19 Posts , Viewing posts 11 to 19
We have become so used to hearing about Charity Trustees who have gone bad and lost the run of themselves but, in this case, depending on one’s viewpoint the only ones losing the run of themselves is either the Charities Regulator or the Revenue Commissioners or both.
Paul Murphy of RTÉ Investigates issued a fascinating update on 21.02.2020 entitled “Charities Regulator excoriated after its Trustee Nominees sued by Revenue”. When reading this article you must suspend any thoughts about “sense” “logic” “appreciation” with “weird” “illogical” and “what on earth”.
In brief, the Kerry based Animal Heaven Animal Rescue (AHAR) incurred substantial tax liabilities which ultimately led to the closure of the Charity.
o January 2017 – RTÉ Investigates exposed misleading fundraising practices, unreceipted cash expenditure and a lack of financial controls.
o March 2019 – the Charity was wound up following an audit which had commenced over 18 months before the Charities Regulator nominated four Trustees.
o April 2019 – the Revenue initiated High Court proceedings against the Trustees nominated by the Charities Regulator.
AHAR is now wound up but, had tax liabilities of €203,000 of which €140,000 has been paid with a commitment to repay the balance of €60,000 in October 2020. Given the tax liabilities are being repaid, and (based on RTÉ Investigates reports) the Revenue have stated its intention to drop these proceedings if the outstanding tax liability is discharged in full why is the Revenue taking proceedings against the current Trustees?
Concerns over the level of “poor governance” at the Charity prompted the Charities Regulator to start nominating Trustees in order to “Implement proper governance and controls of the charity”
The Trustees (nominated by the Charities Regulator) did not receive any remuneration or expenses for their work. They are however receiving legal bills as they have to defend themselves against prosecution by the Revenue which must be costing each of them somewhere between €12k to €15k each.
The Charities Regulator expressed “sympathy” for the Trustees nominated by his office to help sort out CRA issues with the Charity.
One thing for sure the very people who were put in to help rescue the situation were the ones who are being been hammered. Why would anyone want to be involved with a Charity at any level based on this type of scenario where people were doing the right thing for the right reasons and still lose!
All companies are required to keep adequate accounting records but, what precisely does “adequate accounting records” mean?
Adequate accounting records are records which:
- correctly record and explain transactions of a company;
- detail assets, liabilities, financial position, profit or loss of a company; and
- enable directors to prepare annual financial statements.
The type of information which must be contained within the accounting records should cover information such as outlined below.
- All monies received and spent
- All assets and debts
- All purchases and sales
- Records of stock held
- Records of services purchased or provided
- Record of all goods bought and sold, including a record of itemised invoices
Time is money so, handling all of the above personally may not be the most cost effective option for a company.
- having a qualified book-keeper (part-time or full-time)
- retaining information in a simple format - does not have to be a costly bespoke piece of software.
As always, if you have any questions on this blog please contract myself or one of my colleagues.
If you cast your mind back to before we all dug into Mince Pies and Christmas pudding, you might recall the hullabaloo concerning registering beneficial owner details of practically every company in Ireland on the Register of Beneficial Ownership before an end of November deadline.
While companies were by and large aware of their obligations it has been my experience that Charities are not as aware that they too must Register and even if they are aware the first question I hear is …. “but who are the ‘Beneficial Owners’ of our Charity?”. This blog will try and answer that question……….
‘Control’ is the key as under Beneficial Ownership rules this determines who must register. In your standard limited liability company, it is generally the case that whoever holds over 25% of the shares in the company is considered to ‘control’ it and must register their details. Most charities however are companies limited by guarantees (CLG’s) and don’t have shares. As such you have to look at its members as in general they are entitled to exercise, through their right to vote at general meetings, some ‘control’ over the company. Then it is simply a question of numbers!
- ≤ 3 members
If there are 3 or fewer members in a Charity CLG, those members are likely to meet the definition of “control” (because each member has greater than 25% of the voting rights) and their details must be placed on the Register of Beneficial Ownership.
- ≥ 4 members
If there are 4 or more members in a Charity CLG (which is typically the case in most charities), no one member has over 25% of the voting rights and so they do not qualify as a beneficial owner. In this case, the details of the “senior managing officials” (i.e. its Directors and any Chief Executive Officer) must be placed on the Register of Beneficial Ownership.
As you would expect, my easy numbers rule is not the case for every single charity and there can be exceptions (e.g. the constitution of the Charity prescribes ‘control’ in a particular way) but by and an large the members ‘rule’ applies to the vast majority of charities and is an easy way of identifying who must register.
As always, if you have any questions on this blog please contact myself or one of my colleagues.
The deadline for filing Benficial Ownership details in the Central Beneficial Ownership Register is the 22nd of November, 2019. KomSec would advise clients not to leave registration until the last minute as a rush of registrations could cause a system overload in the Companies Registration Office (which is handling filings on behalf of the Registrar of Beneficial Owernship). It should also be remembered that the 2019 legislation increased the sanctions substantially from those provided for in the 2016 legislation. A company who breaches the Regulations may now be liable to a class A fine (currently up to €5,000) or, on indictment, a fine not exceeding €500,000. In addition to these fines, custodial sentences of up to 12 months can be imposed. You have been warned!
Further details can be obtained by contacting KomSec or accessing the Central Register website at https://rbo.gov.ie/
COMPANY LAW - NO DEAL BREXIT
It is hard to know how many people actively care or even believe anything one hears about Brexit at this stage. However, as the prospect of a No Deal Brexit edges ever closer to reality companies are left with no choice but to care.
Two things to consider in the event of a No Deal are outlined below.
Companies incorporated in Ireland must have a minimum of one Director resident in the European Economic Area (EEA). The EEA is an International Agreement that extends the EU single market to
non-EU member parties including Liechtenstein, Iceland and Norway.
Currently, a number of companies rely on having a Director resident in the UK to fulfil the above requirement. Clearly, if or when a No Deal occurs than those companies will no longer have an EEA Director and must have an alternative plan in place. Companies are left with pretty much two choices as they can either:
(a) appoint a new Director who is resident within the EEA; or
(b) take out a Bond with appropriate Insurers.
Companies incorporated in the UK and registered in Ireland as an “External Company” will also face changes in the event of a No Deal. Such companies would have registered as an External Company on the basis that they either trade or have a place of business in the State.
In the event of a No Deal then companies incorporated in the UK and registered in this State as an External Company will have to start filing Annual Returns in Ireland under non-EEA country legislation, refer to Sections 1304 to 1306 Companies Act 2014. Given the paucity of filing requirements on External Companies anyway one must assume that this will be a change easily overlooked.
Enjoy your summer holidays Brexit awaits!
Central Register of Beneficial Ownership of Companies and Provident Societies – Opening Postponed
The common understanding of Beneficial Ownership is that companies must provide details of any individual with an ultimate shareholding of 25%+1 share in any company registered in Ireland.
Providing a detailed understanding of the intricacies involved or, obtaining the pertinent information required is not easy.
The history in implementing EU Anti-Money Laundering Directives in Ireland is almost as long as the name of the Irish Central Register. Some of the key points relating to Anti-Money Laundering and Beneficial Ownership are noted below.
November 2016 Statutory Instrument No. 560 requiring companies to create and maintain a Register of Beneficial Ownership
July 2018 5th Anti-Money Laundering Directive entered into force in EU
November 2018 Criminal Justice (Money Laundering and Terrorist Financing) (Amending) Act 2018
March 2019 Statutory Instrument No. 110 requiring companies to file their Beneficial Ownership details with the Central Register
June 2019 Central Register to be open for electronic filings by companies
November 2019 Deadline for all companies to complete their filings on the Central Register
January 2020 Transposition of 5th Anti-Money Laundering Directive by all Member States
It should have been possible from 22.06.2019 for companies to start electronically filing in the Central Register. Unfortunately, the Central Register have advised that the opening of the Register has been postponed temporarily.
Regardless of whether or not one can file on the Central Register companies must still maintain and update their own internal Register of Beneficial Owners.
New Beneficial Ownership Rules
The long-awaited legislation to set up the Beneficial Ownership Register in the Companies Registration Office has finally arrived. The relevant statutory instrument (The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019) was enacted on the 22nd of March 2019.
What does this mean for my company?
- The majority of Irish companies must have an internal Beneficial Ownership Register in place. If this is not already actioned it must be done now. It can no longer be put on the long finger!
- Beneficial Ownership information must be filed in the newly established Central Register of Beneficial Ownership. The Register will be operational and filings can commence from the 22nd of June 2019. There is a five-month grace period which means the latest a filing can be made on is the 22nd of November, 2019 – although it is probably not advisable to wait until then as the penalties for non-compliance have been sizably increased.
Is there anything new I should be aware of (apart from the basic fact that there is a new Central Register)?
- PPS numbers for every Beneficial Owner must now be provided for in the Register
- Some of the information on the Central Register will be accessible to the general public
- Fines for breach have increased from €5,000 to €500,000
More details and advice on this important new legislation is available at any time from KomSec .
Since the New Year KomSec Limited has experienced a sustained level of increased queries from UK based organisations with interests in Ireland, looking for advice on the choices available to them post-Brexit - Branch Registration or Company Incorporation.
Branch Registration – of interest to some as once registered a Branch has fairly basic statutory filings. Also, Branches file the same financial statements as those filed in the country of origin (i.e. country where company registering Branch was incorporated).
Downside for some is an unease at having to appoint an Authorised Person (resident in the State) representing the Branch where he/she can have as much control over the Branch as any Company Director.
Company Incorporation – of interest as once incorporated the company only needs to either have one individual Director resident anywhere within the EEA or a Bond (S.137 Companies Act 2014). Companies can apply for exemption from the residency rule/Bond on the grounds that the company has “a real and continuous link with one or more economic activities being carried on in the State”. This statement must be supported by the Irish Revenue Commissioners stating it has reasonable grounds to believe the company has such a link.
Downside for some is that once set up the company has a life of its own requiring it to make regular annual filings throughout its corporate history, including preparing and filing financial statements specific to the Irish company.
Which option is ultimately selected will most likely be driven by tax advice. To date, KomSec Limited has found client interest split fairly evenly between both types of entities. To explore options available for your specific organisation contact KomSec Limited directly.
The momentum for Corporate Ireland to prepare for Brexit is finally gaining traction.
Hard or soft exit is not particularly relevant at this point. For now, corporate Ireland should have a schedule of events noting person responsible for reviewing/implementing, and deadline for completion. Some of the areas are outlined below.
- Auditor registration status – in event of a no deal Brexit Auditors based in the UK will no longer meet the eligibility criteria for approval as EU statutory auditors. This means they will no longer be:
(a) entitled to hold audit appointments for Irish companies;
(b) sign audit reports; and
(c) eligible for inclusion on the Irish audit register.
This is something that should be put on your company’s Risk Register. Failure to have an appropriate Auditor in place in time will impact on the signing,
adoption, and filing of Financial Statements.
- Brexit NI – do not forget Northern Ireland will be included in the UK Brexit from the European Union. This seems to be a common problem for a number of companies probably because both jurisdictions are on one island.
- Data Protection – once the UK leaves the EU it will become a “third country” and must be treated as one would any other non-EU state. This will have an immediate impact on the transfer of data between Ireland, and the UK, e.g. companies with inter-company loans, payroll operations, access to group intranets, transfer of public data, etc.
There will be no “transition” period for data protection, it will be effective immediately.
- Director residency – in the event the UK leaves EU without a deal in place companies which have only UK resident director(s) will be required to comply with S.137 Companies Act 2014, i.e. they must have either:
(a) director resident within the EEA; or
(b) bond with appropriate insurers for minimum of two years; or
(c) exemption on the grounds the company has a “real and continuous link with one or more economic activities being carried on in the State”.
This means that companies currently relying on a director resident in the UK (as resident within the EEA) will have to re-consider its options.
- Legislation – the Government started debate on the Omnibus Bill on 25.02.2019. The Bill covers a variety of areas including health (reimbursement & medical care), finance (taxation), transport (sea & bus travel), legal (extradition & immigration).
- Licences – companies must review all licences, accreditations, authorisations, etc, to ensure they remain in force or, are applied for, to ensure compliance following Brexit.
- Revenue – consider logistics of import, export, movement of goods on the island of Ireland. Levying, collecting and payment appropriate customs duties, VAT, taxes, etc. Payroll could be a hidden bump, e.g. staff working in Ireland subject to UK contract or, staff working in Ireland but, payroll managed in UK/NI.
While ultimately the shape of Brexit may still be unknown, what is known is that Corporate Ireland can no longer adopt a wait and see approach. Action must be taken – now.
- All Categories
- Companies Registration Office
- Company Law
- Latest News
- Annual Returns
- Beneficial Ownership (1)
- February 2021 (2)
- December 2020 (2)
- November 2020 (2)
- June 2020 (1)
- April 2020 (1)
- March 2020 (2)
- February 2020 (3)
- October 2019 (1)
- August 2019 (1)
- June 2019 (1)
- April 2019 (1)
- View older Posts (65)