Compliance Statement

The Act restores, in a more targeted and proportionate way than was previously presented in legislation, the Compliance Statement for listed companies (excluding investment companies as defined by Section 1386 of the Act) and large private companies. This is covered under Section 225 of Part 5 of the Act.

In the context of the Compliance Statement, the following are ‘large companies’ and therefore required to include the Directors’ Compliance Statement in the directors’ report:

Large Company (s225) – must exceed both criteria

Turnover exceeds €25 million
Balance sheet total exceeds €12.5 million

Note there is a difference in the thresholds between a ‘large company’ in this context versus a ‘large company’ with respect to the formation of an audit committee. Furthermore, the thresholds noted above  are relevant only to the current financial year of the company and do not have to be met for two consecutive financial years in order for the compliance statement to be applicable.

 

The Compliance Statement shall include the following:


Directors’ Compliance Statement

  • Acknowledgement of responsibility for securing company’s compliance with its relevant obligations*;
  • Confirmation that each of the following three things have been done, or if it has not been done, specifying the reasons why it has not been done:
    1)  Compliance Policy Statement has been drawn up;
    2)  Putting in place of appropriate arrangements and structures to secure material compliance with relevant obligations has been completed; and
    3)  A review of aforementioned arrangements and structures has been conducted during the financial year.

 

*‘Relevant obligations’ encompass the company’s obligations under the Act itself; essentially any items that could potentially result in an officer of the company being guilty of a reportable Category 1 or 2 Offence or of a serious Market Abuse or Prospectus offence. ‘Relevant obligations’ also cover a company’s obligations with respect to tax law.

The appropriate arrangements and structures to be put in place are somewhat subjective and are at the onus of the directors but such arrangements and structures could include (according to Section 225(4)):

  • reliance on the advice of one or more persons employed by the company; or
  • reliance on external advisors or specialists retained under a contract for services provided such persons are considered as having the requisite degree of knowledge and experience to advise the directors on compliance with their ‘relevant obligations’.

 

These arrangements and structures are not necessarily required to be invincible – the Act outlines that they will be considered as being designed to secure material compliance with the company’s ‘relevant obligations’ if they provide a reasonable assurance of compliance in all material respects with those obligations

 

Failure to include a Directors’ Compliance Statement in the directors’ report or failure to confirm that the three things required (as noted above) have been done or specifying the reasons why not if applicable, result in each director being guilty of a Category 3 Offence under the Act.

 

Illustrated disclosure of directors’ compliance statement:

To ensure that the company has achieved material compliance with its relevant obligations, the directors confirm that they have:

  • drawn up a compliance policy statement setting out the company’s policies respecting compliance by the company with its relevant obligations;
  • put in place appropriate arrangements and structures that are designed to secure material compliance with the company’s relevant obligations; and
  • conducted a review, during the financial year, of the arrangements and structures, referred to above.

 

The inclusion of this statement is only applicable where the financial year commences on or after 1 June 2015. Therefore, directors should take the relevant steps required to ensure they have in place the necessary structures and arrangements noted from the first day of the next full financial year that commences after 1 June 2015.

 

Furthermore, where a group directors’ report is presented, it must include the relevant disclosures for the holding company, if the holding company meets the size criteria.