New AML Legislation in Force
The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 came into force on 26 November 2018 (the "Amendment Act").
Although the scope of Designated Person has not been expanded in the Amendment Act, it does impose a new registration requirement on certain financial institutions that are not already authorised by, licensed to carry on activities by, or registered with, the Central Bank under other legislation.
Furthermore, the Amendment Act obliges Designated Persons to enhance their AML policies and procedures and to make certain operational changes in the areas of risk assessments, due diligence and enforcement.
For more information on the new obligations arising from the Amendment Act please see our previous client update Ireland Implements 4MLD: Key Changes for Designated Persons.
Credit Reporting Act 2013 - Extended to include HP and Similar Arrangements
The definition of "credit" in the Credit Reporting Act 2013 (the "CRA") has been amended to include hire purchase and similar finance products, including personal contract plans and any other type of credit/leasing agreement ("HP Products"). The amendment became effective on 29 October 2018 when the Markets in Financial Instruments Act 2018 was signed into law.
Prior to this amendment, the CRA had specifically excluded HP Products in the definition of "credit". This exclusion has now been removed and replaced with a new exclusion known as "trade credit".
"Trade credit" is defined in the CRA as credit provided where (i) each party is acting in the course of his or her business, trade or profession, (ii) the credit in question is repayable within six months; (iii) the party providing the credit is not a regulated financial services provider; and (iv) the purpose of the credit is to enable the party to whom the credit is provided to purchase goods or services from the party providing the credit.
For more information on the credit reporting obligations arising from the CRA, please see our previous client update: Ireland Reminder – Credit Reporting Obligations.
Corporate Enforcement Authority - Draft Legislation Published
Draft legislation, the General Scheme of the Companies (Corporate Enforcement Authority) Bill 2018 (the "General Scheme"), to establish the Office of Director of Corporate Enforcement (the "ODCE") as a stand-alone agency to be called the Corporate Enforcement Authority has been published. The move is a key action in the Government's package of measures to strengthen Ireland's response to white collar crime.
Announcing the decision, the Minister for Business, Enterprise and Innovation said: "By establishing the ODCE as a stand-alone agency, it will be better equipped to investigate increasingly complex breaches of company law. The new Corporate Enforcement Authority will have more autonomy, particularly in terms of the ability to recruit specialise skills and expertise."
Separately, the General Scheme sets out a number of proposed clarifications and amendments to the Companies Act 2014 to give effect to certain recommendations of the Company Law Review Group.
We will be publishing a separate update on the General Scheme shortly but further information on the draft legislation can be read here.
Corporate Crime - Significant Reforms Proposed
The Law Reform Commission ("LRC") has recommended that significant reforms be implemented to deal with corporate crime in its report dated 23 October 2018.
These recommendations include:
- The establishment of a properly resourced statutory Corporate Crime Agency ("CCA") (a multidisciplinary agency similar to the Criminal Assets Bureau) and a dedicated unit in the Office of the Director of Public Prosecutions which would liaise closely with the proposed CCA;
- Granting economic regulators powers to (1) impose significant financial sanctions with court oversight and (2) enter into settlements with regulated entities (to include financial sanctions, consumer redress schemes and agreements to put in place compliance policies). The Central Bank holds these powers at present but other regulators (such as the Competition and Consumer Protection Commission ("CCPC") do not; and
- The reform of fraud offences to address egregiously reckless risk taking. In particular, the LRC recommends that existing corporate offences such as fraud be amended so that they would also be committed where a person or entity is reckless as to whether they are committing an offence – presently the test for certain offences is that a person knowingly or intentionally commits the offence. The LRC does not recommend the enactment of an offence of "reckless trading" on the basis that such an offence would run the risk of having an effect on legitimate, entrepreneurial, risk-taking.
Further detail on the main recommendations in the report can be read here.
Increased Merger Thresholds
It is expected that turnover thresholds that determine whether mergers and acquisitions are required to be notified to the CCPC will change with effect from 1 January 2019. For more information on the proposed changes please see our previous client update: Increased Merger Thresholds from 1 January 2019.
Potential Simplification of Merger Control Process
The CCPC has invited submissions to a public consultation that is seeking views on simplifying the procedures in Ireland used to review certain mergers and acquisitions on the basis that they clearly do not raise competition concerns.
This consultation will consider if introducing a simplified merger review procedure could streamline the review process for certain notifications, and how this might impact on the merger control regime in Ireland. Introducing such a process would bring Ireland in line with both the EU Commission and a majority of EU member states that operate a simplified procedure for certain types of merger review.
Further detail on the consultation can be read here.
Amendments to Non-Financial and Diversity Information Disclosure
The European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 (the "Regulations") which oblige in-scope companies to make annual disclosures of certain non-financial and board diversity matters have been amended by new regulations (the "Amending Regulations")1 which came into operation on 17 October 2018.
These amendments come into force as many companies are preparing to make their first set of filings in respect of the Regulations which apply in respect of financial years beginning on or after 1 August 2017.
The following are the key changes contained in the Amending Regulations:
- Where a subsidiary does not prepare financial statements or their accounts do not disclose the average number of employees, the employee figure for that subsidiary undertaking shall be determined from comparable information in the subsidiary undertaking's accounting records by applying the methods specified in Section 317 of the Companies Act 2014 for a period equivalent to that of the financial year of the holding company;
- An applicable company which is a holding company shall prepare a non-financial statement or a separate statement in respect of the group;
- The statutory auditors of an applicable company will now only be required to establish that the company has provided the non-financial information in respect of the financial year immediately preceding the financial year that is the subject of their report. Previously, statutory auditors were required to establish this in respect of the year that is the subject of their report; and
- The requirements imposed on statutory auditors under section 336(5)2 of the Companies Act 2014 shall not now apply to those parts of the directors' report dealing with non-financial statements.
Changes to Key Employee Engagement Programme ("KEEP")
KEEP is a focused share option programme intended to help SMEs attract, retain and motivate talent in a highly competitive labour market and to support the growth in capacity and performance of Ireland's enterprise sector. It came into effect in January 2018. However, take-up of this scheme has been less than expected due to the restrictive nature of the various conditions contained in the scheme.
Accordingly, in line with the Budget Day announcements this year, the Finance Bill 2018 (the "Bill") introduced the following changes to the KEEP incentive this year, which the Government hopes will make the scheme more attractive:
- The total market value of shares over which options could be granted on introduction of this scheme could not exceed 50% of an employee's annual emoluments in the year of assessment. The Bill proposes an increase in this limit to 100% of an employee's annual emoluments; and
- The Bill replaces the limit on the grant of options over shares having a market value in excess of €250,000 in any three consecutive years with a life-time limit of €300,000.
These changes are subject to a commencement order by the Minister for Finance.
1 European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) (Amendment) Regulations 2018.
2 Section 336(5) requires that, except in respect of micro companies, the statutory auditors report shall state whether the information given in the directors' report is consistent with the company's statutory financial statements and has been prepared in accordance with applicable legal requirements.