Background – Companies Act 2014
The Companies Act 2014 (“the Act”) came into force in Ireland on 1 June 2015. A key provision of the Act impacting the Irish investment fund industry is:
Section 225, the introduction of a requirement for certain incorporated companies to include in the annual report a directors’ compliance statement (“DCS”). This applies to:
- Public limited companies (“PLCs”)
- Private companies limited by shares (“LTDs”) and Designated Activity Companies (“DACs”) that have a balance sheet total of greater than €12.5 million and a turnover of greater than €25 million.
Director’s Compliance Statement Overview
The requirement for the DCS applies for financial years beginning on or after 1 June 2015.
UCITS investment companies set up as PLCs are in scope for the DCS while non-UCITS investment companies are not in scope.
The DCS acknowledges that directors are responsible for securing a UCITS investment company’s compliance with its “relevant obligations”. “Relevant obligations” refer to obligations under the Act which if breached would either be a category 1 or a category 2 offence, a serious market abuse offence or a serious prospectus offence. “Relevant obligations” also include compliance obligations under Irish tax law.
In addition to acknowledging their duty to comply with the “relevant obligations”, the directors’ report must provide assurances to confirm that:
- A compliance policy statement has been drawn up to outline the UCITS investment company’s policies to comply with the “relevant obligations”
- Structures have been created to provide a reasonable assurance of compliance in all material respects with the “relevant obligations”
- The structures have been reviewed and tested during the relevant financial year.
The above assurances operate on a comply or explain basis.
Section 225 allows for directors to receive advice from third party service providers who have the requisite knowledge and experience.
Non-compliance with the DCS requirement is deemed to be a category 3 offence under the Act and is punishable by up to six months in jail and/or a fine of up to €5,000.
What should Directors do next?
There are a number of actions directors should take now including:
- Obtaining a comprehensive list of the relevant obligations under the Act
- Performing a gap analysis comparing the current UCITS investment company activities against their “relevant obligations” under the Act to identify new arrangements and structures that will be required
- Preparing a compliance policy statement
- Ensuring that an annual review process of the compliance arrangements and structures is completed in respect of the full fiscal year.
KB Associates’ Services
KB Associates offers a range of services to investment funds including:
- The provision of designated persons to perform UCITS business plan and AIFMD programme of activity managerial functions
- The provision of UCITS/AIF operational support
- The provision of UCITS/AIF management company services
- Service provider selection
- The provision of directors
- Money Laundering Reporting Officer services
- Company secretarial services.
If you would like to discuss any issues raised in this article or related to KB Associates’ services in general, please feel free to contact Mike Kirby (+353 1 667 1980), Peter Northcott (+44 203 170 8813) or Mike Parton (+1 345 946 4224).