Ireland has waited 13 years from the date of the first Company Law Review Group Report in 2001 until December 2014 to actually get our new Consolidated Companies Act in the form of the Companies Act 2014. Although the Act was enacted on 23rd of December 2014, we had to wait a while longer for the issue of the related commencement order giving effect to the provisions of the Act.
Minister Richard Bruton signed the much anticipated and debated commencement order on 1st of May 2015 in the form of Statutory Instrument 169 of 2015. This statutory instrument dealing with the commencement of the 2014 Act now brings clarity to how the legislation, due to commence on 1st of June, will actually be implemented.
What does the Final Version of the Commencement Order Mean?
The entire companies Act is being fully implemented effect of 1st of June 2015 with the exception of certain elements of S.41 of the Act and 6 other sections of legislation.
The 6 sections of legislation set out below only come into effect for periods commencing on or after 1st of June 2015.
- S.167 - Audit Committees – The requirement for companies with a balance sheet in excess of €25m and turnover in excess of €50m to establish an audit committee.
- S.225 - Directors Compliance Statements – The requirement for a company with a balance sheet in excess of €12.5m and turnover in excess of €25m to prepare a directors compliance statement.
- S.305(1)(b) - Disclosure of Directors Remuneration – The requirement for companies to disclose in their financial statements the aggregate amount of gains by directors on the exercise of share options during the financial year.
- S.306(1) – Supplemental provisions in relation to S.305 – Disclosures under S.305(1)(b) is extended to connected persons as defined under S.220.
- S.326(1)(a) - Directors Report General Matters – the requirement to name the persons who at any time during the financial year were directors of the company in the directors report.
- S.330 – Directors Report – Statement on relevant audit information - The requirement for the directors to make a statement that the auditors have been made aware of all relevant audit information.
The Commencement Order does go on to say that abridged financial statements as referenced by S.353 and S.354 which are prepared before the 1st day of June 2015 are to be prepared in accordance with the provisions of prior Companies Acts.
What does this mean at an Overall Level?
- With the exceptions of the 6 sections specified above, all elements of the legislation come into effect from 1st of June 2015.
- This means that all transactions and changes made after 1st of June 2015 should be done under the CA 2014.
- All changes and simplifications in the legislation are effective immediately.
What does this mean for Financial Statements?
- All Financial Statements approved after 1st of June 2015 should be prepared under CA 2014.
- SS.407 of the Act does provide options in the first year of transition for financial statements. For periods beginning before commencement of 1st of June and ending after, the financial statements can be prepared either under the Companies Act 1963 to 2013 or the 2014 Act however the CRO have not finalized their interpretation of this, and it is subject to the issuance of the commencement order.
What does this mean for Audit Exemption?
- Despite previous interpretations provided, the commencement order does not specifically prevent companies retrospectively availing of the audit exemption.
- Based on the CRO interpretation companies with December 2014 year ends onwards can avail of the audit exemption provided the accounts are not signed off prior to 1st of June 2015 irrespective of what the year end is.
- Be aware of the potential implications of retrospectively availing of the exemption for entity types that could not previously avail of the audit exemption (eg Groups, Companies Limited by Guarantee and Unlimited Companies) where there was no legislation enacted or commenced giving members the right to block the audit exemption prior to this commencement order.
What does this mean for Annual Returns and Forms?
- Any forms or returns signed before the 1st of June 2015 should be submitted using the current versions of forms
- Any forms or returns signed on or after the 1st of June 2015 should use the new CA 2014 forms.
- The key for forms and submissions is the date of signature of the documents is the deemed effective date.
While the commencement order gives clarity there are still certain elements of the legislation order, which are subject to interpretation. Many accountants and company law advisors have been seeking clarification in relation to a recently issued CRO E-zine in relation to financial year ends and the transition provisions and choices under S.407. We are awaiting clarification in relation to the interpretation of S.407 of the Act, but we will be issuing specific, detailed guidance in relation to both transition and audit exemption in the next couple of days once we have obtained the required clarifications.
For more information on the Companies Act 2014 and discussion and debate on the implementation process check into our Linkedin Discussion Group
SI No. 169 of 2015
Companies Act 2014 Commencement Order
|1.||This Order may be cited as the Companies Act 2014 (Commencement) Order 2015.|
|2.||In this Order “Act of 2014” means the Companies Act 2014 (No. 38 of 2014).|
|3.||In this Order “Act of 2014” means the Companies Act 2014 (No. 38 of 2014).|
|(a)||section 4(1) in so far as it relates to Part V of the Companies Act 1990 (No. 33 of 1990),|
|(b)||section 4(2) in so far as it relates to Regulation 6 of the European Communities (Mergers and Divisions of Companies) (Amendment) Regulations 2011 (S.I. No. 306 of 2011),|
|(c)||section 4(2) in so far as it relates to Regulation 6 of the European Communities (Mergers and Divisions of Companies) (Amendment) Regulations 2011 (S.I. No. 306 of 2011),|
|(d)||section 1325, shall come into operation.|
|4.||(1)||In this Article “financial year” does not include a financial year that begins before the 1st day of June 2015.|
|(2)||The first day of the financial year of a company, by reference to which functions of the company under a provision of the Act of 2014 specified in paragraph (3) are performable, is appointed as the day on which that provision shall come into operation.|
|(3)||Each of the following is a provision of the Act of 2014 referred to in paragraph (2): sections 167, 225, 305(1)(b), 306(1), 326(1)(a) and 330.|
|5.||For the avoidance of doubt, in a case in which financial statements of a company are prepared before the 1st day of June 2015, references in sections 353 and 354 of the Act of 2014 to section 290 of that Act are to be read, by virtue of Schedule 6 to the Act of 2014, as references to the corresponding provision of the prior Companies Acts.|
S.4 CA 2014 Repeals and Revocations
|4.||(1)||The Acts of the Oireachtas specified in Part 1 of Schedule 2 are repealed to the extent specified in the third column of that Part.|
|(2)||The statutory instruments specified in Part 2 of Schedule 2 are revoked to the extent specified in the third column of that Part.|
|(3)||This section is in addition to section 1325 and Schedule 15 (repeals related to an unregistered company becoming registered under this Act).|
1S.4.1 repeals the 18 Companies Acts set out in schedule 2 Part 1 other than in so far as it relates to Part V of the Companies Act 1990 (Insider Dealing)
S.4.2 revokes the 15 Statutory Instruments set out in Schedule 2 Part 2 other than in so far as it relates to S.I. 306 of 2011 (EC (Mergers and Divisions of Companies)(Amendment)) Regulations 2011
S.4.3 deals with repeals related to unregistered companies becoming registered under the Act under Schedule 15 Parts 1 and 2 and links into S.1325
S.1325 refers to the repeal of the Schedule 15
This article has been written for information and educational purposes only and does not constitute a subsitute for taking legal advice. When making decisions or advising thrid parties legal advice should be obtained in all cases. This is an interpretation of the legislation of which many aspects have not been practically applied. This interpretation may differ from the interpretation of others. OmniPro and the author shall therefore not be liable for any damage or economic loss occasioned to any person acting on, or refraining from any action, as a result of or based on the material contained in this article.