Minister for Trade and Commerce, Michael Ahern T.D., refers Directors' Compliance Statement to Company Law Review Group

The Minister for Trade and Commerce, Michael Ahern, T.D., today (Thursday 21st April 2005) confirmed his decision to refer the requirements set out in the Directors' Compliance Statement to the Company Law Review Group (CLRG) for consideration and review, asking the Review Group to report back to him by 31st July 2005.

The Directors' Compliance Statement is an obligation on company directors to report annually to shareholders on the company's compliance with company law, tax law and on other enactments that materially affect the company's financial statements. It applies to public companies (plcs) and to large private companies whose balance sheet total and turnover exceed specified amounts. It was introduced to deal with what the Comptroller and Auditor General described in 1999 as a pervasive evasion of DIRT (Deposit Interest Retention Tax). In subsequent investigations a number of company directors pleaded ignorance of what was going on as a mitigating circumstance.

Minister Ahern said: "It is not responsible or acceptable corporate governance that such a business culture should exist or that ignorance could be used to justify failure in fiduciary duties and the committing of offences under the Companies Acts and the other statutes that regulate business."

"From the outset, I have regarded the Directors' Compliance Statement as a very effective mechanism for achieving corporate compliance. However, as the Companies Acts are the primary means of regulating business activity in the State it is very important that the legal provisions in these Acts are appropriate and proportionate. There has been a significant amount of concern expressed about the potential cost and competitiveness issues which the Directors' Compliance Statement may give rise to. I feel it is an appropriate response to look at these concerns thoroughly so that we get the balance right between the encouragement of business activity and the deterrence of sharp practice and downright illegality," Minister Ahern said.

"I have accordingly asked the Company Law Review Group under the esteemed chairmanship of Dr. Tom Courtney to consider the optimal framework for and content of the Directors' Compliance Statement and I wish to thank the CLRG for agreeing to take on this task. The Review Group, which is composed of business, regulatory and professional interests, is I believe, the most suitable body to conduct such a review in the light of its expertise, its representative composition and its statutory advisory role on the reform and modernisation of company law," Minister Ahern added

"I also asked the Director of Corporate Enforcement to produce guidance to assist operators to comply with the requirements. It was essentially during this further process, that parties for which this had a relevance voiced concerns", Minister Ahern concluded.

Terms of Reference applying to referral of Directors' Compliance Statement to the Company Law Review Group for its consideration

The Company Law Review Group is asked to examine and report to the Minister for Trade and Commerce by end July, 2005 its views on the proportionality, efficacy and appropriateness of the Director's Compliance Statement as set out in section 45 of the Companies (Auditing and Accounting) Act 2003, having regard to the following factors:

Ensuring the integrity of the corporation's accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.

The scope of application and the requirements of the Director's Compliance Statement;

Potential costs issues;

Potential competitiveness issues; and

Potential implementation issues.

In making its report the Review Group is requested to ensure that these are consistent with the goal on `Making markets and regulation work better' set out in the Strategy Statement of the Department of Enterprise, Trade and Employment, i.e. to ensure that regulation is fair, balanced and effectively implemented in order to encourage commerce, ensure competitiveness, secure confidence in business and secure the welfare of citizens.

In addressing this issue the Review Group is asked to conduct its analysis and structure its report consistent with the model of regulatory impact analysis developed by the Working Group on Regulatory Impact Analysis.

ENDS/TC149