|John Breslin||Callaghan Kennedy|
Section 225 of the Irish Companies Act 2014 (the Act) introduces a new requirement to include a directors' compliance statement (DCS) in the directors' report that accompanies a company's annual financial statements. While directors of Irish-incorporated special purpose vehicles (SPVs) need to be aware of this DCS requirement, in many cases an SPV will fall outside the scope of the requirement. Where an SPV is required to comply with the DCS requirement, the directors should be able to satisfy the requirement without any material impact on the SPV or its cost of operations.
First, the DCS must include an acknowledgement by the directors that they are responsible for ensuring the company's compliance with its obligations under Irish tax law. The directors must also acknowledge that they are responsible for ensuring certain obligations under the Act and Irish prospectus, transparency and market abuse law (where applicable).
Second, the DCS must include a confirmation that the directors have completed steps listed in the Act designed to guide a company's compliance with the above obligations (the opt-in model). If this has not been done, the DCS must include an explanation as to why it has not (the explain model).
The steps listed in the Act include drawing up an internal compliance policy and reviewing the company's compliance arrangements annually.
Where applicable, the DCS must be included for all financial years commencing on or after June 1 2015. Failure to comply is an offence on the part of each director to whom default is attributable.
Determining whether a company is in-scope
Irish investment funds structured as corporates (PLCs and ICAVs) are exempt from the DCS requirement are exempt from the DCS requirement. Non-Irish incorporated entities (including Cayman Islands-incorporated Irish tax resident companies) are also exempt.
Further, an Irish-incorporated company is outside the scope of the DCS requirement if its balance sheet total for the financial year in question is less than €12.5 million (approximately $13.9 million), or if its turnover for that year is less than €25 million.
Given the above, directors should be able to determine with relative ease whether an SPV is in-scope. It is likely that most single aircraft or property-holding SPVs will fall short of the required turnover threshold.
Opt-in versus explain models
If an SPV is in-scope, the key decision for directors will be to choose between the opt-in or explain models. While ultimately the directors' decision should be determined on a case-by-case basis for in-scope SPVs, in many cases the explain model should be an appropriate choice.
John Breslin and Callaghan Kennedy