Oireachtas Joint and Select Committees
Thursday, 12 December 2019
Select Committee on Finance, Public Expenditure and Reform, and Taoiseach
Investment Limited Partnerships (Amendment) Bill 2019: Committee Stage
I wish to put on the record of the committee that amendments have not yet been agreed upon by Cabinet and prepared, but there will be amendments in the Seanad. The Bill will return to Dáil Éireann to discuss the subsequent amendments further to the conversation on what we pass today.
I am hopeful that we can get through Committee Stage today and get Report Stage done in the Dáil next week. We should get to the Seanad in January and I anticipate that the Seanad amendments will be back in the Dáil before the end of January so the legislation can be concluded. This has dragged on for three and a half years and I want to put it to bed.
We will facilitate the passage of this legislation and its speedy scrutiny. However we have expressed some concerns on the legislation. I would like to tease out with the Minister how the scope of this legislation deals with some of the areas of concern around these fund structures. We know that Irish funds have lobbied heavily for this legislation. They expected it to be progressed before now. It is now going through the Dáil. In my view there are more pressing matters we could be dealing with, but this is an issue that needs to be dealt with.
Investment limited partnerships, ILPs, are tax restructures in which multiple partners are able to carry out activity with limited liability. That is due to the fact that the individual partners are all taxable in their own jurisdictions, some of which are low-tax jurisdictions. Unlike normal companies, however, they do not have to publish financial accounts or statements. There has been a huge expansion of ILPs in this State since 2014. The number has grown from 1,000 to 3,000. The Companies Registration Office has been quoted as saying this is abnormal. At present, these partnerships do not register a principal place of business in Ireland, which is quite unique. They do not make annual returns or file financial statements. They are not covered by the European anti-money laundering directives that require disclosure of the real ownership behind structures. That is the issue that the Minister of State has said he will address through amendments in the Seanad, which would be welcome. Is there scope within this legislation to deal with other issues about these partnerships that concern me and others? Has the need to register a principal place of business in Ireland been catered for in the legislation, or the need to make annual returns or file financial statements? Can the Minister of State clarify that the aim of the amendments he is bringing forward is to ensure that these partnerships are subject to the European anti-money laundering directives by disclosing their real ownership?
The Deputy is talking about the Limited Partnerships Act 1907. That is part of the package that has increased the number of higher equity funds in Ireland. This act is not changing anything about that. That legislation is used for purposes other than alternative investments, and the change proposed by the industry would not be limited to collective investment schemes. They are not being taken on board. The 1907 Act's provisions remain in place. That falls under the remit of the Minister for Business, Enterprise and Innovation, Deputy Heather Humphreys. Her Department recently ran a consultation on the Act, which closed in March 2019. Since then the Department has been considering the responses to the public consultation and working on developing a proposed policy response to the 1907 Act, with a view to submitting them to Government in the next legislative session.
Regarding beneficial ownership, I note that the anti-money laundering directive does not directly require the establishment of beneficial ownership registers for structures in an ILP. We are adding that requirement. This is a higher threshold of analysis and scrutiny, which I believe is important to the development and establishment of a better system for ILPs in Ireland. It will not be possible to lay the charge one sometimes hears, that these are not transparent enough, at the feet of this Oireachtas because the amendments on beneficial ownership that will come before the Seanad will be stronger than what is currently required.
Very well. That deals with just one of the issues I have raised. Will this legislation cater for the requirement to register a principal place of residence in Ireland and the need to make annual returns and financial statements? There is a huge dearth of transparency around these funds. We have raised these structures on numerous occasions and we welcome the provisions on beneficial ownership. However, I have also raised three other areas; the place of business in Ireland, the annual returns and the financial statements. Could the Minister of State elaborate on those three areas?
Does the Central Bank require annual financial statements? A company has to make an annual return to the Companies Registration Office and has to make financial statements. ILPs are not covered by that.
Is there a reason they are not covered by that? Why, in this legislation, are we not ensuring that they behalf like any other company?
I will read out the section in relation to the annual report and the duty of the auditor.
The investment shall cause to be published and filed with the Central Bank of Ireland an annual report the contents of which shall be prescribed by the bank. While it is not a company, it must provide audited reports to the regulator annually, which is in the Act.
If a company produces its annual report, it is available to the public to see. There is transparency in relation to it.
The issue here is transparency. Is there a reason we are not asking them to file annual reports with the Companies Registration Office like any other company?
The general partner is obliged to file. The people who invest in the fund invest. It is the general partner who must file. That is filed with the Companies Registration Office, CRO, from the general partner.
This is an area that I may revisit. I merely wanted to tease it out on Committee Stage. We may look at this in greater detail on Report Stage by proposing an amendment. At this point, I am happy enough to proceed.