Mr. Noel Treacy T.D., Minister for Commerce today (Monday 22nd March, 1999) published the Companies (Amendment) (No. 2) Bill, 1999.

The Bill provides for amendments to the Companies (Amendment) Act, 1990 including new provisions for the appointment of Examiners to companies that have "a reasonable prospect of survival." It provides for the exemption of certain small companies from the need to have their accounts audited each year.

The Bill also includes provisions relating to Irish Registered Non-Resident Companies (IRNRs) designed to prevent the use of Irish registered companies for exclusively foreign activities without any connection with this State.

Launching the Bill, Minister Treacy said "The IRNR provisions are important to root out the abuse of Irish registration for fraudulent activities. The other changes in the Bill are geared to streamlining the Examinership process and help small business by removing certain audit requirements."

Measures to address problems created by Irish Registered Non-Resident Companies The Companies (Amendment)(No. 2) Bill, 1999 introduces a number of measures which, in combination with the tax measures contained in the Finance Bill, 1999, have the necessary elements to tackle the IRNR problem in a comprehensive and focused manner as already announced on the 11th February, 1999 by the Minister for Finance.

The Company Law measures will provide for the following:-

• As a precondition of incorporation, every application for registration will be required to demonstrate that the proposed company intends to carry on an activity in the State. This provision is designed to prevent the use of Irish registered companies for exclusively foreign activities without any connection with the State.
• Every company will be required to either have an Irish resident director or provide a bond to the value of £20,000 as surety in the event of the company failing to comply with certain company law and tax requirements. This will apply to new companies, as a pre-requisite to incorporation, and to existing companies after a transitional period of 12 months.
• The number of directorships that any one person can hold will be limited to 25 subject to certain exemptions. The aim of this provision is to curb the issue of nominee directors as a means of disguising beneficial ownership or control.
• Enhanced Strike-off provisions will be introduced where companies: (a) fail to make the statutory annual return to the Companies Registration Office(CRO); or (b) fail to register with the Revenue Commissioners for tax purposes.

There will be enhanced notification to the CRO where directors have resigned, including strike-off provisions where a company appears to have no director. This provision will ensure more up to date information in the CRO in relation to directors.

Commenting on the measures now proposed, the Minister said that "they are designed to prevent Irish Registered companies being used as vehicles to perpetrate frauds or undertake money laundering in other jurisdictions, thereby damaging Ireland's reputation as a well regulated economy."

Proposals to amend Company Law in relation to Examinership The Minister stated that the refinements to the Examinership process reflect the recommendations of the Company Law Review Group in the light of the operation of this legislation.

• The main proposal will require the court to be satisfied that there is a "reasonable prospect" for survival of a company as apposed to the present test, where "some prospect" of survival was sufficient. To facilitate this, the Court will now have to be provided with the report of an independent accountant before it decides if an examiner should be appointed.

T he Bill also provides that:

• Only pre-petition debts included in the funding statement to be included in the preliminary report may be paid by the Examiner during the examination period;
• the position of creditors will be enhanced in a number of ways. In particular, they will be entitled to be heard when the Court first considers the petition for the appointment of the Examiner;
• moreover, while the expenses of an Examiner will continue to be payable in priority to all creditors (secured and unsecured), it is proposed to amend section 29 of the Act so that liabilities certified by an Examiner under section 10 will no longer rank in priority to secured creditors but will continue to have priority over floating and unsecured charge holders
• it is proposed to repeal the provision which prohibits Banks from exercising their right of "set-off" when an examiner is appointed to a company - thus, a bank will be able to establish its "net" position (whether positive or negative) in relation to a creditor which has been permitted to operate a number of separate bank accounts for operational purposes;
• it is proposed to limit the circumstances in which an Examiner can repudiate a contract etc. under section 7(5) of the Act to contracts etc. entered into after the appointment of the Examiner to the company.

Commenting on the proposed amendments in the Examinership area, the Minister said that "the overall thrust of the proposals is to make the Examinership process more effective". Removal of Statutory Audit Requirement for Certain Small Companies Part III of the Bill contains the necessary provisions to exempt certain small private limited companies that meet the specified criteria from the obligation to have their accounts audited. The provision will reduce the burden on such companies. This proposal is included in Partnership 2000.

The exemption will be available where the directors of a company take a view that the company will meet the relevant criteria i.e. the company must have:

• a turnover not exceeding £100,000
• a balance sheet total not exceeding £1,500,000
• number of employees not exceeding 50 persons

The Minister pointed out, however, that directors of "exempted companies" will still "have to prepare annual accounts and submit these to the CRO with their annual return".