Niall Collins (Limerick County, Fianna Fail)
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770. To ask the Minister for Jobs, Enterprise and Innovation the reason she put forward the amendment under section 3(1)(j) of the Companies (Accounting) Bill 2016; if this will significantly increase the regulatory burden on the pharmaceutical industry; her views on whether this is a proportionate policy measure; if she consulted with pharma companies before introducing this amendment; if not, the reason therefor; and if she will make a statement on the matter. [17644/17]

Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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The purpose of the amendment to insert a new section 3(1)(j) into the Companies (Accounting) Bill 2016 is to delete section 1237 (5) of the Companies Act 2014.

Section 1237(5) of the Companies Act 2014 gives the Minister the power to grant an unlimited company an exemption from the obligation in section 1237(1) of the same Act, to end the name of the company with “unlimited company”, “cuideachta neamhtheoranta”, “u.c.” or “uc”.

Before the enactment of the Companies Act 2014, most companies, such as limited companies, had to include the company type in their company name.  The requirement in section 1237 (1) extended that requirement to unlimited companies for the first time.

This gave effect to a recommendation of the Company Law Review Group, which was agreed by the Government and included in the General Scheme of the Companies Act. That General Scheme was published in 2007.

Given the significant changes that the Companies Act 2014 as whole introduced, the Act provided for a general transitional period of 18 months from the date of its commencement. This was to allow for companies to adapt, for example to convert to the new company forms, if necessary, and to change the company name as a result. Once the transitional period ended, companies must comply fully with the provisions of the Companies Act 2014.

The Companies Act 2014 was commenced on 1 June 2015 and the general transitional period ended on 30 November 2016. Most companies were able to make any necessary adaptations within that 18 month period.

As the Companies Act 2014 was being enacted (it was the Companies Bill 2012), representations were made by some companies, including in the pharmaceutical industry, and by their legal representatives.  They stated that the 18 month transitional period would not be sufficient time for the necessary organisational changes due to the nature of their businesses. They asked for an extension of time beyond the 18 month period.

In response, the Oireachtas gave the Minister a power in section 1237(5) to consider applications from unlimited companies for longer adaptation periods where special circumstances exist. This was enacted as section 1237(5) and was intended as a temporary measure to facilitate those unlimited companies that found that they needed more than the general transition period of 18 months.

During the general transition period some unlimited companies did assess that they would need longer, and applied for an extension under section 1237(5). Extensions were granted to just over 100 companies, some within the same groups as each other, for a period of 5 years in addition to the 18 months of the general transitional period. A few of these companies are in the pharmaceutical sector. These extensions are due to end on 1 December 2021.

Now that the general transition period is over, unlimited companies are legally obliged to comply with the requirements of section 1237(1) unless they have been granted an extension of additional time. 

Section 3(1)(j) of the Companies (Accounting) Bill 2016 deletes section 1237(5) of the Companies Act 2014 because the need for section 1237(5) no longer exists.  Maintaining section 1237(5) on the Statute Book could give rise to confusion. Companies that are forming for the first time have made applications to me under section 1237(5). This is clearly contrary to the policy of section 1237(1).

One of the main principles underpinning the Companies Act 2014 is the principle of transparency. Also, the Act provides for 5 main company types and the rules for each type are different in some respects. For example, unlimited companies are not obliged to file financial statements with their Annual Return in the Companies Registration Office. It is important that third parties know what type of company they are dealing with. The obligation to include the company type in the company’s name has applied to the vast majority of companies registered in Ireland for several years.

As the original intention of section 1237(5) was to create a temporary measure, it was not necessary to consult on its removal. All extensions that have been granted are unaffected and remain in place until they expire in late 2021.