Heather Humphreys (Cavan-Monaghan, Fine Gael) | Oireachtas source

I move amendment No. 1:

In page 6, to delete lines 18 to 25 and substitute the following:

“(a) section 344;

(b) section 935A;

(c) section 935B;

(d) section 935C;

(e) section 935D;

(f) section 936;

(g) section 941A;

(h) subsections (4) and (5) of section 996;

(i) subsections (7) and (8) of section 1220;

(j) subsections (3) and (4) of section 1277;

(k) section 1441;

(l) section 1448.”.

With this group of amendments we are asked to choose how we should provide in law for the few companies which find themselves unable to meet the deadlines for transparency obligations. These are important obligations that come with the privilege of limited liability. They provide that an annual return and financial statement must be filed with the Companies Registration Office, CRO. The approach I propose in amendments Nos. 1, 3 and 6 seeks to help companies avoid late filing in the first place. After all, companies which file on time face no late filing fees or applications to court for more time, and keep any entitlement to the audit exemption. It also means the financial information provided is relatively up to date and therefore has the benefit of being useful to all companies.

Deputies Kelleher and Quinlivan have both tabled amendments proposing that we continue to permit companies which are late to apply to the District Court for extra time. That approach only benefits a few companies and undermines the protection that transparency brings for all, but I will return to their amendments shortly.

It is important to remember the purpose of asking companies to file on time. This is done because public filing by each company is an essential protection for all other companies, suppliers and employees who rely on meaningful financial information. The law currently allows up to 11 months after the end of a financial year for public disclosures. This is not onerous, especially when the recent simplifications that have been introduced are considered. Any further delay in publishing this information means that it becomes less useful for anyone trying to assess whether a company can meet its financial obligations, that is, pay its bills and wages owed.

My amendments will streamline the process for filing annual returns and financial statements with the CRO. We have excellent levels of compliance - approximately 95% - but we can still improve. My amendments seek to bring practical and real time saving benefits to all companies. The amendments retain the full period currently allowed for filing but remove one interim step so that the annual return and the financial statements may be filed in a single step. I hope that the amendments proposed will be supported by the House.

We have a choice between amendment No. 3, which is an integral part of my approach, and amendment No. 4 in the names of Deputies Kelleher and Quinlivan. Due to the way in which the amendments are structured, we cannot have both. Amendment No. 4 represents a backwards step. I accept the spirit in which both Deputies have tabled the amendment, and that they are motivated to act on behalf of the few small companies which are unable, for genuine reasons, to meet filing deadlines. I can see the point they are making, and I have received representations from local accountants on this matter. That is why I have tabled amendments to help those small companies avoid being in that situation in the first place. However, I do not agree that going to court is the solution.

The provision the Deputies are seeking to maintain only came into operation in 2015, and experience has shown that it is not appropriate as it risks undermining transparency and can be used to avoid proper disclosure. Last year, just over 1,000 companies were granted an extension of time by the courts. That may not seem like many companies, but each one of those is likely to have a network of suppliers, employees and other creditors. The purpose of filing annual returns and financial statements in the first place is so that those suppliers, employees and other creditors can access that information. Each time a company goes to court for an extension of time, the result is that its financial statements may not be publically available for as much as two years after the end of a financial year. This renders the information almost useless to third parties. Clearly this undermines the protection that transparency is intended to give to creditors and employees. In effect, amendment No. 4 rewards the few companies that fail to meet deadlines at the expense of the vast majority of companies that comply with the law every year.

I am advised by my officials that the experience of the CRO is that a number of companies are persistently late. These companies do not face a once-off, genuine circumstance we can all understand, but rather are repeat offenders. They are happy to work the system by paying the late filing fees and applying to the courts to withhold information. It is not right that some companies can deliberately abuse the system in that way. As legislators, we have made several changes over the past few years that make filing and financial reporting obligations easier and simpler.

We have extended the audit exemption to more companies. It is only correct that we also consider the rights and the interests of others that rely on timely and meaningful disclosure. For this reason I have reservations about the amendments proposed by Deputies Kelleher and Quinlivan, but I am happy to listen to their arguments. With the Leas-Cheann Comhairle's permission, I would like the opportunity to reply to those when we come to amendments Nos. 3 and 4.

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