Annual
Returns: Recent Changes in Irish Company Law
The
Company Law Enforcement Act 2001 ("the Act") introduced
very important changes regarding the filing of annual returns
and audited accounts for companies. Considering the serious
nature of the sanctions for failure to comply with the Act
and bearing in mind to the powers vested in the Director of
Corporate Enforcement, all company officers need be aware
of and must ensure compliance with these new requirements.
THE
PREVIOUS POSITION
Previously
a company had to hold its annual general meeting (AGM) every
twelve months. The directors would lay before the shareholders
the audited accounts for the financial period ending not more
than nine months prior to the date of the AGM. The annual
return to be filed in the Companies Registration Office (CRO)
was made up to a date fourteen days after the AGM. This return
together with the audited accounts had then to be filed in
the CRO within 77 days of the AGM.
THE
NEW POSITION
As
and from 1st March 2002, there is no longer any link between
the holding of the AGM and the preparation and filing of the
annual return in the CRO. The Act introduced an Annual Return
Date (ARD), within 28 days of which a company's annual return
must be submitted each year. The ARD in subsequent years will
fall on the anniversary of the previous year's ARD. The ARD
is the anniversary of the date of the annual return filed
prior to the commencement of the Act i.e. the date referred
to on the previous annual return (which should have been made
up to a date 14 days after the AGM).
ALTERING THE ARD
The
ARD cannot be more than nine months from the relevant financial
year-end. This will give rise to a difficulty where a company
has, for example, a year-end of 31st December 2001 and is
allocated an ARD on or after 1st October 2002. In this event,
the company has two options:-
1. It may move the ARD to an earlier date by making the annual
return up to a date which is at least 14 days prior to the
existing ARD; attaching the accounts for the year ending 31st
December 2001;
In
this way the company may bring its ARD forward to a date earlier
than 16th September 2002.
or
2.
It may move the ARD to a later date by delivering an annual
return no later than 28 days after the existing ARD without
accounts and nominating the new ARD which cannot be later
than six months after the initial ARD allocated.
Thus,
a company whose financial year ends on the 31st of December
2001 with an ARD of 1st of October, 2002, may extend its ARD
to a maximum of six months to the 1st of April, 2003 by filing
an annual return made up to 1st October 2002, without accounts.
If so, the next annual return must be made up to a date no
later than 1st April 2003, and ought to have annexed to it
accounts for the year ending 31st December 2001 and the year
ending 31 December 2002.
CONSEQUENCES OF NON-COMPLIANCE WITH NEW RULES
Failure
to adhere to these new requirements will expose the company
and its officers (the directors and the secretary) personally
to a new range of sanctions and enforcement measures.
These are as follows:
1.
The standard fee for an annual return will increase from €30.00
to €130.00 if the return is not filed within the 28-day
period from the ARD and the company will incur a daily penalty
of €3.00 up to a maximum of €1,200.00 per annum.
2.
During the first 12 months after the failure to file the annual
return, only the above late filing penalty can be levied.
Thereafter, an on-the-spot fine of €500.00 can also be
levied against the company by the Registrar of Companies.
3.
An officer of the company may be personally liable and may
be prosecuted for permitting a breach of the Act. Where the
officer had an opportunity to prevent such a breach, he/she
will bear the onus of disproving fault on his/her part. District
Court fines have been increased to a maximum of €1,900.00
per officer per offence.
If
a company director is prosecuted in respect of three offences
over a five-year period, the Registrar of Companies is entitled
to bring an application before the High Court seeking an order
disqualifying that person from acting as a director of any
company.
4.
A company may be stuck off the Register of Companies and dissolved
for failure to file an annual return. If a company is struck
off, the assets become vested in the Minister for Finance.
5. If the business continues to trade, the owners will no
longer enjoy the benefit of limited liability and would be
personally liable for any debts incurred after the company
has been dissolved.
ACTION
POINTS
1.
Find out what the ARD is for your company. Every company has
already been allocated its ARD. This information is available
on the CRO website (http://www.cro.ie). In any event, every
company will receive notice of its ARD not later than two
months before the next annual return is due to be filed.
2
The relevant audit and accounts should be completed as early
as possible so that the company is in a position to comply
with its obligations when it receives notification from the
CRO of the ARD.
3.
Company secretaries should ensure that the address of the
registered office as notified to the CRO is correct as this
is the address at which the notification of an ARD will be
received.
4
To avoid both civil and criminal sanctions companies and their
officers must be both pro-active and compliant in terms of
all obligations under the Act.
For
further information or general enquires please contact
Kevin O'Brien
E-mail: kobrien@kilroys.ie
or
Joanne Griffin
E-mail: jgriffin@kilroys.ie
Telephone: +353-1-4395600
Fax: +353-1-4395601/4395602
©
Kilroys Solicitors 2002
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