The 2006 EU Directive on Company Reporting was signed into law in Ireland on 18 November 2009. The changes introduced by the implementing Regulations include:
- “Fair Value” accounting is now permitted for a larger category of financial instruments for all companies.
- New disclosure requirements for all companies regarding:
- off-balance sheet arrangements; and
- related party transactions.
Corporate Governance Statement
The Regulations also require all companies with securities traded on a “regulated market” (in Ireland, the Official List of the ISE) to prepare an annual corporate governance statement. The Regulations provide that where a company has decided not to comply with any corporate governance code, the company must explain the reasons for its decision.
In practice, this new requirement will have little impact on traditional trading public limited companies as they are already subject to similar requirements under the Listing Rules and the Combined Code on Corporate Governance. However, this requirement is new with regard to fund companies whose shares are admitted to trading on the ISE.
Compliance for Fund Companies
The ISE has reviewed the UCITS/Non UCITS corporate governance requirements in relation to fund companies and has confirmed its opinion that a board of directors could reasonably decide not to apply the provisions of a corporate governance code because it has instead complied with the requirements of the ISE listing rules and the relevant Financial Regulator requirements. The ISE has discussed this view with the Dept of Enterprise, Trade and Employment (“DETE”), and while they believe it is ultimately a matter for the directors to determine, the DETE concurred that such a view could reasonably be taken on the issue. The Irish Funds Industry Association is preparing a standard form of wording that could be included in annual accounts where a fund company has decided not to prepare a corporate governance statement.
The Regulations do not contain any transitional provisions and so became effective immediately. However, some practitioners are of the view that financial statements for year ends prior to the enactment of the legislation (i.e. 18 November 2009) which were or are to be signed after the enactment of the legislation would not have to include a corporate governance statement.
