Guernsey Discusses Company Law Directive With EU

by Jason Gorringe, Tax-News.com, London

14 February 2007

It emerged this week that the Guernsey authorities are in discussions with the European Commission regarding the introduction, in 2008, of the 8th Company Law Directive amongst the members of the European Union.

The move will directly affect accounting firms that audit Guernsey companies listed on stock exchanges in EU Member States. Those firms who undertake that work will for the future be required to have public oversight of their work.

In the absence of appropriate oversight each auditor would need to register in the EU member state where the company they audit is listed, making themselves subject to that State’s oversight body.

Member States that are involved where Guernsey companies are listed on the exchanges will include the UK, Ireland, Luxembourg, France and Germany. This raises the possibility of Guernsey auditors being inspected by these EU Member States directly.

To ensure that Guernsey maintains control of any such inspection and oversight of local auditors, discussions have been taking place with both the professional oversight bodies in the UK and with the EC in Brussels, in order to seek a pragmatic solution for the island.

According to Guernsey Finance:

"Talks between Guernsey, Jersey and the Isle of Man have taken place with the Financial Reporting Council (FRC) in the UK who the Crown Dependencies would wish to use as the oversight body, thus ensuring that the other EU member states involved could accept the regime as equivalent and therefore remove the need for their oversight bodies to become involved directly."

"Guernsey plans to enact legislation that would require local accountancy firms auditing Guernsey companies with EU listings to be subject to an oversight regime which the Guernsey authorities would then delegate to the existing UK bodies. This would ensure that a relevant oversight regime would be in place without the necessity for creating a new body on the island or elsewhere in the Crown Dependencies."

The discussions to put these procedures in place are well advanced, the finance industry body revealed, with the FRC agreeing to provide this service for each of the Crown Dependencies. At a meeting in Brussels at the end of 2006, the EU Commission also listened very positively to a submission from Guernsey and Jersey at which Peter Niven, Director, Finance Sector Development, put the case for the delegation of oversight to the UK. A written submission has now been sent to Brussels and a response is awaited.

“Talking directly to the Commission in Brussels has been extremely useful and has raised the understanding within the EU of Guernsey’s finance industry and the strong links between Guernsey businesses and the Stock Exchanges particularly in London, Dublin and Luxembourg,” announced Mr Niven.

He continued:

“The strength of our investment fund sector has particularly interested the Commission and we have used this as a way in which we can ensure that Guernsey’s professionalism and breadth of finance business overall is demonstrated and understood in this important forum. These discussions have reflected very positively on Guernsey as a robust international finance centre and a jurisdiction that wishes to ensure that international standards are maintained to support a vibrant and dynamic industry that works closely with its international partners.”

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