At present, it is possible for an unlimited company incorporated in Ireland not to publish its accounts in the Companies Registration Office by virtue of the provisions of regulation 6 of the European Communities (Accounts) Regulations 1993 (part III of the European Communities (Accounts) Regulations 1993 implement Council Directive 90/605/EEC, which amended the fourth and seventh Company Law Directives as regards the scope of those directives), which provides as follows:
“6. This part shall apply to the following undertakings:
1) Unlimited companies and partnerships where all the members thereof who do not have a limit on their liability are
a) Companies limited by shares or by guarantee, or
b) Bodies not governed by the law of the State but equivalent to those in paragraph (a), or
c) Any combination of the types of bodies referred to in subparagraphs (a) and (b), and
2) Unlimited companies and partnerships where all the members thereof who do not have a limit on their liability are
a) (i) Unlimited companies or partnerships of the type referred to in paragraph (1) that are governed by the laws of a member state, or
(ii) Bodies governed by the laws of a member state that are of a legal form comparable to those referred to in paragraph (i), or
b) Any combination of the types of bodies referred to in subparagraph (a) and subparagraphs (a) and (b) of paragraph (1).”
Accordingly, where an Irish unlimited company has a member that is a limited company incorporated outside the EU and at least one member that is an unlimited company incorporated outside the EU, that Irish unlimited company may avoid having to publish its accounts. This exemption is available notwithstanding the fact that the shares in the unlimited company incorporated outside the EU may be wholly owned by a limited company incorporated outside the EU, thus affording the benefit of limited liability within the group structure.
In October 2011, the European Commission published the provisional text of a directive to repeal and replace the fourth and seventh Company Law Directives (78/660/EEC and 83/349/EEC respectively). The directive on annual financial statements, consolidated financial statements, and related reports of certain types of undertakings (2013/34/EU) aims, among other things, to create a single directive on the form and content of financial statements.
On 26 June 2013, the European Council adopted the revised text of the directive, which included in its recitals (at recital 6) the following statement: “The scope of this directive should be principles-based and should ensure that it is not possible for an undertaking to exclude itself from that scope by creating a group structure containing multiple layers of undertakings inside or outside the union.”
Article 1 of the directive goes on to detail the types of entities that are to fall within the scope of the directive, once implemented into the local law of a member state. Article 1.1(b) provides that the directive shall apply to the following types of Irish undertaking (annex II – types of undertaking referred to in point (b) of article 1(1)):
- Unlimited companies,
- Partnerships, and
- Limited partnerships.
but only in circumstances where all of the direct or indirect members of the undertaking, having otherwise unlimited liability, in fact have limited liability by reason of those members being undertakings which are (i) of the types listed in annex 1 (that is, limited liability undertakings of any type in each of the members states) or (ii) not governed by the law of a member state but which have a legal form comparable to those listed in annex 1 (that is, limited liability undertakings established outside of the EU).
Implementation in Irish law
The Department of Jobs, Enterprise and Innovation is currently engaged in a consultation process with regard to the directive in which the Business Law Committee is participating. The legislation to implement the directive has to be enacted by 20 July 2015.
It would appear from the text of the directive that certain non-disclosure structures currently in use in Ireland will no longer be available. Accordingly, practitioners may wish to advise clients who have availed of the exemption under the 1993 regulations that they will need to be considering their options under the directive in the next 12 to 18 months, as these changes will, unless the department opts to bring forward the date, affect financial statements for 2016 (assuming the financial year will begin on 1 January 2016), which would need to be filed in 2017. In a group structure with any level of complexity, altering the current arrangements will take some time to agree and implement – accordingly the earlier discussions with clients begin, the better.