Proposal to amend provision for Directors Compliance Statements

In December 2005 the Government published its proposals to amend the present Directors' Compliance Statement provision in line with the recommendations of the Company Law Review Group which finalised and submitted its Report to the Minister in July 2005.

The Government in its public announcement on this issue indicated that when implemented in amending companies’ legislation, the DCS will apply to the directors of:

• Public limited companies (whether listed or not) and
• Private companies limited by shares with both a balance sheet total of over €12.5 million and a turnover of over €25 million in the financial year in question.

The annual directors’ report for such companies will have to address the following matters:

• An acknowledgement that the directors are responsible for securing the company’s compliance with its relevant obligations.
• Confirmation that the company has in place a compliance policy statement that is, in the opinion of the directors, appropriate for the company, and if not, why not.
• Confirmation that the company has in place appropriate arrangements or structures that are, in the opinion of the directors, designed to secure material compliance with its relevant obligations, and if no, why not.
• Confirmation that the company’s arrangements or structures have been reviewed during the financial year and if not, why not.

Relevant obligations will mean compliance by the company with its legal obligations under:

• Tax law and
• Company law, where the failure to comply is an indictable offence under the Companies Acts.

The proposed DCS provision will no longer require auditors to state whether in their opinion the DCS is fair and reasonable.

Failure to include a Compliance Statement in the annual Directors’ Report will constitute an offence. Each director found guilty of the offence would be liable on summary conviction to a fine not exceeding €1,904 and/or a term not exceeding 12 months in prison and on indictment to a fine not exceeding €12,697 and/or a term not exceeding 5 years in prison.

For further information please contact:
Joanne Griffin at jgriffin@kilroys.ie

© Kilroys Solicitors January 2006