knowledge | 10 August 2016 |
Financial Disclosure by Unlimited Companies: New Rules Imminent
The Companies (Accounting) Bill 2016
proposes significant change to the financial disclosure obligations of
unlimited companies. Directors of unlimited companies should speak with their
legal advisers, soon, to identify and implement arrangements that are
appropriate to each group to address these imminent changes.
Companies (Accounting) Bill 2016
Published on 5 August 2016, the main purpose of the Companies (Accounting) Bill 2016 (the “Bill”) is to give effect to EU Directive 2013/34/EU1 (the “Accounting Directive”) in Irish law. The Bill will do so by amending the Companies Act 2014 (the “Act”) in many ways. An effect of the proposed amendments will be that most unlimited companies that are incorporated in Ireland will for the first time be obliged to file their financial statements (in the Act, previously called “annual accounts”) in the Companies Registration Office (the “CRO”). In this regard, the Bill proposes to go further than the Accounting Directive mandates. Directors of affected companies should consider the implications of these proposals for their company, and liaise with their legal advisers to identify solutions, soon.
Current Law and Rationale
Currently, under section 1274 of the Act, an unlimited company that is incorporated in Ireland must file its financial statements in the CRO if the relevant unlimited company is of a designated type. An Irish unlimited company which has at least one member that is an unlimited company incorporated outside the EEA is not a designated type and accordingly falls outside the requirement to disclose its financial statements publicly (although it must nonetheless prepare financial statements for its member(s) and for tax purposes).
The Bill proposes to amend section 1274 by widening the term “designated” unlimited company. The effect of this change will be that most unlimited companies that currently are not required to disclose their financial statements in the CRO will be required to do so.
It seems likely that:
- the changes, once enacted, will apply to accounting periods beginning on or after 1 January 2017 (although it is possible that the changes will be imposed for financial years that commenced on or after 1 January 2016); and
- if following these changes, a company is required to file its financial statements, those statements will need to show previous year comparisons so that financial information for the then-prior accounting period may also need to be disclosed.
Directors of an unlimited company that currently is not required to file its financial statements in the CRO should examine its existing corporate structure and assess what impact the proposed amendments in the Bill will have for it. If (as is likely) such a company will come within the scope of the filing obligation and the directors are concerned that disclosure of sensitive financial information might adversely affect the business, they need to take action. We at McCann FitzGerald are considering how such critical information might be best protected in the new environment: come and talk to us.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.