One major effect of the Bill is that, if enacted, it will abolish “non-filing structures” as they are currently known.
Non filing structures
Under existing law, certain unlimited companies are not required to file financial statements in the CRO. This applies to unlimited companies who have at least one member who is either an individual or an unlimited company or partnership formed in a non-EEA country (typically the Isle of Man, Jersey or the Cayman Islands, but also many other jurisdictions). The exemption from filing financial statements applies even where the top company in the structure is a limited company – thus providing the security of limited liability for the shareholders of the top company, without the requirement to file financial statements. All other unlimited companies (defined as designated ULCs) are required to file financial statements.
What will change?
Section 76 of the Bill amends Section 1274 of the Companies Act 2014 to provide for a revised and expanded definition of designated ULC and is designed to eliminate the existing non-filing of accounts exemption. The new definition is very broad and includes for example the type of structure outlined above. This change is driven by the Directive which provides that companies should not be able to avoid publishing financial statements by creating a multi-layered group structure.
When will this happen?
It is not clear, the Directive was due to be transposed into Irish law before 20 July 2015, but that obviously did not happen. Given the delay, it is expected that the Bill will be enacted as soon as possible, and it is likely that its provisions will apply to financial years commencing in 2017.
What next for directors and shareholders of unlimited companies?
Directors and shareholders of unlimited companies with a non-filing structure should consider the impact of the requirement to file financial statements. Financial statements could include information which, if in the public domain, could impact both commercially on the business of the company and also, in the era of tiger kidnappings, on the personal safety of the ultimate shareholders. Companies should take legal advice to address these issues.