Companies Bill May Discourage Investment In Ireland

by Robin Pilgrim, LawAndTax-News.com, London

18 June 2003

Ireland's planned Companies Bill has drawn further criticism from the international business community this week, with the European Federation of Accountants (FEE) warning that proposals contained in the Bill could cost the jurisdiction dear in terms of foreign investment.

Writing in the Irish Banking Review, FEE president, David Devlin warned that the government must not seek to impose higher financial reporting obligations on businesses in Ireland than is the international norm, although he admitted that there is a need for reform following recent high profile corporate governance scandals in the United States and elsewhere.

'For our own domestic reasons, as well as due to the role played by foreign direct investment and financial services in Ireland, it is important to have in place corporate governance arrangements of the highest quality, so that Ireland is seen as a good place in which to do business. This will enable us to overcome the history of Irish scandals which are still under investigation,' he wrote in the Summer 2003 edition of the Review.

However, he expressed concern that certain provisions contained within the Companies (Auditing and Accounting) Bill are too stringent, and may encourage firms to relocate to other jurisdictions.

Measures which Mr Devlin believes could leave Ireland out of step with the rest of Europe include the proposed requirement for directors to report on their company's compliance with the Companies Act, tax laws, and other relevant legislation, and plans to require all companies (even subsidiaries) to establish their own audit committees.

Despite this, the FEE chief and PricewaterhouseCoopers partner concluded, a degree of change is ultimately necessary, as: 'the cost to business in the long run of not making necessary and balanced reforms would be far greater in terms of loss of confidence in business and auditors and the knock-on economic and social costs.'

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