Impact and implications for Irish charities of the Companies Act 2014, as presented to The Wheel.

1. 1© 2015 Crowe Horwath
Audit | Tax | AdvisoryAudit | Tax | Advisory
The Wheel
The Companies Act 2014: The Impact and Implications for
Irish Charities
29 January 2015

2. 2© 2015 Crowe Horwath
The Companies Bill was published on 21 December 2012 by the Minister for Jobs, Enterprise
and Innovation.
It also introduces a number of reforms, which are designed to make it easier to operate a
company in Ireland.
Set out across 25 Parts its aim is to ease accessibility of the law for each different company
type
Consolidates the 16 Companies Acts as well as the many statutory instruments and court
judgements
 The aim is to make it easier for companies to know and understand their legal obligations.
 It will also implement a series of major reforms to reduce red tape and make it easier and
cheaper to run a company in Ireland
The Companies Act 2014 was signed into law on 23 December 2014 and commenced on 1
June 2015.
The Companies Act 2014 is available for download at http://www.oireachtas.ie
Background to the Companies Act 2014

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New Company Types
The Companies Act 2014 creates new company types to replace the current types.
LTD – Private Company Limited by Shares
DAC – Designated Activity Company limited by shares or by guarantee
PLC – Public Limited Company
PUC – Public Unlimited Company
PULC – Public Unlimited Company with no share capital
ULC – Private Unlimited Company
CLG – Company Limited by Guarantee (these are public guarantee
companies)
Organisations such as charities, sports clubs and management companies, which previously
incorporated as public companies limited by guarantee without a share capital, will now
incorporate as Companies Limited by Guarantee (CLGs).

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If the company does not change the name
during this transitional period by submitting
an amended constitution using Form N3, the
Registrar of Companies will change the
name of the company and issue a new
certificate.
Changes to the company name will affect
company letterheads, stationery and
signage.
Any documentation submitted to the CRO
after the end of the transition period which
bears the incorrect name will be refused.
New Company Types: Conversion Process

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 There are a number of changes proposed to the
form B1
 It is proposed to include the certification of the
Financial Statements ("Accounts") as part of the
Form B1
 The forms will not be used until commencement of
the Act on 1 June 2015.
 The first page of the B1 will include a tick box for
the form B73 (notice of change of ARD).
Companies Registration Office:
Revised B1 Form (Annual Return)

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 Insert the date of the start and end of the financial
year covered by the financial statements
 A company may, once in every five years, by filing
a form B78a with the Registrar, apply to alter its
current or its previous financial year end date,
which will then become its financial year end date
for the future.
 Under s.996 and s.1220, companies which have
been formed for charitable purposes, and which
have been granted an exemption by the Charities
Regulatory Authority, are not required to attach
financial statements to their annual return.
 However they are required to annex a special
auditors report to the return unless they are
entitled to and have availed themselves of audit
exemption
Companies Registration Office: Filing Financial Statements

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 A registered person under section 39 is a person
authorised by the company to bind the company
generally.
 This is to save third parties having to look to Articles
or refer to Board Minutes to see who is authorised to
bind the company.
 If a Board of Directors wishes to give any person (eg
CEO or Senior Managers) power to bind the company
generally (not just in specific transactions), it can
register that person with the CRO.
 Notification to the CRO of authorisation and de-
authorisation of a Registered Person can be effected
using Form B46.
 Where "not applicable" or "none" is appropriate,
please state this.
Companies Registration Office:
Section 39- Registered Person-Binding a Company

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Directors Duties Rationale
The codification of these duties will now set out clear rules of the principal fiduciary duties to
which a Director will have to consider when acting as an officer of the Company.
This will act as a more accessible checklist of the rules and regulations for any person who is,
or is considering becoming a Director of a Company.
Ultimately, this will result in a greater awareness of the rules and regulations that a Director
must consider and lead to better governance practices within Companies.
“Easier to comply, harder to deny.”
With this increased responsibility placed on Directors, it is extremely important that they
understand the obligations that are placed on them.

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Directors Duties: Codified Fiduciary Duties
8 Fiduciary
Directors
Duties
Codified under
Section 228
To act
honestly and
responsibly
Act in
accordance
with
Company’s
Constitution
A Director will not
use the Company's
property,
information or
opportunities for
their own interest
To exercise
care, skill and
diligence
Avoid Conflicts
of Interest
Have regard to
the interests of
Members
To act in good
faith for the
best interests
of Company
Not to restrict
power of
Director’s
independent
judgement

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Company Secretary Role
 All Companies required to have a Company Secretary (section 129(1))
 Duty placed on the Director to appoint a Company Secretary who has the:
 “skills or resources necessary to discharge his or her statutory and other duties.” (section 129(4))
 To comply with new requirement Directors may seek to:
 appoint a Company Secretary who has the necessary skills.
 obtain Company Secretarial Services.
 Single Director Companies will require that Company Secretary to be a different person (section 129(6)).
 Some other key duties:
 Duties delegated by the Board of Directors without deviating from the secretary’s statutory and other legal duties
(section 226(4)).
 the skills necessary so as to enable him or her maintain (or procure the maintenance of) the records (other than
accounting records) (section 226(2)).
 Secretaries will also be obliged to acknowledge their duties and obligations

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The consolidation of the law in this area is an improvement in accessibility and transparency,
and is set out in Part 6.
Part 6 refers to “financial statements” and “accounting records”, where legislation previously
referred respectively to “accounts” and “books of account”. This reduces the risk of confusion
arising from the use in practice of “accounts” to refer both to “financial statements” and
“accounting records”.
CLG can for the first time claim audit exemption should they meet the required criteria.
However, be careful of the Charities Act 2009 requirements!
Ability to fix defective Financial Statements with the new B1 X Form.
Auditors’ reporting of offences- no longer ambiguous
They will now be Category 1 and 2 offences only.
Directors’ report to confirm (so far as directors are aware) auditors have relevant information
 increases directors’ accountability for audit.
Introduction of Directors Compliance Statement: “Comply or Explain”
Changes in respect of Financial Statements

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Directors Compliance Statement- “Comply or Explain”
New Provision in the Act
Compliance with Statement for “Large Companies” i.e. balance sheet €12.5 million and an
annual turnover of €25 million.
 Compliance Statement must have:
that the directors have drawn up a compliance policy statement;
That the directors have put in place appropriate arrangements or structures that are, in directors’
opinion, designed to secure material compliance with the company’s obligations under company law
and tax law; and
that the directors have conducted a review during the relevant financial year of the arrangements and
structures and have taken such steps to ensure the company’s compliance with the Companies Act
214 and Tax law, or explain why this has not been done.
However, explanation must be given for non compliance with these obligations.
Non Compliance with this Act or tax law, a failure to comply can be considered to be an
offence (Section 225) This will be a category 1 or a category 2 offence if not complied with or
a serious Market abuse offence or a serious prospectus offence.

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SORP is a set of recommended practices issued by the Charity Commissioners in the UK to
advance and maintain standards of reporting in the charity sector.
The most recent version SORP 2005.
New SORP effective from 1 January 2015
Objectives:
improve the quality of financial reporting
enhance the relevance, comparability and understanding of information presented in accounts;
provide clarification, explanation and interpretation of accounting standards and of their application in
the charity sector
assisting those who are responsible for the preparation of the Trustees’ Annual Report and Accounts
One of main differences between accounts of a charity and that of a commercial entity is the
format of disclosing incoming and outgoing resources between restricted and unrestricted
funds and the analysis of movements on such fund balances in the charity’s accounts.
SORP

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Key funds in a charity
Unrestricted
Funds
Designated
Funds
General Fund
Restricted
Funds
Restricted
Funds
Endowment
Funds

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 Format of Statement of Financial Activities (SOFA) simplified
 Income recognition (probable v’s certainty)
 Donated goods & services (gifts for resale/own use) (record when received rather than when sold – but
can use cost v benefit)
 Government grants (no condition=a/c when receivable, if conditions, a/c when conditions are met)
 Financial instruments/investments (mixed motive investments)
 Branches / subsidiary (incorporated branches to be consolidated)
 Commitments (commitments and obligations with conditions disclosed, obligations with no conditions
recorde).
 Trustees’ annual report MUST/SHOULD/MAY
 Cash flow statement FRS allows certain disclosure exemptions. SORP not allowing such exemption
 Employee benefits accrue unused annual leave carried forward
 Substance over form restricted v unrestricted
 Multi employer defined benefit pension schemes required to recognise a provision for agreed
contributions and disclose payment plans
Key changes in SORP (Exposure draft)

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Contact us
For further details on Companies Act 2014 ,SORP, or any other financial or advisory services :
Sharon Gallen, Audit Partner sharon.gallen@crowehorwath.ie | 01 488 2200
Roseanna O’Hanlon, Audit Partner roseanna.ohanlon@crowehorwath.ie | 01 488 2200
Shane McQuillan, Advisory Partner shane.mcquillan@crowehorwath.ie | 01 488 2200
John Byrne, Tax Partner john.byrne@crowehorwath.ie | 01 488 2200
Grainne Howard, Company Secretarial Manager grainne.howard@crowehorwath.ie | 01 488 2200