Pádraig Mac Lochlainn (Sinn Fein) | Oireachtas source

This legislation is admittedly long and dense but it is welcome because it brings Irish law in line with an EU directive and that is to be supported. The Bill will allow for the use in Ireland of sections of the financial reporting standards applicable in the UK for small companies and the financial reporting standards applicable to the micro entity regimes by micro companies.

Under section 15, it is proposed that the thresholds for small and medium companies in Ireland are set at the maximum permitted under the EU directive. This would mean micro companies would include companies which fulfil two of the following criteria - have a balance sheet of under €350,000, a net turnover of less than €700,000 and an average of fewer than ten employees. This is good for both micro companies and companies which would not previously have been considered medium sized or which now fall under the small category and therefore have access to a range of benefits within this Bill. This element of the Bill also represents a shift in our thinking towards business. We are moving from a top down approach where larger companies were considered the norm to a "think small first" approach where smaller companies are the starting point. When we think of promoting local business and entrepreneurship in Ireland, the small first approach will aid the development of many start-up businesses, as well as looking after one of the biggest elements of our economy.

Small and medium enterprises in Ireland represent almost half of Irish corporate entities, employ more than two thirds of all Irish workers and comprise more than half of all Irish private sector turnover.With this Bill, we see a move within our philosophy away from the preoccupation with taking care of the big multinationals towards looking after SMEs in Ireland. I also welcome in particular the provisions in chapter 10 of this Bill which will bring in several measures that will increase transparency around companies that are involved in extractive businesses. These particular provisions were originally agreed during the Irish presidency of the Council of the EU in April 2013 and I think that is something we should be proud of. At a basic level, these provisions ensure a large company or public interest entity involved in an extractive industry or in the logging of primary forests must prepare and make available to the public an annual report on specified payments to governments.

The reason this particular element of the Bill is so welcome is because of something known as the “resource curse”. The resource curse phenomenon is when countries rich in natural resources have tended not to perform well economically, for example, many countries in Africa. One possible explanation of this is because of low levels of transparency and accountability and high levels of corruption. This element of the Bill will attempt to ensure that, at the very least, large extractive companies are not conducting business in a way that would further the so-called curse of rich resources in developing nations.

When Sinn Féin talks about equality, we not only mean on the island of Ireland but also overseas, and any legislation that aids the development of nations and tackles corruption and exploitation by large companies is to be commended and welcomed. On this theme of activities across the seas, the Bill is also in line with European policy, and this policy will be good for Europe. When conducting its impact assessment, the European Commission estimated that the implementation of the accounting directive, which this Bill falls under, will give rise to burden reduction savings of up to €1.7 billion per year across the EU. In this very tumultuous time for the EU, I think Ireland should be proud to play a positive role towards improving the EU’s financial standing by doing our part to enact this directive through the Bill.

While this Bill has many positives, I have a couple of reservations that also need to be stated. The first is that I am concerned the proposed legislation will allow small companies to give fewer note disclosures in their financial statements. "Notes", of course, refer to the additional explanatory detail supplied with a company’s statutory financial statements to provide a comprehensive overview of its financial health. For example, notes can include such things as information on company debt, staffing, subsidiary undertakings, company share interests and directors’ remuneration. While I understand there is a balancing act between, on the one hand, the time and resources that smaller companies currently give to accounting and, on the other, the need for transparency, I would have a concern this balance is not struck within the Bill. Reducing the level of notes required when providing financial statements from approximately 31 to the mandatory level of eight, plus five optional notes, is quite a leap. Can we ensure transparency will not be compromised to an unsatisfactory degree in lieu of relieving the administrative burden on smaller companies?

While Sinn Féin sympathises with the need to reduce accounting time for smaller businesses, we are also concerned with the dumbing down, as it were, of the requirement for a statutory audit. Under sections 41, 43 and 45, micro companies will be exempt from preparing a directors’ report and, therefore, will be exempt from having the opinion of a statutory auditor on the consistency of the directors’ report within the financial statement. Under sections 56 and 58 to 61, inclusive, it is my understanding that both micro companies and small companies will be exempt from audits. If existing medium size companies will now be considered "small" under this new legislation, that means many more companies than we might first imagine will be exempt from such audits.

As I have said, transparency within business is of paramount importance, and there is a challenge within this Bill to ensure continued transparency for all businesses, regardless of their size. I would have a concern that a lack of audits and a huge decrease in notes within accounts will decrease transparency within companies, particularly those medium companies which will now be considered small within this legislation.

Overall, Sinn Féin welcomes this long overdue Bill which will have positive effects on Irish business, especially smaller businesses. We also welcome the positive impact the Bill will have on some developing countries. However, we do have reservations regarding transparency and accountability in the context of this Bill and we think that should be noted.