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SEC Regulated Companies

AUTHOR(S): Fergus Bolster, George Brady, Alan Chiswick, Ciaran Healy, Brian McCloskey, Madeline McDonnell, √Čanna Mellett, Tim Scanlon, Patrick Spicer
PRACTICE AREA GROUP: Corporate
DATE: 28.07.2017

Section 279 of the Companies Act 2014 (and its predecessor, section 1 of the Companies (Miscellaneous Provisions) Act 2009), as amended, allowed, by way of permissive exemption, certain Irish holding companies whose securities were listed on US stock exchanges to use US generally accepted accounting principles (“US GAAP”) in the preparation of their statutory financial statements for a limited period of time, instead of International Financial Reporting Standards (IFRS) or Irish GAAP which would otherwise be required.  The section 279 exemption was due expire for financial years ending after 31 December 2020.

The exemption was originally introduced as international negotiations on the convergence of US GAAP and IFRS standards were taking place and in the context of an expectation then held that the US Securities and Exchange Commission (“SEC”) would allow IFRS to be used by domestic US registrants. The process of convergence was originally expected to have been concluded by 2015 but, to date, has not progressed materially in the manner anticipated in 2009.

The Irish government, in recognition of the underlying rationale for the exemption, in particular the avoidance of costly duplicative financial reporting, has, in the Companies (Amendment) Act 2017, extended the exemption period to cover financial periods to 31 December 2030 for existing companies incorporated before 18 July 2017.  However, the exemption will no longer be available for new holding companies incorporated after that date.

To avail of the exemption and be entitled to use US GAAP in the preparation of its statutory financial statements, a holding company must satisfy the following criteria:

(i)            the company must not have securities admitted to trading on a regulated market in the European Economic Area;

(ii)           the company must be registered with the SEC or the company must, otherwise, be subject to the reporting requirements of the SEC;

(iii)          the company must have been incorporated prior to 18 July 2017; and

(iv)          the company must either:

(a) not have made an annual return to the Irish Registrar of Companies to which statutory financial statements were attached prior to 4 July 2012; or

(b) if it did, it must have used US GAAP in the preparation of any such financial statements.

The Matheson View

The extension of the section 279 exemption is to be welcomed given, on a practical level, it extents an important cost saving measure currently availed of by many Irish companies listed in the US for an additional 10 years.

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Matheson Snapshot


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