Minister Michael Ahern Announces Reform of Directors’ Compliance Statement

The Minister for Trade and Commerce, Mr. Michael Ahern T.D., today (Thursday 1^st December 2005) announced that the Government has agreed to take forward in legislation the proposal for a new model of the Directors’ Compliance Statement [DCS], as recommended by the Company Law Review Group. The legislation will substantially amend the terms of the DCS as currently provided for in Section 45 of the Companies (Auditing and Accounting) Act 2003 [45/2003].

Announcing the new proposals Minister Ahern said: “The new model of the Directors’ Compliance Statement represents an exemplary approach to regulation. It is the product of a rigorous Regulatory Impact Analysis (detailed in the CLRG report), was conducted on the basis of extensive consultation and was supported by the large majority of stakeholders in good corporate governance. I believe the introduction of this new legislation will bring certainty to this area and is a proportionate form of regulation.”

The new model for the DCS requires from the directors of PLCs and large private companies a statement of compliance with regard to all offences in tax law and indictable offences in company law, places an obligation on the directors of companies within the scope of the DCS to acknowledge their responsibilities with regard to these codes, requires the directors to adopt a compliance policy statement and have arrangements in place for securing compliance, subject to a ‘comply or explain’ approach.

The new model for the DCS is proposed by the Company Law Review Group (CLRG) in its Report on the Directors’ Compliance Statement published today. It derives from the intensive review by the CLRG which examined the proportionality, efficacy and appropriateness of 45/2003. It differs from existing 45/2003 in restricting and clarifying the obligations on which directors must report, in being less prescriptive about the methods a company uses to review its compliance procedures, and in not requiring review of the compliance statement by an external auditor.

Minister Ahern expressed his appreciation and that of the Government to the CLRG and its Chairman, Dr. Thomas B. Courtney, for their detailed and robust impact analysis of 45/2003 and for devising a proposal for an alternative compliance statement which sets a stringent corporate governance test for the businesses concerned without imposing additional costs.

The proposed new model of the Directors’ Compliance Statement will be given effect in forthcoming legislation and will be an integral feature of the systemic reform and simplification of the company law code.

Link to CLRG Report: http://www.djei.ie/commerce/companylawreview/clrgreport.htm

ENDS/TC195