The months ahead will be challenging for firms as they address the strict requirements introduced by the new Companies Act.
The commencement on June 01 2015, of the Companies Act 2014 has resulted in a surge in demand for chartered secretaries, particularly those who have trained in professional services practice.
“This is a direct result of a new duty on the company to ensure that the person appointed as company secretary has the necessary skills to discharge his/her statutory and other legal duties,” said Salvador Nash, Head of Company Secretarial with KPMG.
“Indeed, the Act provides that the appointee must make a public declaration acknowledging that he/she has legal duties and obligations imposed on him/her by the Companies Acts, other statutes and common law.”
Nash outlined that post-incorporation, there is a wide variety of statutory compliance obligations imposed by the Companies Acts, most of which involve the imposition of time limits with which companies must comply in order to avoid the possibility of penalties being imposed on the company and/or its directors.
"These obligations include the requirement to have annual general meetings; to file financial statements; to prepare and file an annual return; and to maintain certain statutory registers such as the Register of Members, the Register of Directors and Secretary, and the Register of Officers’ Interests. It is a statutory requirement that minutes of meetings of directors and minutes of general meetings be maintained. With these requirements in mind, we provide company law compliance services in relation to statutory filing requirements, including maintaining statutory books and records, and preparing annual returns."
Not surprisingly, these are challenging times for companies as they address the strict compliance requirements introduced by the new Act. Nash reminded us that the new Act affects all companies already on the register and actions should be taken before the end of this year in order to remain compliant.
“For example, existing private companies will have to decide whether to become a Private Company Limited by Shares - new simplified entity - or a Designated Activity Company. Conversion steps then need to be taken, which may include a change of name. In order to avoid a possible breach of their duties, it would be unwise for directors to do nothing and allow their company to default to a LTD. This could have serious cost implications for Irish businesses.”
A LTD, expected to be the most common type of company, will no longer have an objects clause, thereby giving it the same contractual capacity as a natural person. Additionally, a LTD may elect to avail of less onerous requirements under the Act (e.g. a LTD may have a sole director, but the same person cannot be the secretary, and may have a written form AGM). The introduction of a one document constitution for a LTD instead of the existing two document Memorandum and Articles of Association, will necessitate review to ensure specific provisions are contained in the new constitution.
According to Nash, compliance issues that are currently vexing companies and their professional advisers include the replacement of Companies Registration Office (“CRO”) administrative procedure to grant annual return filing extensions with applications to the District Court. The Act introduced this change to provide a statutory mechanism for such extensions. The CRO’s intention to require companies to file a separate set of financial statements with each annual return is also a challenge, as is its intention to strictly enforce the length of financial periods.
In terms of cultural change, already apparent is a more robust attitude by the Registrar to the provisions of the legislation. The up-shot sees a rise in demands from clients for instant advice, and for production of underlying documentation that in turn is putting pressure on professional staff.
Nash flagged that forthcoming changes will require all but owner managed unlimited companies to file financial statements on public record, resulting in disclosure of commercially sensitive information not currently in the public domain.
Another future change could see public disclosure of persons who control Irish companies. “A public consultation was conducted in Ireland on whether details on a central register of beneficial owners of Irish incorporated companies should be made available to the public at large – and, if so, whether certain personal information of owners should not be made publicly available. This has arisen from the EU 4th Anti-Money Laundering Directive and is to be enacted into law no later than June 26, 2017. The UK Government has already decided that such information should be publicly available,” said Nash.
He sees a need to increase general awareness regarding the obligations for foreign companies who have a presence in Ireland to register a branch here and the consequential requirement to file financial statements on public record in Ireland. The Act only permits one registration option, whereas there were two options under previous legislation, and the extent of the foreign company’s activities in Ireland determines whether there is an obligation to register.
For companies seeking professional corporate secretarial input, Nash believes that brand recognition is a determining factor when it comes to making a choice, particularly for multi-nationals and that puts KPMG front of mind.
“Multi-national clients who face huge challenges with rapid globalisation, ever changing legal structures and internal pressures to reduce cost are demanding integrated corporate secretarial services with a global presence. This has led to KPMG developing its Global Company Secretarial Services offering of which KPMG Ireland is a founding member."
The Companies Act 2014 was 15 years in the making, but Nash said, “A constant evolving business environment and IT development requires ongoing review and updating of the Company Law Code, something which is currently within the remit of the Company Law Review Group (CLRG), and all practitioners of company law should contribute in order for Ireland to have an efficient world-class company law infrastructure.
This article first appeared in the Sunday Business Post and is reproduced here with their kind permission.