All directors must now disclosure their salaries to the public – how would you feel about your next door neighbour knowing your salary?
Well under section 305 of the new Companies Act 2014, which came into effect in 1 June 2015, ALL directors including shadow directors and de-facto directors must now disclose their director’s remuneration including salaries, benefit-in-kind, fees, and pensions in the annual abridged accounts lodged to the Companies Registration Office. This is in addition to the disclosure of gross amounts paid to employees and numbers of employees which is separately required.
Disclosures of director’s salaries will leave many business owners scratching their heads. Most SMEs and family owned businesses have one or maybe two directors. Whilst the director’s name won’t appear directly beside the salary it will be patently obvious who earns what from the disclosures. Once the accounts are lodged to the Companies Registration Office www.cro.ie anyone can log on and have a look for a small nominal fee. This in our opinion raises all sorts of commercial, privacy and security issues which could have quite serious ramifications for the directors personally and their business.
There are no exemptions or exceptions so if disclosures are not made then the directors are in breach of company law and committing an offence. It will leave Auditors and Accountants in a tricky situation as no doubt pressure will mount on them from directors not to make the disclosures and then they will be exposed and subject to sanctions from their Accountancy Institutes.
A word of warning to directors, some Accountants use software that just automatically prints off the abridged accounts and unknowingly lodged directly to the CRO with the disclosures. Directors should review the abridged accounts on completion and go through a proper sign off procedure before approving them for lodging.
For the record it is a category 2 offence under section 324(6) to approve statutory financial statements which do not give a true and fair view or do not comply with company legislation. This could include fines up to €50,000 and/or prison terms.
Returning to sole trader status could now become a more attractive option thus dismantling corporate structures as we know it today. It was intended that the new Companies Act 2014 would simplify company law administration and make it less burdensome for the ‘one person company’, however it now looks as if it could actually destroy it. One suspects there may well be legal challenges to this legislation particularly under Data Protection breeches so watch this space. For more information contact Pat Sutton on firstname.lastname@example.org or 045 530777