Companies (Accounting) Act 2017

The Companies (Accounting) Act 2017 (“the 2017 Act”) will be commenced on 9 June 2017. The main goal of this Act is to transpose EU Directive 2013/34/EU (“the Accounting Directive”). It largely concerns the financial accounting requirements within Part 6 of the Companies Act (“the 2014 Act”); however, there are a number of new features, as outlined below. As it is an amendment act its provisions amend those of the 2014 Act. While the majority of the 2017 Act contains substantive changes to Part 6 of the 2014 Act, it also addresses a number of anomalies, issues and uncertainties within the 2014 Act. It’s a large Act with over 100 sections so the below is an overview of the main features of this legislation.

1. Company Categories and Thresholds

The 2017 Act expands the existing category of companies to include a new “micro” company. The 2017 Act amends the financial thresholds for the existing small, medium and large companies, reflected below.

	Micro	Small	Medium
Net Turnover	€700,000	€12 million	€40 million
Balance Sheet Total	€350,000	€6 million	€20 million
Average Employees	10	50	25

For a company to qualify as one of the above categories it must not exceed 2 out of the 3 thresholds. For example, if a company exceeded 2 of the 3 thresholds within the medium category it would be categorised as a large company. Medium companies will no longer be able to submit abridged financial statements. The small and micro categories are unavailable to public limited companies or public unlimited companies.

2. Micro Companies

A company that qualifies as a micro company has different requirements to that of a small, medium or large company, as set out below:

• Micro companies are not obliged to prepare or file a director’s report;
• Micro companies are exempt from the requirement to disclose director’s remuneration;
• Micro companies are exempt from some of the required disclosures in sections 305 to 312 of the 2014 Act, which include the requirements to disclose a director’s material interest in other transactions and arrangements.

3. Non-filing Structures

The 2014 Act enabled unlimited companies to avoid publicly filing their accounts if they were owned by a limited holding company. Under the 2017 Act any Irish registered unlimited company must file its accounts if it has a direct or indirect limited holding company.

4. Expanded EEA/non-EEA Company Definition

Where the 2014 Act defined an “external company” as an EEA or non-EEA company, the 2017 Act contains an expanded definition of these two concepts. The new definition includes both bodies corporate and undertakings whose members’ liability is unlimited, in relation to both EEA and non-EEA companies, including subsidiary undertakings of bodies corporate. This is relevant in that it expands the types of non-Irish registered companies or undertakings which must file the relevant documents with the CRO when seeking to establish a branch in Ireland. This will lead to a greater number of companies complying with the requirements within Part 21 of the 2014 Act.

5. Unlimited Company Names

Previously under s 1237(5) of the 2014 Act an unlimited company may avoid the requirement to have its name end with ‘Unlimited Company’ (UC) or ‘Cuideachta Neamhtheoranta’ (CN) by way of ministerial declaration. This exemption has now been repealed and all unlimited companies’ names must contain either of the above suffixes.

6. Debt Securities

After the commencement of the 2014 Act there was uncertainty over the validity of debt securities issued prior to its commencement in relation to private companies which converted to LTDs, pursuant to the 2014 Act. The 2017 Act addresses this by providing that any restrictions on LTDs having such securities contained within the 2014 Act will only apply to securities issued after 1 June 2015, the date of commencement.

7. Definition of ‘Credit Institutions’

The 2014 Act prevented credit institutions from modelling and structuring themselves as LTDs. A ‘credit institution’ was broadly defined in section 275(1)(c) as “a company engaged in the business of accepting deposits or other repayable funds or granting credit for its own account”. This definition was open to interpretations which would prevent companies engaged in intra-group lending from modelling themselves as LTDs. The 2017 Act has narrowed this definition to “a company engaged in the business of accepting deposits or other repayable funds from the public and granting credit for its own account”.

8. Section 72 Merger Relief

Under section 72 of the 2014 Act, any premium on at least 90% of another company’s issued share capital will be exempt from the general rule that that premium be transferred into a designated share premium account. This relief was previously only available to Irish companies. Under the 2017 Act the definition of ‘company’ was broadened to provide this relief to all bodies corporate, including foreign companies.