H4, the FAI and how this impacts my Company?
It has been a crazy few weeks with the drip feeding of revelation after revelation coming from the media in relation to the activities and governance at the FAI over recent years.
The latest twist was the filing of a H4 form with the Companies Registration Office by their Auditors.
What is a H4 Form?
Company Law, which was fully updated in recent years with the Companies Act 2014, makes it clear that all Companies have an obligation to maintain “adequate accounting records”. In fact section 281 of the legislation is one of the easiest to understand pieces of legislation I have ever seen. It simply says…… “A company shall keep or cause to be kept adequate accounting records”…..simples!
Section 282 then goes on to give some more specifics as to what the basic requirements for accounting records are. For those interested you can get the detail of that section as this link. Most business owners would be familiar with these basic requirements. In fact, following these requirements gives the business owner the opportunity to have available information to allow them make basic business decisions which will hopefully help them grow the business……win win.
Throughout company law there are references to various types of category offences. In total there are 4 categories of offences – category 1, 2, 3 & 4. As you would expect the seriousness determines which category number it is with 1 being the most serious.
An auditor has an obligation to report all suspected cases of Category 1 and 2 offences to the Office of the Director of Corporate Enforcement (ODCE). This would be where they believe there are reasonable grounds that such an offence has been (or is being) committed. This is where the H4 form that has been in the media the last few days comes in. This is the form that goes on public record with the Companies Registration Office. In addition there would more than likely be a more detailed report sent to the ODCE. It is not up to the Auditor to determine if an offence has actually been committed or not, that is for others to determine and due process to be followed but, needless to say, the optics of having a H4 filed would never be good.
How does this impact me?
Believe it or not, section 281 and section 282 (as with the rest of company law) relates to your own private company also. Sometimes we find that people do not fully understand that when you establish a company and start to trade through a company you have a separate legal entity and that as a director you are responsible for the running of that company. This includes community groups or charities that trade as a Company Limited by Guarantee. It is vitally important that good governance practices are in place and that as a director you are comfortable that controls and procedures are in place and being followed.
Regardless of whether or not your company is audited or has a requirement to be audited, the requirements to maintain adequate accounting records are the same and more importantly so are the potential offences!
Having a company and trading through that company can have significant benefits (tax and otherwise). With the right approach and advice, the setting up of good controls and procedures for your bookkeeping does not have to be onerous which will ensure you comply with these sections of Company Law and are maintaining adequate accounting records. You can then use these accounting records and the information they provide to assess your business and make good decisions for the future.
As ever, we can help you ensure this is done so feel free to contact one of the team!