following:

“(j) subsection (5) of section 1237;".

This is a technical amendment. Deputies may recall I signalled on Committee Stage my intention to table an amendment to clarify that an application process under the Companies Act 2014 has now ended. The Companies Act 2014 was a significant modernisation of Irish company law. In order to accommodate companies adapting to the changes in that Act, a transitional period of 18 months was provided. One of the changes in that Act was to make the requirement for company types to display their company type at the end of their names apply to all company types. Up to that time it had applied to almost all company types, but not all. In light of the organisational preparations that might be needed by some companies, section 1237(5) allowed companies, in special circumstances, to apply to the Minister for an extension of time to make those arrangements. The period for applying to the Minister ran alongside the transitional period, which has now ended. Any company that required the extension of time has now been granted it.

Accordingly, this amendment clarifies that the application period has ended.

Amendment agreed to.

Amendment No. 3 is out of order.

Can I say something on that?

The Deputy can say it in the context of the section.

In the context of the section, this is a big issue - I know it is ruled out of order - for American multinational companies and their reporting requirements in the US vis-à-vis Ireland and Europe. It is something which should be dealt with as part of this Bill. We discussed it at committee recently and all the members of the committee were in agreement. The Fianna Fáil spokesperson will table this amendment in the Seanad.

Strictly speaking it is out of order.

The point is made.

May I have just a second on that one?

I agree with Deputy Niall Collins that we should have taken that amendment. It is a sensible amendment. It will come back through the Seanad anyway. It is something that does need to be taken.

So that we fully understand, the amendment does not arise out of committee proceedings and, therefore, had to be ruled out of order. That is standard practice.

Amendment No. 3 not moved.

Amendment No. 4 in the name of an tAire arises out of committee proceedings. Amendments Nos. 6 to 13, inclusive, and 35 are related and will be discussed together.

I move amendment No. 4:

In page 13, line 7, to delete "section 280" and substitute "section 277".

This amendment is grouped with amendments Nos. 6 to 13, inclusive, and 35. All of these amendments are technical. They correct either cross-references in the Bill or grammatical errors.

Amendment agreed to.

I move amendment No. 5:

In page 13, to delete lines 8 to 14 and substitute the following:

" "277A.(1) Subject to this section, the directors of a company may, before the operative date of the provisions of the Act of 2017 specified in subsection (4) (the 'specified provisions of the Act of 2017'), opt to prepare and approve statutory financial statements for the company in accordance with those specified provisions for any financial year which commenced on or after 1 January 2015.".

This amendment is technical. This amendment removes the reference to the date 24 December 2016 from section 14. Deputies will recall that section 14 allows companies to apply the benefits of this Bill to financial statements in respect of some financial years that have now finished. This is considered important to mitigate the effects of delay with transposing the EU Accounting Directive. However, by including the end date of 24 December 2016, the Bill could have excluded some companies from using section 14 only because their financial year ended a few days after that date. It could also give rise to a gap where some companies could use section 14 to apply the new rules for one year, then have to revert to the old rules for a single year before applying the new rules again. Clearly, this would not be our intention.

This amendment is intended to ensure that there will be a smooth transition to the new reporting requirements and that section 14 will be useful in practice.

Amendment agreed to.

I move amendment No. 6:

In page 13, line 34, to delete "section 5" and substitute "section 4".

Amendment agreed to.

I move amendment No. 7:

In page 13, line 35, to delete "sections 11 to 13" and substitute "sections 10 to 12".

Amendment agreed to.

I move amendment No. 8:

In page 14, line 2, to delete "sections 79 and 80" and substitute "sections 81 and 82".

Amendment agreed to.

I move amendment No. 9:

In page 14, line 3, to delete "section 82" and substitute "section 84".

Amendment agreed to.

I move amendment No. 10:

In page 14, line 4, to delete "section 85" and substitute "section 88".

Amendment agreed to.

I move amendment No. 11:

In page 14, line 5, to delete "section 87;" and substitute "section 89.".

Amendment agreed to.

I move amendment No. 12:

In page 14, to delete line 6.

Amendment agreed to.

I move amendment No. 13:

In page 43, line 2, to delete "subsections" and substitute "subsection".

Amendment agreed to.

Amendment No. 14 in the name of an tAire arises out of committee proceedings. Amendments Nos. 14 to 18, inclusive, and 24 are related and will be discussed together.

I move amendment No. 14:

In page 44, to delete line 21 and substitute the following:

"

Qualification of company based on size of company

Sections 280A to 280G

".

Amendments Nos. 14 to 18, inclusive, and 24 are all technical.

The Companies Act 2014 prohibits certain types of companies from using the small company regime. This is because the reduced reporting requirements on small companies are not appropriate to those types of companies. The types of company concerned are public companies and investment companies.

These amendments provide that public companies and investment companies continue to be ineligible for the small and micro-company regimes that this Bill introduces. While the definition of "ineligible entities" was amended at Committee Stage, it is still necessary to carry through these amendments across the rest of the Companies Act 2014.

Amendment agreed to.

I move amendment No. 15:

In page 44, between lines 22 and 23, to insert the following:

"Modification of definition of "ineligible entities" in case of PLCs

75. The Principal Act is amended by the insertion of the following section after section 1116:

"1116A. The definition of 'ineligible entities' in section 275(1) shall apply to a PLC as if—

(a) in paragraph (c), 'undertakings,' were substituted for 'undertakings, or',

(b) in paragraph (d)(ii), 'shall be read accordingly, or' were substituted for 'shall be read accordingly;', and

(c) the following paragraph were inserted after paragraph (d):

'(e) are PLCs;'.".".

Amendment agreed to.

I move amendment No. 16:

In page 44, to delete line 27 and substitute the following:

"

Qualification of company based on size of company

Sections 280A to 280G

".

Amendment agreed to.

I move amendment No. 17:

In page 44, to delete line 32 and substitute the following:

"

Qualification of company based on size of company

Sections 280A to 280G

".

Amendment agreed to.

I move amendment No. 18:

In page 44, after line 33, to insert the following:

"Modification of definition of "ineligible entities" in case of PUCs and PULCs

76. The Principal Act is amended by the insertion of the following section after section 1267:

"1267A. The definition of 'ineligible entities' in section 275(1) shall apply to a PUC or a PULC as if—

(a) in paragraph (c), 'undertakings,' were substituted for 'undertakings, or',

(b) in paragraph (d)(ii), 'shall be read accordingly, or' were substituted for 'shall be read accordingly;', and

(c) the following paragraph were inserted after paragraph (d):

'(e) are PUCs and PULCs;'.".".

Amendment agreed to.
Amendment No. 19 not moved.

I move amendment No. 20:

In page 46, between lines 10 and 11, to insert the following:

“(2) Subsection (1), in so far as it relates to subsection (2)(a)(iii) of section 1274 of the Principal Act, shall come into operation on 1 January 2022 for any financial year which commences on or after that date.".

Deputy Bríd Smith had an objection to that one. She took unwell.

We have no choice.

Amendment agreed to.

Amendment No. 21 in the name of Deputy Niall Collins arises out of committee proceedings. Amendments Nos. 21 to 23, inclusive, are related. Amendments Nos. 22 and 23 are physical alternatives to amendment No. 21. Amendments Nos. 21 to 23, inclusive, will be discussed together.

I move amendment No. 21:

In page 46, to delete lines 15 to 31.

In support of amendment No. 20, I am withdrawing amendment No. 21.

Amendment, by leave, withdrawn.

I move amendment No. 22:

In page 46, to delete lines 19 to 23 and substitute the following:

" " 'EEA company' means—

(a) a body corporate—

(i) which is incorporated in a state (other than the State) that is an EEA state, and

(ii) whose members’ liability in respect of such body corporate is limited,

or

(b) an undertaking—

(i) which is formed or incorporated in a state (other than the State) that is an EEA state,

(ii) whose members' liability in respect of such undertaking is unlimited, and

(iii) which is a subsidiary undertaking of a body corporate whose members' liability in respect of such body corporate is limited;",".

Amendment agreed to.

I move amendment No. 23:

In page 46, to delete lines 27 to 31 and substitute the following:

" " 'non-EEA company' means—

(a) a body corporate—

(i) which is incorporated in a state that is not an EEA state, and

(ii) whose members' liability in respect of such body corporate is limited,

or

(b) an undertaking—

(i) which is formed or incorporated in a state that is not an EEA state,

(ii) whose members’ liability in respect of such undertaking is unlimited, and

(iii) which is a subsidiary undertaking of a body corporate whose members' liability in respect of such body corporate is limited.".".

Amendment agreed to.

I move amendment No. 24:

In page 48, between lines 8 and 9, to insert the following:

"Modification of definition of “ineligible entities” in case of investment companies

83. The Principal Act is amended by the insertion of the following section after section 1400:

"1400A. The definition of 'ineligible entities' in section 275(1) shall apply to an investment company as if—

(a) in paragraph (c), 'undertakings,' were substituted for 'undertakings, or',

(b) in paragraph (d)(ii), 'shall be read accordingly, or' were substituted for 'shall be read accordingly;', and

(c) the following paragraph were inserted after paragraph (d):

'(e) are investment companies;'.".".

Amendment agreed to.

Amendments Nos. 25 to 27, inclusive, are related and will be discussed together.

I move amendment No. 25:

In page 57, line 26, to delete "Act," and substitute "Act, and".

These amendment together delete section 86(g) of the Bill. That section inserts a provision into Schedule 14 of the Companies Act 2014 that requires unregistered companies to prepare a directors' compliance statement.

However, I now intend to introduce regulations to the Oireachtas Joint Committee on Jobs, Enterprise and Innovation on 11 April. Those regulations will insert the provision into company law. As a result, section 86(g) of the Bill is now redundant.

Amendment agreed to.

I move amendment No. 26:

In page 57, line 27, to delete "Act, and" and substitute "Act.".

Amendment agreed to.

I move amendment No. 27:

In page 57, to delete lines 28 to 32.

Amendment agreed to.

Amendment No. 28 is out of order.

Amendment No. 28 not moved.

Amendments Nos. 29 and 30 are related and will be discussed together.

I move amendment No. 29:

In page 59, lines 12 and 13, to delete all words from and including "Section" in line 12 down to and including line 13 and substitute the following:

"Section 633 of the Principal Act is amended—

(a) by the substitution of the following subsection for subsection (4):".

Amendments Nos. 29 and 30 are technical amendments and make further changes to section 633 of the Companies Act 2014.

The purpose of these amendments is to extend the period for a person to apply to the Irish Auditing and Accounting Supervisory Authority, IAASA, for authorisation as a liquidator from two years after the commencement of the Companies Act 2014 to 30 months after its commencement. As a result, the application period will run to the end of November 2017.

This extension is necessary as IAASA has only got the powers to prescribe the application forms and fees in this Bill and authorisation cannot begin before this Bill is enacted.

Amendment agreed to.

I move amendment No. 30:

In page 59, to delete line 19 and substitute the following:

“Supervisory Authority.”,

and

(b) in paragraph (5)(a) of the Table to the section, by the substitution of “within 30 months after” for “within 2 years after”.”.

Amendment agreed to.

Amendments Nos. 31 and 34 are related and may be discussed together.

I move amendment No. 31:

In page 61, after line 37, to insert the following:

“(b) in section 183—

(i) in subsection (9), by the substitution of “previous death of the appointer” for “previous death or insanity of the appointer”, and

(ii) in subsection (10), by the substitution of “such death, revocation or transfer” for “such death, insanity, revocation or transfer”,”.

This is a technical amendment which is related to amendment No. 34. As I signalled on Committee Stage, the purpose of the amendments is to remove the terms "unsound mind" and "insanity" from the Companies Act 2014 and replace them with new terms. While the terms have been removed from the majority of company law provisions, just a few remain. The amendments will remove their remaining uses.

Amendment agreed to.

Amendments Nos. 32 and 33 are related and may be discussed together.

I move amendment No. 32:

In page 62, line 6, to delete “any floating charge created by the company” and substitute “a floating charge”.

Amendment No. 32 is related to amendment No. 33. Both are technical and propose to correct a typographical error in an amendment tabled on Committee Stage.

Amendment agreed to.

I move amendment No. 33:

In page 62, line 11, to delete “subsection (1)(c)(i)” and substitute “subsection (1)(i) or (ii)”.

Amendment agreed to.

I move amendment No. 34:

In page 62, to delete lines 17 to 19 and substitute the following:

“(j) in section 1205—

(i) in paragraph (b), by the substitution of “subsection (9)” for “subsection (8)”,and

(ii) by the substitution of the following paragraph for paragraph (c):

“(c) in subsection (10), there shall be substituted ‘such death or revocation’ for ‘such death, insanity, revocation or transfer’.”,”.

Amendment agreed to.

I move amendment No. 35:

In page 64, line 42, to delete “section 91” and substitute “section 100*”.

Amendment agreed to.
Bill, as amended, received for final consideration and passed.