Cayman Islands: Corporate Legislative Update - Ireland

Last Updated: 12 October 2018
Article by Edward Miller, Patrick Quinlan, Colm Rafferty, Deirdre MacCarthy and Nigel Wilson

Most Read Contributor in Cayman Islands, November 2018

Credit Reporting Act Obligations Commencing 30 September 2018

The Credit Reporting Act 2013 (the "CRA") established an official statutory register (the "Register") operated by the Central Bank of Ireland ("CBI") to record the amount of credit in the Irish economy. The Register will also enable creditors to check a potential borrower's credit status before advancing credit.

Banks established in Ireland and authorised by the CBI will already be aware of the implications of the CRA if they have consumer credit customers, due to information-gathering and reporting obligations under the CRA having been introduced for consumer credit during 2017. However, credit providers such as alternative lenders and other business lenders along with purchasers of non-consumer debt in the secondary markets who have had no exposure to consumer credit, now need to be aware of the potential application of the CRA which imposed reporting obligations effective from 30 September 2018.

For more information on the credit reporting obligations arising from the CRA, please see our previous client update Ireland Reminder – Credit Reporting Obligations1.

Anyone involved in lending, extending credit or imposing interest in any context should consider whether it has any obligations under the CRA.

Investment Limited Partnership and Irish Collective Asset-Management Vehicle (Amendment) Bill

In July 2017 the Irish Government approved the heads of the Investment Limited Partnership and Irish Collective Asset-Management Vehicle (Amendment) Bill (the "Bill").

The aim of the Bill is to support the development of real economy investments by ensuring that Ireland continues to remain a leading centre of excellence for investment structures and remains at the cutting edge of market developments. Until the Bill is published there is still uncertainty about the changes that will be implemented, however, it is hoped that the changes will include amendments which will (i) improve the operation of Investment Limited Partnerships ("ILPs") and align the structure with AIFMD and (ii) allow for the establishment of umbrella ILPs and the migrations of ILPs, thereby increasing the structural options available for promoters of venture capital and private equity funds in Ireland.

The Government recently published its legislation programme for Autumn/Winter 2018 in which it confirmed that the Bill is due to be published before the end of the year.

The Commencement of the Companies (Statutory Audits) Act 2018

The Companies (Statutory Audits) Act 2018 (the "2018 Act"), for the most part, commenced on 21 September 20182. This Act relates largely to the obligations on auditors and the Irish Auditing and Accounting Supervisory Authority ("IAASA") and is very technical. Listed below are some of the key provisions that will be of relevance to companies more generally:

Key Provisions

Detail of Amendments

Loss of audit exemption on late filing of annual return revised

Under the Companies Act 2014 (the "2014 Act"), where a company missed its deadline for filing its annual return late, it lost any entitlement that it might otherwise have had to avail of an audit exemption in respect of that financial year and the following year. This has changed under the 2018 Act – a company will now not lose this entitlement in respect of the financial year to which the late return relates. Instead, it will lose its audit exemption in respect of the two financial years immediately following that year.

The effect of this amendment is that it will no longer be necessary to carry out an audit on a historical set of financial statements (i.e. the financial statements that relate to the year in which the late return was made) which can be costly and time consuming. This is a welcome change as it will allow the company and the accountant to agree the process for engaging an auditor and to plan for the costs of the audit.

The process for filing an annual return to become more streamlined upon commencement of Section 9 of the 2018 Act (expected to occur prior to year-end)

Under the 2014 Act, where a company files its annual return electronically within 28 days after its annual return date, it has a further 28 days from that date during which to file its financial statements. The 2018 Act (upon commencement of Section 9) will amend this such that companies will be granted 56 days to file their annual return and financial statements.

Note: This section has not yet been commenced so the usual two filing deadlines continue to apply.

The IAASA have been given additional supervisory powers in respect of statutory audits

The 2018 Act permits the IAASA to prescribe additional requirements in relation to the content of a statutory auditors' report, where necessary to give effect to legal requirements, or to add to the credibility and quality of the report. In addition to this, the IAASA will be entitled to impose sanctions on a statutory auditor.

The new provisions state that where administrative sanctions have been imposed on a person (in a scenario where all rights of appeal have been exhausted / have expired), there is provision for the publication of information in that regard on the IAASA's website.

Information published on the IAASA's website would then remain available for five years.

In addition, where a breach has occurred in relation to the audit of a public-interest entity ("PIEs")3, the IAASA will be required to inform the Director of Corporate Enforcement ("ODCE") of the

breach and assist the ODCE in any investigation of the matter.

Exemptions from establishing audit committees

The 2018 Act allows certain PIEs to avail of the exemption from establishing an audit committee. These include PIEs which are small or medium-sized enterprises (as defined by Directive 2003/71/EC – Prospectus Directive). It also includes companies listed on an EU regulated market (having had an average market capitalisation of less than €100 million for the previous three years). These entities will only be entitled to avail of the exemption where the functions assigned to an audit committee are performed by their boards of directors.

The Companies (Statutory Audits) Bill had controversially proposed that companies wishing to extend time to file their annual returns would have to make an application to the High Court (thereby removing the option to make such application to the District Court). However, after successful lobbying, this proposal was not included in the 2018 Act and companies may continue to make these applications to the District Court (in the district where the registered office of the company is located) or the High Court.

The 2018 Act revokes the European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 2014/56/EU, and Regulation (EU) No 537/2014) Regulations 2016 (the "2016 Regulations") which gave effect to the mandatory provisions (and some optional provisions) of the EU Audit Directive4 and the EU Audit Regulation5 and restates the 2016 Regulations in the 2014 Act by inserting a new Part 27 entitled 'Statutory Audits'.

Footnotes

1 Ireland Reminder Credit Reporting Obligations

2 S.I. No. 366 of 2018 commenced all of the 2018 Act on 21 September, apart from section 3(1)(a), 3(1)(h), 3(1)(i), 3(1)(j) and section 9

3 "Public interest entities" are defined by the EU Audit Directive and include entities governed by the law of an EU Member States whose transferable securities are admitted to trading on a regulated market of any Member State, credit institutions, insurance undertakings or other entities designated by Member States as such because they have significant public relevance due to the nature of their business, their size or the number of their employees

4 Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 on statutory audits of annual accounts and consolidated accounts

5 Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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