Dáil Éireann Debate, Tuesday - 16 January 2018
619. Deputy Maurice Quinlivan asked the Minister for Business, Enterprise and Innovation if her attention has been drawn to the concerns of small businesses on the proposed removal of section 343(7) of the Companies Act 2014; and if this provision in the Companies (Statutory Audits) Bill 2017 is being reconsidered. [54565/17]
View answerI have received some representations on behalf of small business regarding the removal of section 343(7) of the Companies Act 2014. I brought forward this amendment in the Companies (Statutory Audits) Bill 2017 as I consider it an appropriate and necessary measure to protect the interests of users of company financial statements.
Prior to the Companies Act 2014, a company could apply only to the High Court for an extension of time to file its annual return. Where such an Order was given for an extension of the time, the company did not lose its audit exemption. Separately, a company could apply to the Registrar of Companies for its late filing fees to be waived but it lost the audit exemption as it was still late filing its annual return.
The Companies Act 2014 introduced the option, under section 343(7), for a company to also apply to the District Court for the extension of time to file its annual return and, if obtained, it retained its audit exemption.
Section 343(7) was commenced on 1 June 2015 and since then concerns have arisen regarding its impact on timely filing of annual returns and financial statements by companies which is an important transparency measure and safeguard for third parties such as suppliers, employees and other creditors. The number of Orders granted by the District Court in the course of 2016 was more than double the number of waivers granted by the Registrar in 2014 under the previous scheme.
Section 9 of the Companies (Statutory Audits) Bill 2017 repeals section 343(7) of the Companies Act 2014. A new section 343A provides that a company may apply to the District Court for an Order waiving the fee required for the late filing of its annual return. This is similar to the position that obtained before the enactment of the Companies Act 2014, whereby a company could apply to the Registrar but that decision now falls within the remit of the District Court.
The loss of audit exemption where an annual return is not filed on time was introduced as a policy response for such failure in the Companies (Auditing and Accounting) Act 2003. The loss of audit exemption has proved central to creating a culture of compliance and acting as a support to good corporate governance practices. Today the compliance level is at 90%.
Companies have a considerable period of time, up to 10 months, to prepare and file their financial statements. The vast majority of companies manage to file within this timeframe. Any further delay risks making that information less meaningful to the third parties concerned.
This is an important consideration as those third parties may also be small companies that supply or otherwise do business with that company. Given the time allowed to companies to prepare their financial statements, the fact that the financial reporting obligation has been simplified and reduced in the Companies (Accounting) Act 2017 and that this Act also made more companies eligible for the audit exemption, I consider that the proposals in the Companies (Statutory Audits) Bill 2017 are appropriate.
