Fergus O'Dowd (Louth, Fine Gael)

I move: "That the Bill be now read a Second Time."

Tá mé ag tógaint an Bhille seo thar cheann an Aire Post, Fiontar agus Nuálaíochta, an Teachta Richard Bruton. I thank the Deputies for facilitating the debate on this urgent issue.

The Bill, which has already passed all Stages in the Seanad, is compact and focused in nature and proposes a small number of changes to an existing company law measure. The Bill is proposed in the interests of maintaining a dynamic and flexible operating environment for the commercial enterprises in question. To ensure its continued relevance, legislation must be regularly appraised and adjusted as necessary. Company law meets these criteria for relevance, and can take pride in its spirit and tradition of responsiveness to continuously evolving corporate circumstances. The body of company law at this time comprises some 15 Companies Acts and it is not standing still. The Department of Jobs, Enterprise and Innovation is currently progressing a major legislative project on the reform and consolidation of company law from the seminal 1963 Act onwards. I will address this later in my contribution.

The Bill amends those provisions of the Companies (Miscellaneous Provisions) Act 2009 which permit the use of US accounting standards - referred to as US GAAP - in the preparation of the accounts of the category of company specified there, and which allow for the prescription of the use of other internationally recognised accounting standards. The Bill extends both the timescales relating to the availability for use of US accounting standards and the period for which an individual company can avail of this provision without changing the eligibility criteria. It also correspondingly extends the periods in respect of the provision in that Act for prescription of other internationally recognised accounting standards also based on the 2009 Act.

The general context in which the proposal can be viewed is that of the Government's policy of stimulation and facilitation of foreign direct investment. FDI continues to be a key element of our economic regeneration strategy. The statistical data testify to its vital contribution to the economy, where it accounts for a total of 250,000 jobs which equates to one in every seven of our people at work. This performance is holding up despite the general international economic downturn and the immediate outlook for Ireland's foreign investment portfolio is positive. Up to the end of May, IDA Ireland had made 44 announcements in 2012 with the potential to create over 5,000 jobs. We can take encouragement from this vote of confidence in Ireland's economy, reaffirming our attraction as a foreign direct investment location. In accordance with the Government's action plan for jobs, IDA Ireland is working to target another 144 new FDI investment projects in 2012, which are expected to create 12,500 new jobs with an associated 8,750 in the wider economy, giving a total impact of 21,250 this year.

Since taking office, the Government has made a priority of addressing the major task of repairing our economy and restoring our international reputation. This has required us to take action on a variety of fronts. We are engaging with our European colleagues, the United States and many other countries to demonstrate that Ireland is squaring up to its economic difficulties, and has the intent, resolve and imagination to overcome them. The restoration of our fortunes is an incremental process to be attained by the accretion of a large number of measures which of themselves may appear small, but which, in aggregation, develop substance and significance. Accordingly, there is scope for the population as a whole to contribute, in their own way, to the process of national recovery. The part the Minister, Deputy Bruton, has played has occupied much of his time since taking office last year. I understand the Minister has undertaken eight major trade investment missions involving either IDA Ireland or Enterprise Ireland, in the course of which he met companies from one coast of the United States to the other, and from Saudi Arabia, India, China and elsewhere. The Government has seized these opportunities to promote Ireland's many inherent strengths and its strategic location as a gateway to the European market. This has generated keen interest in all aspects of what Ireland has to offer, including our skilled workforce, our pro-business environment, our tax offering, the strong base of multinationals already here and our embedded links with Europe. Ireland is open, ready and eager for business and investment, and our hope is that this will lead to further jobs being created here in the near future.

Ireland's approach to capturing FDI has undergone significant adaptation over time to achieve the optimum advantage and effect, with the result that the FDI landscape has continually undergone a transformation, scanning the horizons of enterprise focusing on and securing FDI using novel technologies, innovative business models and new markets. Ireland's economy has been the beneficiary of these agile approaches and techniques, evolving in various phases from that of a location based originally on manufacturing to a rebranding of ourselves as the "young Europeans", through to the model of the smart economy built on the dual strengths of our innovativeness and entrepreneurship. On a global scale, Ireland scores extremely well in many of the key areas of importance to investors, helping drive FDI. The IMD World Competitiveness Yearbook 2012 ranks Ireland's overall competitiveness at 20th, up from 24th last year. It also ranks Ireland first in the world for investment incentives, first for the availability of skilled labour and first for flexibility and adaptability of people. The same report also ranks Ireland second in the world for foreign investors, third for labour productivity, third for exports of commercial services and fourth for corporate tax rate on profit.

As a member of the European Union, Ireland offers international investors a stable political and economic environment and a sophisticated, well-developed corporate, legal and regulatory environment. The quality of our economic regulation is a significant factor in our competitiveness and growth. It is critical, therefore, that we have the capacity to respond to economic circumstances as they unfold in a way that is both strategic and reflective of the evolving needs of business and investors.

Those companies with a presence in Ireland and availing of the US GAAP facility under the 2009 Act provide significant employment here which the Bill should help to consolidate, with the possibility of further jobs being created, particularly in the event of an improvement of the economic situation in export markets over the coming time. These companies are involved across a range of industry sectors, including health care, technology and services. This is the broad policy context for the US GAAP measure contained in the Bill.

As I have already mentioned in outline, the Bill allows for the so called US GAAP facility and the provision for prescription of the use of other international accounting standards as provided for in the Companies (Miscellaneous Provisions) Act 2009 to be extended from the financial year ending on 31 December 2015 until 31 December 2020 with a removal of the restriction of a four-year maximum period for the use by a beneficiary company of either of the provisions. The Minister is introducing this proposal in response to a strong approach to him from a number of US multinational companies, most of which have a significant operating presence in Ireland, requesting a prolongation of the US GAAP facility provided for in the 2009 Act. High-level transatlantic initiatives have been afoot for some years to converge, or at least significantly align the International Financial Reporting Standards, known as IFRS which are used in the production of company accounts in the EU, with US GAAP accounting standards which are used in the US. This would lend greater comparability to the financial performances of listed companies in the two jurisdictions because the ingredients used to produce these financial reports were similar or practically identical.

The request that has persuaded the Minister, Deputy Bruton, to introduce this measure has a basis in delays in the process of international convergence of the US GAAP and IFRS accounting standards which is lagging behind the expectations of 2009. In addition, the 2009 Act imposed a restriction on the time period allowed for use by a beneficiary company. The current situation as regards the US Administration's attitude to this standards-convergence process or to a move to permitting this category of company to list in the US using IFRS accounting standards continues to be inconclusive. While the attitude of the US Administration on this issue is likely to clarify over time, it is difficult to predict with accuracy when this may occur.

The four-year maximum period allowed to companies to use US GAAP under the existing legislation means that a number of the companies seeking the extension would be faced with having to put measures in place, as of the present time, to provide for the move by them to preparing accounts under IFRS. Certain companies' entitlement under the 2009 Act expires at the end of this year. If these companies were to be required to take on IFRS, which is a very different set of accounting standards, a considerable lead-time would be required for the necessary groundwork to be undertaken to provide for such a transition. These companies, which are listed on US exchanges, need legal certainty now as to whether the time extension for the use of the US GAAP is being permitted. This clarity is required from a number of perspectives, including considerations of corporate risk and corporate obligations relating to the US Securities and Exchange Commission and companies' shareholders.

To deny the requested facility would entail significant costs and resource implications for the companies in question. Appropriate mechanisms would be required to be in place to provide for the preparation of accounts under IFRS, and subsequently applied in the production of the accounts of these companies. It would be particularly onerous and expensive for a company to convert to IFRS if the obligation to do so were to arise over a relatively short period. Additionally, these companies would be still required to produce accounts using US GAAP and report to the US Securities and Exchange Commission, to remain compliant in the US. This would mean these companies would be required to produce two sets of accounts, which would be costly and burdensome on them. The legislation is designed to facilitate multinational companies that have operations in Ireland to consolidate, and if possible, add to their activities here. Such developments would contribute to further economic activity by them in Ireland and provide additional valuable employment opportunities.

The legislation, therefore, provides for the extension of the use by this very specific category of companies of US GAAP as provided for in the Companies (Miscellaneous Provisions) Act 2009 until the financial year ending at the latest on 31 December 2020. The restriction on the use by the relevant parent undertaking of this facility to a maximum of four years is removed. In the interests of maintaining the flexibility provided for in the 2009 Act in this area, the Minister is extending the enabling provision for ministerial prescription of other specified internationally recognised accounting standards if such a demand arose, and it was considered appropriate to do so. This term of this extension will parallel that for US GAAP. A point of prudential significance to make is that companies will continue to be subject to Irish company law generally, including, of course, all the provisions which relate to accounts. In fact, Irish company law will override any provision of US GAAP which may be in conflict with the Companies Acts.

Allowing these companies to prepare their Irish accounts using US accounting standards for a further period of time would eliminate the significant duplication of cost and effort of preparing two sets of accounts under two different accounting standards. It will also create a bridge to span the period during which significant international developments may occur with regard to the international harmonisation of accounting standards.

I will now turn to the details of the Bill. Section 1 is the interpretation section. Section 2 provides for the extension of the use of US GAAP as provided for in the Companies (Miscellaneous Provisions) Act 2009 by certain parent undertakings which are defined in the section. This is subject to the proviso that the use of those principles in the preparation of the undertaking's accounts does not contravene any of the provisions of the Companies Acts or any regulations made thereunder. The accounts in question are the company's group accounts and the individual accounts.

As heretofore, this arrangement will be limited to a specified category of companies. In addition to existing beneficiary companies, the specified category of companies also comprises parent companies incorporating in Ireland for the first time whose securities are not traded on a regulated market in the European Economic Area, EEA, whose securities are registered with or who are subject to reporting to the US Securities and Exchange Commission and who, on the date that this Bill passes into law, have not already incurred an obligation to file their first accounts with the Registrar of Companies. The section also provides for this arrangement to apply from the financial year ending at the latest on 31 December 2015 until the financial year ending at the latest on 31 December 2020, with the four year restriction for a beneficiary company removed.

Section 3 extends the Minister's power to make regulations to prescribe other specified internationally recognised accounting standards under which specified categories of companies may prepare accounts from the financial year ending on 31 December 2015, as provided for in the 2009 Act, up to and in respect of the financial year ending on 31 December 2020 at the latest, with the four year restriction for a beneficiary company removed. The criteria applied under the 2009 Act remain. These require that any such regulations shall specify the accounting standards, which shall be internationally recognised, and generally accepted accounting principles or practices of a jurisdiction where a majority of the subsidiaries of the parent undertaking have a substantial connection or where the market is situated in which the shares of the parent undertaking are primarily admitted to trading. In preparing accounts using other internationally recognised accounting standards companies must not contravene any provision of the Companies Acts or any regulations made thereunder.

Section 4 is a standard provision and simply contains the Short Title and provides that the Bill and the Companies Acts shall be read as one.

I referred earlier to the ongoing major review and consolidation of the Companies Acts being undertaken in the Department of Jobs, Enterprise and Innovation, and I welcome this opportunity to brief Deputies on the status of this major undertaking. The Companies Bill will consolidate existing Irish company legislation dating from 1963 and introduce several reforms. It will consolidate the existing 15 Companies Acts, or 16 when the Bill currently before the House becomes law, dating from 1963, as well as other regulations and common law provisions relating to the incorporation and operation of companies, into a single Act, which is expected to comprise some 1,400 sections.

Parts 1 to 15 of the Companies Bill, which correspond to "Pillar A" of the general scheme, were published in soft copy format on the Department of Jobs, Enterprise and Innovation website in May of last year. Parts 1 to 15 contain all of the law relating to the most common company type in Ireland, the private company limited by shares. These parts comprise some 952 sections, together with six Schedules, and represent more than two-thirds of the entire Companies Bill. The decision to publish Parts 1 to 15 in May 2011 was made to afford stakeholders, including business owners, practitioners, advisers and representative bodies, an opportunity to become familiar with the proposed new legislation.

In summary, the provisions of the Bill cover the incorporation of companies, corporate governance duties of directors and secretaries, financial statements and auditors, receivers, reorganisations, examinerships, windings-up and compliance and enforcement. The provisions are brought together in a coherent structure which will facilitate business people in incorporating and operating companies on a day-to-day basis. The Bill also modernises company law to reflect modern business practice. Given that almost 90% of companies in Ireland today take the form of a private company limited by shares, the Bill sets out all of the provisions relating to that type of company in sequential Parts. In subsequent Parts the provisions for the private company limited by shares are modified for other company types such as public limited companies, PLCs, and guarantee companies.

Furthermore, to promote compliance with the law and to protect members and creditors, the Bill also sets out clearly the duties of, for example, directors, company secretaries and auditors, including corporate governance duties. The Bill also sets out the functions of the Companies Registration Office, the Office of the Director of Corporate Enforcement and the Irish Auditing and Accounting Supervisory Authority in ensuring compliance with the law and brings together the provisions relating to compliance and enforcement, such as company investigations, compliance and protective orders, disclosure orders, disqualification and restriction of directors and prosecution, offences and evidential matters. I can also confirm that drafting of the remaining Parts of the Bill - those corresponding to "Pillar B" - is at an advanced stage and the Minister hopes to be in a position to publish and introduce the Bill into the House towards the end of this year.

In conclusion, the extension of the timelines both in the US GAAP provision and in the scope to designate other internationally recognised accounting standards is a facilitative measure which signifies the Government's practical and active approach to industrial promotion and stimulating foreign direct investment. I commend the Bill to the House.

See this speech in context