I move amendment No. 3:
In page 4, before section 6, but in Part 2, to insert the following new section:
"6.—(1) Part III of the Companies (Amendment) (No. 2) Act 1999 is amended—
(a) in section 32(1) (as amended by the Companies (Auditing and Accounting) Act 2003)—
(i) by substituting "Subject to sections 32A and 32B" for "Subject to sections 32A and 33(1)", and
(ii) by substituting the following paragraph for paragraph (ii):
"(ii) unless and until—
(I) circumstances, if any, arise in that financial year which result in one or more of the said conditions not being satisfied in respect of that year, or
(II) circumstances otherwise arise by reason of which the said company is not entitled to the exemption in respect of that financial year,
the provisions mentioned in subsection (2) shall not apply to the said company in respect of that year.",
(b) in section 32(3)—
(i) by substituting, in paragraph (a)(ii), “€7.3 million” for “€1,500,000” (inserted by the Companies (Auditing and Accounting) Act 2003), and
(ii) by substituting, in paragraph (a)(iii), “€3.65 million” for “£1,500,000”,
(c) by inserting the following section after section 32A (inserted by the Companies (Auditing and Accounting) Act 2003):
"32B.—Notwithstanding that the conditions specified in section 32(3) are satisfied, a company is not entitled to the exemption in a financial year if a notice, with respect to that year, is served, under and in accordance with section 33(1) and (2), on the company.",
(d) in section 33—
(i) by substituting the following subsections for subsections (1) and (2):
"(1) Any member or members of a company holding shares in the company that confer, in aggregate, not less than one-tenth of the total voting rights in the company may serve a notice in writing on the company stating that that member or those members do not wish the exemption to be available to the company in a financial year specified in the notice.
(2) A notice under subsection (1) may be served on the company either—
(a) during the financial year immediately preceding the financial year to which the notice relates, or
(b) during the financial year to which the notice relates (but not later than 1 month before the end of that year).”,
(ii) by deleting subsection (3), and
(iii) in subsection (4), by substituting the following paragraph for paragraph (c):
"(c) no notice under subsection (1) has, in accordance with subsection (2), been served on the company, and”,
and
(e) in section 35, by substituting the following subsection for subsection (1):
"(1) Whenever by reason of—
(a) circumstances referred to in section 32(1)(ii) arising in the financial year concerned the exemption ceases to have effect in relation to a company in respect of that year, or
(b) circumstances otherwise arising a company is not entitled to the exemption in respect of the financial year concerned,
it shall be the duty of the directors of the company to appoint an auditor of the company as soon as may be after those circumstances arise and such an appointment may be made by the directors notwithstanding the provisions of section 160 of the Principal Act.".
(2) Nothing in subsection (1)(b) prejudices the future exercise of the power under subsection (7) of section 32 of the Companies (Amendment)(No. 2) Act 1999 in relation to subsection (3) (as it stands amended by subsection (1)(b)) of that section 32.”.
Deputies may recall that in my contribution on Second Stage, when I gave an overview of the provisions contained in the Bill, I made specific mention of an objective that I wished to have accommodated in the context of the audit exemption provision. It was my priority that the increased thresholds for turnover and balance sheets introduced in section 6 should be capable of being availed of as early as possible by companies and, in particular, by companies for which the financial year begins on or after 1 January 2007. To give effect to that it has proved necessary to make a larger number of amendments than might have been thought necessary. This is especially so as the provisions of Part III of the Companies (Amendment)(No. 2) Act 1999, which first introduced the possibility for a company not to appoint an auditor, contain a number of interrelated and interdependent provisions such that when one is changed, a number of consequential amendments must be made.
The essence of the changes now being made will still enable a member or members holding not less than 10% of the voting shares of a company that would otherwise be eligible to avail of the exemption to notify the directors that the exemption should not be availed of. Under the existing provisions, such a notification would have to be made no later than one month before the end of their preceding financial year. Under the new arrangements, such a request can be made in the preceding financial year or in the year when the exemption is being availed of provided it is made at least one month before the end of that financial year.
However, in making the necessary revisions we may have unwittingly removed an element of the original approach which continues to be relevant in the new scenario, that is, the two-month period we had provided in respect of the initial financial year to which the new audit thresholds would be applicable. This pause was expressly provided to enable a member or members holding not less than 10% of the voting shares of a company that would otherwise be eligible to avail of the exemption to notify the director that the exemption should not be availed of. As just mentioned in the previous context, such a notification would have to be made no later than one month before the end of the preceding financial year.
Notwithstanding that we are proceeding with the different approach, I consider that on balance there may be merit in reinserting the two-month period in respect of the financial years in progress at the time of commencement of the new provision. There is no need to have the two-month provision apply for subsequent years. This would enable early take-up of the new dispensation, subject to the relevant criteria being met. It would also appear to meet what I understand Deputy Quinn is seeking to achieve in his amendment to section 6(2). I intend to have this matter reviewed before Report Stage and, if necessary and appropriate, I will bring forward an amendment to deal with that aspect.
The other substantial change being made is to section 35 of the Companies (Amendment)(No. 2) Act to put beyond doubt that where a company fails to file its returns on time in the Companies Registration Office or a notification not to avail of the exemption is made, the directors must appoint auditors. I trust that explains what the amendments are designed to achieve, and I commend them to the committee.