Ireland: Non-Financial Reporting Requirements For Irish PLCs Listed On NYSE/NASDAQ

Last Updated: 14 August 2018
Article by Arthur Cox
Most Read Contributor in Ireland, October 2018

The purpose of this publication is to identify and summarise the non-financial reporting ("NFR") requirements arising under the European Union (Disclosure of Non-Financial and Diversity Information by Certain Large Undertakings and Groups) Regulations 2017 (the "2017 Regulations") from the perspective of Irish public limited companies listed on the NYSE/NASDAQ.

WHY ARE THESE OBLIGATIONS RELEVANT TO US-LISTED COMPANIES?

The NFR obligations are derived from the transposition of an EU Directive into Irish law. The Directive applies to companies listed on a regulated market within the EU, but the 2017 Regulations extend the NFR obligations to all large PLCs, including those listed on the NYSE/NASDAQ.

It was assumed that this was a drafting error, as Irish regulations implementing an EU Directive cannot increase the scope of the Directive, and the relevant Irish Government Department was asked to amend the Regulations accordingly. However, after considering the matter, the Department has stated that its view is that all PLCs currently covered by the Regulations (including those listed on the NYSE/ NASDAQ) should make the NFR disclosure.

As a matter of Irish constitutional law, the extension of the NFR obligation to US-listed companies would require primary legislation (an act of the Irish parliament) because it goes beyond the scope of the Directive, and we are continuing to engage with the Department with a view to changing its position on this issue. However, given that the Regulations apply to fiscal years commencing after 1 August 2017, we are now advising Irish companies listed in the United States to make contingency plans on the basis that the NFR obligations will apply to them.

ARE ALL US-LISTED IRISH COMPANIES SUBJECT TO THE NFR REQUIREMENTS?

As the Regulations are currently drafted, they cover any Irish public limited company that:

  • meets one or both of the following financial thresholds:
    • total assets exceeding €20 million (€24 million gross in the case of a holding company); and/or
    • turnover exceeding €40 million (€48 million gross in the case of a holding company); and
  • an average number of employees exceeding 500 (for the company or its group).

It is currently irrelevant whether a company that meets these criteria has listed securities, or where such securities are listed.

ARE US-LISTED COMPANIES ALSO REQUIRED TO PUBLISH A "DIVERSITY REPORT"?

No. The 2017 Regulations require certain Irish companies to publish a "diversity report" describing its policies, objectives and results in encouraging diversity in the areas of, inter alia, age, gender and educational/professional background. This obligation does not apply to Irish public limited companies whose shares are solely listed on the NYSE/NASDAQ.

WHAT ARE THE NON-FINANCIAL REPORTING REQUIREMENTS?

Companies must disclose information on the following matters (the "NFR matters"):

  • environmental matters;
  • social and employee matters;
  • respect for human rights; and
  • bribery and corruption.

The NFR disclosure should include:

  • a brief description of the group's business model;
  • the information necessary for an understanding of the development, performance, position and impact of the group's activity relating to the NFR matters;
  • a description of the group's policies pursued in relation to the NFR matters (or a clear and reasoned description as to why the group does not have policies in relation to the NFR matters), and of the outcome of those policies;
  • a description of the due diligence processes the group implements in relation to the NFR matters, and of the principal risks related to the NFR matters that are linked to the group's operations – where "relevant and proportionate", this should include disclosure concerning the group's business relationships, products or services that are likely to cause adverse impacts on the NFR matters, and how the group manages those risks; and
  • an analysis of the key performance indicators relevant to the group's business that are employed in relation to the NFR matters and, where appropriate, references to and explanations of amounts included in the accounts that are related to the NFR matters.

Information relating to impending developments or matters in the course of negotiation may be omitted from the NFR disclosure where it could, in the opinion of the directors, seriously prejudice the company's competitive position.

However, the reason for omissions must be given, and information should not be omitted if this would prevent a understanding of the group's development, performance, position and the impact of its activities on the NFR matters.

IS THE NFR DISCLOSURE SUBJECT TO AUDIT?

In the course of preparing their audit report, a company's auditors must establish that the NFR disclosure has been made by the company in accordance with the 2017 Regulations. For now, it remains unclear what this means in practice, though auditors are beginning to consider this in detail. When companies have determined the steps they intend to take to comply with the 2017 Regulations, it is recommended that they engage with their auditors to ensure that this will be sufficient to enable their auditors to issue their audit report within the usual timeframes.

IS THE FORMAT FOR THE NON-FINANCIAL DISCLOSURE PRESCRIBED?

The NFR disclosure may be set out:

  • in a specific section (the "NFR section") in the directors' report for the company's Irish statutory accounts; or
  • in a separate standalone document signed by 2 directors on behalf of the company and which is laid before the annual general meeting with the company's balance sheet (the "NFR report"). Where a company wishes to publish a separate NFR report, the NFR report must be either:
    • published on the website of the company within 6 months of the financial year end of the company and a statement that the NFR report has been or will be published, and the address of the website where it will be published, must be included in the director's report for the company's Irish statutory accounts; or
    • annexed to the annual return of the company filed with the Companies Registration Office in Dublin.

Given the timing and logistical constraints of preparing a separate NFR report, and the need for auditor sign-off described above, we believe that the latter option will be of limited value to most companies.

Our current expectation is that most companies will include the NFR section in their directors' report, relying, in as far as possible, on cross-references to information publicly available elsewhere, e.g. in the company's annual report, ESG report, etc.

The Guidelines on Non-Financial Reporting published by the European Commission (the "Guidelines") envisage this "signposting" approach.

While the Guidelines are non-binding, given their source they are likely to be regarded as "best practice" in NFR disclosure. The Guidelines emphasise that the NFR disclosure requirements are not prescriptive and encourage flexibility of approach, specifically recognising the broad diversity of businesses and sectors that are subject to the NFR disclosure regime.

Given that the current financial year is the first when the 2017 Regulations will be applicable, we expect market practice in this area to evolve over the next twelve months as companies adapt their approach on NFR disclosure to the specific circumstances of their own business.

WILL THE DIRECTORS' COMPLIANCE STATEMENT NEED TO BE UPDATED?

No. The NFR disclosure obligations do not fall within the 'relevant obligations' covered by the directors' compliance statement.

WHAT ARE THE CONSEQUENCES OF NON-COMPLIANCE?

Failure to comply with the NFR requirements is an offence, but the audit process referred to above is likely to be of considerable reassurance to directors in this area. Where the auditors were satisfied that a company's NFR disclosure complied with the 2017 Regulations, and the information disclosed is accurate, it is hard to envisage circumstances where a company or its directors could be found to be in breach of the 2017 Regulations.

WHAT STEPS SHOULD COMPANIES BE TAKING NOW?

  • Review existing policies and reports against the NFR disclosure requirements
  • Determine where existing disclosure can be cross referenced to meet the NFR requirements and identify if additional new disclosure is required For further information or to view our latest Non-Financial Reporting Requirements webinar, please contact any of the Arthur Cox contacts below.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions