Companies (Accounting) Bill 2016 – A Brief Overview – Part 1

This article is the first in a four-part series which aims to address some of the changes which the Bill will introduce to Irish law.

What is the Companies (Accounting) Bill 2016?

The Bill is scheduled to go before the Dáil in the early part of November 2016, according to the Department of Jobs, Enterprise and Innovation.  It is understood that the new legislation could be in force from as early as 1 January 2017 – however it is possible that the Oireachtas may require some changes to the Bill before it is enacted and this process could delay the introduction of the new legislation.

Why is the law being changed?

The primary purpose of the Bill is to transpose EU Directive 2013/34/EU (the “Directive”) into Irish law.  A secondary purpose of the Bill is to address a number of issues which have been identified in relation to the Companies Act 2014.

Article 53 of the Directive imposes a deadline for the transposition of the Directive into each EU Member State’s legislation by 20 July 2015.  Accordingly, Ireland is already in breach of EU regulations.

What regulations are contained in the Directive?

The main points of the Directive are:-

1. The “think small first” principle.  The aim is to stimulate the EU economy by supporting SMEs.  The regulatory burdens on small companies and micro companies will be reduced.
2. To consolidate the rules in relation to the presentation and dissemination of financial data by corporate entities.  This requires the restructuring of Part 6 of the Companies Act 2014.
3. New rules for Extraction (i.e. mining and quarrying) and Logging businesses.  This is the motive behind the new Part 26 of the Companies Act 2014.

What impact will the Bill have on the Companies Act 2014?

1. Increased audit exemption thresholds and accounting regimes for companies. These changes will be examined in greater detail in future articles.
2. Increased disclosure requirements for large companies and clarification on the form and purpose of the Corporate Governance Statement.
3. Development of the existing regulatory framework, including the role of various accountancy bodies within the company law regime and clarification of the reporting obligations of certain companies to the ODCE.
4. A significantly narrower definition of a “Non-Designated Unlimited Company” (i.e. a company which is not obliged to file financial statements).  This amendment may require certain companies to file financial statements for the first time since incorporation.

It is important to note that the Bill has not yet been enacted and may be subject to change. Some of the changes mentioned above will be examined in greater detail in future articles.

For further information regarding the Companies (Accounting) Bill 2016 please contact Eoin Paterson at mwalsh@reddycharlton.ie.