Address by Mr Michael Ahern TD, Minister for Trade and Commerce to the Institute of Chartered Secretaries and Administrators Annual Conference

at 9am in Jury’s Hotel, Ballsbridge

Good morning ladies and gentlemen

I am delighted to be here this morning to welcome you to the Institute of Chartered Secretaries and Administrators Annual Conference.

As I am sure you will all agree, the company secretary is the linchpin of a company and very often its chief compliance officer. This is despite the fact that the responsibilities of company secretaries are stated only obliquely in statute law, arguably with even less clarity than those of directors. Historically, the secretary has been expected to be the principal administrative officer of the company insofar as administration concerns, compliance with the requirements to maintain registers and the requirements to file documents with the Registrar under the Companies Acts.

It is surprising, to say the least, that until the insertion of the new Section 383 of the Companies Act 1963 by Section 100 of the Company Law Enforcement Act 2001, there was no statement in the Companies Acts as to what the secretary’s duties might be. However, the importance of the company secretary has been recognised in reviews of corporate governance such as Cadbury, and I am particularly pleased that we are recognising the role in the Company Law Consolidation and Reform Bill. The proposed Heads which are set out for inspection and comment on the website of the Company Law Review Group provide that:

• The duties and responsibilities of the secretary of the company will, without derogating from the secretary's statutory and other legal duties and responsibilities, be such duties and responsibilities as are delegated to the secretary by the board of directors.
• The directors will, in their appointment of a secretary, who may be one of their number, have a duty to ensure that the person appointed as secretary has the suitable skills to maintain (or to procure the maintenance of) the records (other than accounting records) required to be kept under the Companies Acts.
• Upon notification of appointment as a secretary on the prescribed form, the secretary’s signature should appear below a statement: “I/We acknowledge that, as a secretary, I/we have legal duties and obligations imposed by the Companies Acts, other statutes and at common law.

I am pleased also that the ICSA played its part, as a key stakeholder on the Company Law Review Group, in drafting those provisions and I would like to express my appreciation for the contribution made by successive nominees of the ICSA to the CLRG since its inception. Your contributions have always been informed and measured and your nominees have always impressed by their expertise, application and pro bono mindset.

A second theme I want to touch on today is regulatory reform. Regulations and regulatory bodies exist to support and protect the people and economy of Ireland, as well as the specific industries or activities they regulate. Regulation and regulatory activity should, in a balanced way, promote economic and jobs growth, social development and environmental well-being.

Regulation by its nature sometimes involves making businesses, other organisations, and individuals do specified things – or restrict them from doing specified things – because the Oireachtas has determined that the best interests of Irish society as a whole require it. Consequently, there are occasions when regulatory bodies have a statutory obligation to say “no” and the businesses or individuals at the receiving end are not pleased. In other words, just because business does not like a particular regulation or set of regulations does not mean that those regulations, are, of themselves, bad. Good regulation is regulation, which, in achieving its goal, brings the greatest net benefit to the community.

For this overall net benefit requirement to be satisfied, regulation needs to meet three tests:

• regulation must be the most effective way of addressing an identified problem;
• it must impose the minimum burden on those regulated; and
• cause the minimum amount of collateral damage to others.

Moreover, the basis on which conclusions to these tests were reached must be transparent.

Regulatory Impact Analysis (RIA) is the single most important tool for achieving good regulation. RIA involves the systematic weighing of alternatives and broad consultation processes to allow the desirability of regulatory decisions to be assessed under the discipline of transparency and accountability. On 21 June 2005 the Government decided to mainstream a model of Regulatory Impact Analysis (RIA) across all Government Departments and Offices to be applied to all proposals for regulatory change, whether these are domestic or EU legislation.

This should mean that in the future, the three tests I referred to will be applied to regulatory proposals systematically, in order to implement the principles of better regulation. That still leaves a significant body of law and administrative decisions and practices, which have not been tested in this systematic way.

We have decided to deal with that issue by setting up a standing dialogue with business through the establishment of the independent Business Regulation Forum (BRF) as announced by the Taoiseach on 11 July 2005.

The BRF will examine specific existing codes, or sectoral areas of regulation, on a problem solving basis. Outcomes of such review could include recommendations to repeal or amend regulations, to clarify obligations and define required standards. The BRF will also be able to consider, with regard to specific codes or sectors, and on the basis of evidence presented and analysed, if particular regulations are inconsistent, disproportionate or duplicatory.

The intention is that both components in membership of the BRF, public sector and business will have responsibility for educating their respective communities about mutual responsibilities for achieving their shared vision and goals of better regulation.

What we expect to gain from raising our game on regulatory reform is to have better, more focused regulatory mechanisms, which do not always rely on classic ‘black letter’ law, for example, but might rely on a market mechanism where this offered the best cost-benefit outcome. As people in the forefront of business life I am sure you will welcome the enhanced emphasis on necessity and proportionality in shaping our regulatory regimes.

Finally, I want to talk to you about the Directors’ Compliance Statement (DCS) because the ICSA has been a key participant in the recently completed review of the DCS carried out by the Company Law Review Group.

The DCS is set out in Section 45 of the Companies (Auditing and Accounting) Act 2003. The DCS requires the directors of a PLC or large private company to prepare a compliance statement setting out the company’s compliance with company law, tax law and other enactments materially affecting the financial statements. The company is required to report on its procedures for ensuring compliance and to review its statement annually. Though enacted, 45/2003 has not been commenced to allow for full dialogue with industry and development of guidance on compliance by the Office of the Director of Corporate Enforcement (ODCE).

The Directors' Compliance Statement was conceived 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. For that reason the Government undertook 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.

To that end I 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. I believe the Review Group, which is composed of business, regulatory and professional interests, is 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. The Review Group was asked for its views on the proportionality, efficacy and appropriateness of the DCS.

I am aware that the Review Group undertook a comprehensive risk and regulatory impact analysis over a 10 week period before finalising its recommendations. The Review Group considered the scope, content, degree of prescription, verification and timing of the DCS as envisaged by 45/2003, conducted a cost/benefit analysis and looked at the very important issue of national competitiveness. The process of reviewing the DCS was also assisted by a wide consultation exercise and the Review Group benefited from the views of protagonists of and antagonists to the DCS obligation.

The Review Group has now made its recommendations to Government and a decision on the future shape of the DCS is imminent. The whole commitment of the Government to the review reflects our concern to have good and appropriate legislation in place, and as part of the means of achieving that we are committed to dialogue with the relevant shareholders.

I would nominate the DCS review as an effective way to achieve good regulation and good governance. Since the CLRG reported to me I have taken the opportunity to consider the package of measures they propose in detail, and I have made proposals to government in a way that will give us the corporate governance standard of a DCS without affecting costs significantly. I expect the Government to take a decision on a remodelled version of the DCS in the near future.

Thank you. Before I leave may I wish you all a fruitful and informative day.

ENDS

TC 179