In this short legal update, we look at how The Companies (Accounting) Act 2017 has sought to address the scope of Unlimited Companies, both domestic and foreign, as well as its creation of the new “micro-company”
The Companies (Accounting) Act 2017 (the “2017 Act”) was signed into law on May 17th 2017 of this year, and generally took effect from 9 June 2017, with some exemptions.
The main purpose of the Act was to transpose the EU Accounting Directive 2013/34/EU (the “Accounting Directive”) into Irish law, amending the Companies Act 2014 (the “Companies Act”) to give effect to the provisions in the Accounting Directive relating to the statutory financial statements and related reports of companies. Among other things, the 2017 has sought to address certain anomalies which were recognised in the Companies Act. This is the first amendment to the Companies Act since it came into force in 2015.
Our update is split into the following sections:
The 2017 Act introduced a new category of company; the “MicroCompany”. Being classified as a MicroCompany entitles that company to certain accounting exemptions which will relieve the administrative burden of incorporation on small companies.
In order to avail of these MicroCompany exemptions, a company must satisfy any two of the three requirements, being:
Where two of these requirements are met, a micro company may avail of certain accounting reliefs under Section 51 of the 2017 Act. Micro companies may file minimal form financial statements, they are not required to disclose Directors’ remuneration and are not obliged to prepare or file a Directors’ report.
Certain companies are excluded from availing of the Micro-Company exemption include holding companies which prepare group financial statements and investment undertakings.
alters the size requirements for a company to qualify as a Small, Medium or Large Company. The below table sets out these new limits in full:
The 2017 Act removes the exemption available to medium sized companies from filing abridged financial statements. The exemption on grounds of size will apply to small and micro companies only. As a result, medium sized companies (and larger companies) must file full financial statements.
Another important amendment of the 2017 Act is that the scope for unlimited companies to avoid filing financial statements has been reduced significantly.
This has been introduced under Section 78 of the 2017 Act in order to capture unlimited companies which have effectively been able to achieve limited liability for their ultimate shareholders through the use of group structures while benefitting from the exemption from the obligation to file financial statements.
Under the new legislation, if an unlimited company has no ultimate protection of limited liability in its group structure, it will still be possible for that company to avail of the exemption from filing financial statements.
However, there are now certain types of unlimited companies that will be required to file financial statements under the new Act:
With regards to numbers 1 and 3 above, these filing requirements applied for the financial years commencing on or after the 1 January 2017.
However, companies coming within the ambit of number 2 above will only be obliged to file financial statements for years commencing on or after the 1 January 2022.
Section 27 of the 2017 Act alters the law with regard to the disclosure requirements where money is paid to a third party for the services of a director.
If any money is paid to, received by, or receivable by a third party in consideration for the services of any person acting as a Director of the company, including any of its subsidiaries or otherwise in connection with the management of the companies or its subsidiaries, then this payment must be disclosed. The new Micro-Company is exempt from this requirement.
Finally, various sections of the 2017 Act place new requirements on foreign incorporated limited liability companies with a branch established in Ireland.
Such companies are now obliged to register certain details at the Companies Registration Office and to file accounts on an annual basis.
The Act also extends these obligations to unlimited foreign incorporated bodies that are subsidiaries of limited liability body corporates.
Should you have any queries in relation to the Companies (Accounting) Act 2017 or any other Corporate or Banking Law queries, please get in touch with