Richard Bruton (Dublin North Central, Fine Gael)

I am pleased to bring the Companies (Amendment) Bill 2012 before the House and I thank Senators for facilitating the debate as an urgent issue.

This Bill proposes a small number of focused changes to company law in the interests of maintaining a dynamic and flexible operating environment particularly for US companies. This is in keeping with the spirit and tradition of responsiveness of company law to continually evolving corporate circumstances. The body of company law at this time comprises some 15 Companies Acts, and it is not standing still. My Department is currently involved with a major legislative project on the reform and consolidation of company law to which I will return later. I believe that Bill will run to 2,500 sections and will delight Senators when it comes to the House. The ambition is to make Ireland one of the best places in the world in which to establish a company.

The Bill before the House 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 a specified category of company and allow for the prescription of the use of other internationally recognised accounting standards. Without changing the eligibility criteria, 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. There was a sunset clause and a maximum period that companies could use, both of which are being amended. It also correspondingly extends the periods in respect of the provision in that Act for prescription of other internationally recognised accounting standards.

The present measure can be seen in the context of the Government's policy of encouragement and facilitation of foreign direct investment. The importance of foreign direct investment to the economy remains highly significant. FDI accounts for a total of 250,000 jobs, which is one in every seven, in Ireland. The immediate outlook for Ireland's foreign investment portfolio is exceptionally good. To date in 2012 there have been 25 investment announcements with the potential to create more than 4,000 jobs. It is encouraging to note that notwithstanding the economic downturn, Ireland continues to be an attractive location for foreign direct investment and that so many companies are prepared to undertake and announce these investments in Ireland.

FDI has a major role to play in the current situation where Ireland is in the process of emerging from a period of unprecedented financial turbulence and where critical stages in that process still lie ahead. However, there is widespread acknowledgement of and admiration for the progress we have made on this difficult recovery. This Government has been operating on a wide variety of fronts in addressing the task of repairing our economy and restoring our international reputation. 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 Ireland's fortunes is an incremental process in which we all have a role to play. It has occupied much of my time since taking office last year. For example, I have undertaken eight major trade investment missions in that time, involving either IDA Ireland or Enterprise Ireland, in the course of which I have met representatives of companies from both sides of the United States, Saudi Arabia, India and China. This has given me the opportunity to promote Ireland's many strengths and its strategic location as a gateway to the European market. There has been strong interest in all aspects of what Ireland has to offer, including our skilled workforce, our pro-business environment, our tax offering, the base of multinational companies already here, and our embedded links with Europe. Ireland is open, ready and eager for business and investment, and my hope is that this will lead to more jobs being created in Ireland in the near future.

Ireland's FDI landscape has continually undergone its own transformation, scanning the horizons of enterprise focusing on and securing FDI using novel technologies, innovative business models and new markets. Ireland has evolved from being a location based originally on manufacturing to rebranding 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 areas of importance to investors, helping drive FDI. The IMD "World Competitiveness Yearbook 2011" ranks Ireland first in the world for corporate taxes, first for business legislation for foreign investors and first for the availability of skilled labour. The same report also ranks Ireland second in the world for consumer price inflation, third for direct inward investment flows, third for availability of finance skills, fourth in the world for labour productivity and fourth for exports of commercial services. The World Bank "Doing Business Report 2011" ranks Ireland first in the eurozone for ease of doing business, while Ireland is ranked second most attractive country globally for foreign direct investment by the "NIB/FDI Intelligence Inward Investment Performance Monitor 2011".

Ireland, as a member of the European Union 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 present measure should help to consolidate, with the possibility of further jobs being created, particularly if the economic situation in export markets picks up over time. These companies are involved across a range of industry sectors, including health care, technology and services.

As mentioned earlier, the Bill allows for the 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 present proposal is a response to a strong approach to me 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 Companies (Miscellaneous Provisions) Act 2009. The request has a basis in delays in the process of international convergence of these US GAAP accounting standards with International Financial Reporting Standards, IFRS, which is lagging behind the expectations we had in 2009, as well as the restriction of the time period allowed for use by a beneficiary company of US GAAP in the 2009 Act. The present 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 it will clarify over time, it is difficult to predict with accuracy when this may be.

The four-year maximum period allowed to companies to use US GAAP under the present 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. While the companies' entitlement under the 2009 Act does not expire until 31 December 2012, a considerable lead time is required for the necessary groundwork to be undertaken to provide for taking on a very different set of accounting standards, if this is required. These companies, which are listed on US exchanges, need legal certainty now as to whether the extension of the time-related elements of the US GAAP facility is being permitted from a number of perspectives, including considerations of the corporate risk and corporate obligations requirements of the US Securities and Exchange Commission, and shareholders.

If the requested facility were not granted, significant costs and resource implications are entailed for these companies. Appropriate mechanisms would need to be in place to provide for the preparation of accounts under IFRS and subsequently applied in the production of these accounts using these standards. It would be particularly onerous and expensive for a company if the obligation to convert to IFRS were to arise over a relatively short period. Furthermore, these companies would still be required to produce accounts using US GAAP and report to the US Securities and Exchange Commission, in order to remain compliant in the US. A requirement to produce two sets of accounts would prove costly and burdensome for these companies.

The legislation is designed to facilitate multinational companies that have operations in Ireland to consolidate, and if possible, add to activities. Such developments would further contribute to economic activity in Ireland and provide valuable employment opportunities. The legislation which I am now introducing, therefore, provides for the extension of the use by this restricted category of companies of US GAAP as provided for in the Companies (Miscellaneous Provisions) Act 2009 until financial years ending at the latest on 31 December 2020.

The restriction on the use by the relevant parent undertaking of this facility to four years is removed. In the interests of maintaining the flexibility provided for in the 2009 Act, I am extending the enabling provision for ministerial prescription of other specified internationally recognised accounting standards if such a demand arose and was considered appropriate to do so. This term of this extension will parallel that for US GAAP.

A significant point 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 the 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 sets of accounting standards. It will also create a bridge to span the period during which significant international developments may occur relating to the convergence of US and international 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, SEC, 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 financial year ending at the latest on 31 December 2015 until 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 financial year ending on 31 December 2015, as provided for in the 2009 Act, up to and in respect of 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 on 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 Act and the Companies Acts shall be read as one.

I referred earlier to the ongoing major review and consolidation of the suite of Companies Acts being undertaken in my Department, and I welcome this opportunity to brief Senators on the status of this major project. The Companies Bill will consolidate existing Irish company legislation dating from 1963 and introduce several reforms. The proposed Bill 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 my Department's 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 6 Schedules, and represent over two-thirds of the entire Companies Bill. I decided to publish Parts 1 to 15 in May 2011 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 are in 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 am happy to inform Senators that drafting of the remaining Parts of the Bill - those corresponding to "Pillar B" - is at an advanced stage, and I hope to be in a position to publish and introduce the Bill into the Houses towards the end of this year.

In conclusion, the extension of the time lines 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.