ICSA Ireland Conference 2017, 23 May

ICSA Ireland Conference
Effective governance in uncertain times - the evolving role of
the company secretary
Tuesday 23 May, Ballsbridge Hotel, Dublin

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the conversation
@ICSA_News
#ICSAIreConf17

Welcome and introduction
Ruairi Cosgrove FCIS, President, ICSA
Ireland

Striking a balance: the interaction
between the Company Secretary
and CEO
Fiona Muldoon, CEO, FBD plc

Strategy case study
Michael Cullen, CEO, Investec Ireland

ICSA: The Governance
Institute
Annual Conference
23 May 2017
Strategy
Michael Cullen, CEO Investec Ireland

• Strategy
o Doing the right thing
• Executing a Strategy
o Doing things the right way
• Culture
o How we do the right thing

Strategy
“Culture eats strategy for
breakfast…”
Peter Drucker

Strategy – Case Study
• 1987
o IFSC established
o Gandon Securities raises $50mn in Equity and Sub-
Ordinated Debt from a range of domestic and
international institutions
o Gandon was first institution to get a licence to operate
from the IFSC
• Strategy
o To hire the best proprietary traders and effectively
operate as a Hedge Fund under a corporate structure
o Some independent directors
o Risk management system that give 1 in 10000 chance
of wiping out equity

• 19 October 1987
o Black Monday
o Equity Prices collapsed 22% in one day
o Strategy in tatters….shareholder unease and risk
management system in question
o Equity intact!!!

• Strategy Change
o Focus on positives
o Talented people
o International Network
o Capital to seed new businesses
o Trading skills

• 1990-1995
o Seeded Ireland’s first Futures Fund Management business
o Became alternative provider to SME sector of derivatives
in competition to Banks
o Started an International Structured Finance business
o Created reputation for entrepreneurial culture and quality
staff
o Profits rising…diversified business streams…
shareholders happier
o Future bright as an independent financial services
company

• 1995-1996
o Surprise developments
o Staff defections and bid from Woodchester Credit
Lyonnais Bank
o Sale necessitated breakup of business
o Managed Futures business sold to IIU
o Gandon became subsidiary of Woodchester acquiring
responsibility for the management of their treasury and
corporate loan books
o Proprietary trading now incidental to remaining business
o Strategy now clearly fee based businesses

• 1996-1998
o Happy Days….
o Devolved management, supportive shareholder,
client acquisition strong and business lines
evolving
o Stakeholders are aligned

• 1998-2000
o The left field….
o GE purchase Woodchester
o Gandon does not fit into their strategy
o Profits delay the inevitable
o Management organise sale to Investec

• April 2000 to June 2012
o Investec Ireland
o Early successes derailed by foray into Property Lending
o Position recovered by profits on International Business
o Access to ECB Funding a strategic advantage
o Focus on Capital Light businesses
o Exited lending, except to existing clients
o Increased franchise through acquisition of NCB in 2012

• 2017 Current Strategy
o Concentrate on capital light high touch customer
centric businesses that provide financial solutions
to corporates and high net worth individuals

• Lessons
o Strategy must be flexible
o Shareholders must be aligned
o Culture must suit the environment
o Disappointment and failure go hand-in-hand with
success
What have we
Learned ?

• Leading change in uncertain times
o Brexit
o Trump
o French Presidential Election
o Taoiseach steps down 17 May 2017
o UK General Election 8 June 2017
o German Federal Election 24 September 2017
o Irish economy
….. the only certainty is uncertainty and
the only constant is change
Best President
Ever !!!
*Alternative Fact !!!!!!
BREXIT!

Who we are…
• Investec came to Ireland in 2000 when the Investec Group acquired Gandon Capital Markets, a treasury and
corporate banking operation. In 2012, Investec acquired the NCB Group, whose main activities included
stockbroking (private client and institutional), bonds, corporate finance, venture capital investment and
international funds listing.
• Since 01 October 2013, the Investec businesses in Ireland have been aligned with the existing Group structure /
pillars of Specialist Bank and Wealth & Investment.
• Investec is a leading specialist bank and wealth and investment manager in Ireland with Headquarters at Harcourt
Street, Dublin 2 and a regional office at One Albert Quay, Cork. Investec’s main activities in Ireland include wealth
management (private client and institutional), private banking, corporate treasury and FX, Corporate Finance and
Venture Capital Investment. Investec employs a team of c. 250 in Ireland.
• The Investec Group is an international specialist bank and asset manager. It provides a diverse range of financial
products and services to a select client base in three principal markets: the United Kingdom & Europe, South
Africa and Asia/Australia. The Group was founded in 1974 and currently has approximately 9,000 employees with
offices in 14 countries. Investec is dual listed on the London Stock Exchange and the Johannesburg Stock
Exchange. Investec is a FTSE 250 company.
• Investec plc is quoted on the Johannesburg and London stock exchanges with a market capitalisation of
£5.7bn as of 17 May 2017. Investec’s three principal areas of business worldwide are Specialist Banking,
Wealth and Investment and Asset Management. For more information, visit www.investec.ie.
Michael Cullen, CEO Investec Ireland

Eyes wide shut: a case study on
governance failure
Stephanie Manahan, CEO, Central Remedial
Clinic

‘Eyes wide shut’
A case study on Governance Failure
ICSA
The Governance Institute
23rd May 2017

65 years of service
for people with physical & multiple
disabilities

What Happened…
• 2009
• 2009 commencement of formal service level agreements
• April 2009:
– The HSE wrote to the Chair of the CRC requesting that
senior management remuneration be reduced.
• June 2009:
– The CRC responded ; remuneration of the CRC Senior team
was a matter solely for the CRC Governors.
– In the AGM of that same month the following was noted
in the minutes of the AGM from the then Chairman that
there were ‘difficulties with the HSE…..and could signal a
difficult year ahead’

• 2010
• June 2010:
– The CRC appointed 3 new people internally to the senior
management team and all 3 were granted top-ups on their
salaries.
• 2011
• November 2011:
– The CRC committed in writing to complying with HSE
salaries for future appointments.

• April 2012:
– Discussion at Board on the senior management
remuneration; the Board agreed to keep salaries as they
were.
• December 2012:
– The media interest in salaries at executive levels across the
state and state funded sector. Journalist FOI request for
information on the salary of the CRC CEO prompted
discussion at the Board.
– It was decided to continue with the same remuneration
levels despite a government position on the establishing a
maximum of no one earning greater than €200,000 at the
time on a public salary.

• March 2013:
– 15th of March HSE Internal Audit issued its report dealing with salary
top-ups.
– Later that month the Board of the CRC announced the retirement of
the CEO and agreed a retirement package with him.
– The salary of the new CEO discussed; set at a reduced rate but non-
compliant with the HSE rate.
• April 2013:
– The Board agreed that the outgoing CEO would take up a position on
the Board on his retirement.
– The CRC wrote to the HSE informing them of the plan to recruit a new
CEO and move towards the HSE pay scales.

• May 2013:
– HSE requested business case for replacement of the CEO and
agreement on the salary as per Service Agreement and previous
correspondence.
– CRC continued with the recruitment and agreed the interview panel
for the post of CEO (3 CRC Board members made up the interview
panel)
• June 2013:
– CRC Board approved appointment of new CEO. The successful
candidate was a current member of the Board of the CRC.
– HSE advised the Chairman of CRC that there was no approval to
proceed with the recruitment of the CEO and to stop any process
immediately.
– The HSE wrote twice to the Board of the CRC to request cessation of
the CEO recruitment process.

• July 2013:
– The HSE requested confirmation that no appointment had been made
and that the process had been halted.
– The CRC responded with the announcement of the new CEO
– The HSE requested all documentation pertaining to the recruitment of
the new CEO and reminded the CRC it was in breach with its service
arrangement.
– The HSE issued a first performance notice .
• August 2013:
– A special meeting of the CRC Board agreed a non-confrontational
approach and agreed to meet with the HSE.
– A second performance notice was issued to the CRC for failure to
submit documentation and a portion of funding was withheld.

• September 2013:
– Documentation sent to HSE regarding the recruitment
process.
• October 2013:
– meeting between the HSE and the CRC to discuss the
issues.
• November 2013
PAC notified the HSE that it would examine the findings of
HSE’s Internal Audit report on Section 38 Remuneration.
– November 23rd…..

• December 2013:
– December 6th: the new CEO resigned
– December 11th: first appearance of the CRC at the
Public Accounts Committee
– December 13th: the Board of the CRC resigned en-
masse.
• The story that followed is well known and well
documented but what if things had been different?
• How could events have been arrested and crisis been
averted and who was responsible for the catastrophe
that it became?

Amongst all this Noise….
a quiet voice…..
Between the positions taken up
HSE V CRC
CRC v HSE
Funded Section 38 V Incorporated Entity
One thing was forgotten….

The CRC was a charity….
the impact on the Charity Sector was
catastrophic

Four and a half years earlier...

Roads to
Ruin*
Board Skill &
NED Control
Board Risk
Blindness
Poor Leadership
& Culture
Defective
Communication
Excessive
Complexity
Inappropriate
incentives;
explicit or
implicit
Glass Ceilings

The Key Factors
Board Skill & NED Control
• Not being in effective Control of the
Organisation
• Not having the skills necessary on the Board
to understand & oversee the business
• Being blinded by a charismatic leader

Key Factors
Board Risk Blindness
• Failing to identify threats
• Taking a good reputation for granted
• Failing to question success; Luck v Skill
• Senior management oversight
• Setting a risk appetite
• Failure to recognise gradual change in the
landscape; the ‘back story’

Key Factors
Inadequate Leadership on Ethos & Culture
• Setting a business and moral compass
• Culture and Values matter
• Setting and embedding a coherent risk
strategy
• Ensuring the moral compass is implemented
throughout
• Risk of double standards

Key Factors
Defective Communication
• Information flowing in all directions; up, down
and sideways
• A listening culture
• Learning from own or others experience
• Group think

Key Factors
Organisational Complexity
• Group structure v single structure
• Core business

Key Factors
Incentives
• Explicit and implicit
Glass Ceiling
• Hierarchy
• Access to C-suite & Board

Importance of Relationships
o Relationships recognised as a principle risk
o Impact of failing to build effective
relationships
o Reliance on personal capabilities rather than
embedded in corporate ethos.
o Relationships need to be managed to ensure
success

What have we done?
At Board level
• New structures
• Reporting mechanisms
• Oversight &
accountability
• Directors Handbook
• Effectiveness review
• Annual committee
reviews
• Independent Co Sec
• Risk Register Oversight
At Management Level
• New Structure
• Authority levels
• Internal controls
• Reporting Structures
• Review of roles & Responsibilities
• Annual objective setting and
review
• Interface with Board via
committee structure
• Communication Strategies

What have we done
• Strategic Plan
• Comprehensive Stakeholder
engagement
• MVV Review
• MVV Workshops
• Detailed Implementation Plan
• Dashboard tracker
• Open Recruitment
• Comprehensive
Stakeholder analysis
• New Traditions
• SORP Compliance
• Governance Code
• Charities Regulation
Authority
• Statement of Guidelines of
Fundraising Principals
• Staff Survey & Follow up
• Service User Survey &
Follow up
• Communications Group
• Investment in people &
buildings

Reference
• Roads to Ruin; A study of Major Risk Events:
Their origins, Impact and Implications. A report
by Cass Business School on behalf of Airmic
www.airmic.com/roadstoruin
• Report of the Interim Administrator appointed
to the HSE to the CRC and Friends and
supporters of the CRC Ltd.
www.hse/publications

Mindfulness: enhancing
workplace relationships
Stephen Stynes, Potential Project Ireland

© 2015/16 – Potential Project
Redefining Leadership
In the Age of Complexity
How Mindfulness Enhances Workplace Relationships
Stephen Stynes, Potential Project International
The ICSA Ireland Conference , Dublin
23rd May 2017

GLOBAL LEADERS ADOPTING MINDFULNESS

THE PAID REALITY
Pressured
Always on
Information overloaded
Distracted

THE PAID REALITY LEADS TO ADT
Attention
Harvard Business Review: “Overloaded Circuits: Why Smart People Underperform”, Edward M. Hallowell / Killingsworth MA, Gilbert DT. A Wandering
46.9%

ADT AT WORK
46.9%
mind off
task
53.1%
mind on
task
Killingsworth MA, Gilbert DT. A Wandering Mind Is an Unhappy Mind. Science 12 November 2010: Vol. 330. no. 6006, p. 932 DOI: 10.1126/science.1192439
Distracted
Autopilot
Loss of control
Stressed
Frenzied
Action addicted
Disengaged
Cognitively rigid
Mindful
Conscious choices
Sense of control
Resilient
Focused
Prioritized
Engaged
Creative

HOW ATTENTIVE ARE YOU?

TEST YOUR MULTITASKING SKILLS
I am a great multitasker
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
1
I am
2 3

THE DOWNSIDES OF MULTITASKING
Stanford University; “Cognitive control in media multitaskers”, Eyal Ophir Et. Al. – Institute of Cognitive Neuroscience, University College London, Kep
Kee Loh Et. Al. Higher Media Multi-Tasking Activity Is Associated with Smaller Gray-Matter Density in the Anterior Cingulate Cortex
DRAINS ENERGY
Due to switching
HAMPERS CREATIVITY
Due to a full mind
DECREASES QUALITY
Due to more mistakes
KILLS PRIORITIZATION
Due to loss of overview
REDUCES EFFICIENCY
Due to switch time
REDUCES WELL-BEING
Due to increased stress
REWIRES YOUR BRAIN
Becomes default working mode
SHRINKS YOUR BRAIN
Less grey matter

WHAT IS MINDFULNESS?

FOCUS
AWARENESS

FOCUS
Without Distraction
AWARENESS
Without Judgement

MINDFULNESS: MANAGING ATTENTION
TASK
AT
HAND

THE ATTENTION ECONOMY
Accenture Institute of Strategic Change, Thomas Davenport: ”The Attention Economy” - Harvard Business School Press, 2001
”Understanding
and managing
attention is now
the single most
important
determinant of
business success”
Accenture Institute of Strategic Change,

FranklinCovey global Time Matrix™ Survey – 351.613 respondents from Africa, Asia-Pacific, Europe, Latin America, Middle East and North America
WE SPEND AN AVERAGE OF
ON LOW PRIORITIES

MINDFUL LEADERSHIP
SPEED UP
BY
SLOWING
DOWN

2 RULES OF MENTAL EFFECTIVENESS
Rule 1:
Focus on what you choose
Rule 2:
Choose your distractions
mindfully

THE THREE CORE QUALITIES IN MINDFULNESS
RELAXATION
FOCUSCLARITY

THE FOUNDATION OF MINDFULNESS TRAINING
CountingBreathingAnatomy Distractions
A B C D

“I initiated the program expecting that we would
become more focused and productive. That has
happened and I am grateful.
However, I realize another much bigger change:
I experience in myself and my employees that we
are becoming better human beings.”
Thomas Berg, Sales Director
IF Insurance.

Thank You
@StephenStynes
www.potentialproject.com
www.linkedin.com/in/stephenstynes

Top bunk thinking: a case study in
Competition Law
Keith Packer, former Commercial General
Manager, British Airways

Technical update: Companies
Registration Office
Maureen O’Sullivan and Dave McFadden
Companies Registration Office

M A U R E E N O ’ S U L L I VA N , R E G I S T R A R O F
C O M PA N I E S
CRO – DEVELOPMENTS
IN 2017

OVERVIEW
• Expansion of Mandatory E-Filing
• Mandatory e-filing will commence for 4 more Forms
• New requirements for e-filing of Annual Return
• Beneficial Ownership
• S.I. 560 of 2016
• Establishment of central register

MANDATORY ELECTRONIC FILING
• Currently only for Registration of Charges (Forms C1,
C1a, C1b and external company equivalents F1, F1a
and F1b)
• From 1st June 2017 it will be mandatory to file the
following forms electronically
• B1 Annual Return
• B10 Change of Director/Secretary or in their particulars
• B2 change of registered office
• B73 change in annual return date
• Paper forms filed after that date will be returned

E-FILING OF ANNUAL RETURNS
• As well as filing the B1 electronically:
• Financial statements will have to be uploaded using the pdf upload
facility in CORE
• The filing fee will have to be paid electronically using a customer
account or credit/debit card
• Cash/cheque payments will not be accepted for filing Annual
Returns
• The option of using a ROS signature continues to be available
• Signature pages will continue to be accepted
• Signature pages will have to be received in CRO within 28 days of
capturing B1
• Financial statements must be uploaded before the signature page is
received in CRO

AWARENESS CAMPAIGN
• Information campaign
• Direct emails to companies
• Letters to companies who haven’t yet registered an email address on
CORE
• Radio ads
• Newspaper ads
• Information also available through the usual channels
• Website
• E zine
• Twitter
• Youtube channel
• Be ready for 1st June, register now on www.core.ie

IMPACT OF AWARENESS CAMPAIGN
• Increase in queries to our Information Unit asking for
information on electronic filng
• Behaviour is already changing
• More payments by customer account/electronic means
• An increase in the number of financial statements being uploaded

REGISTER OF BENEFICIAL OWNERSHIP
• Anti money laundering measure
• Required under the 4th Anti Money Laundering Directive
• Central Register to be established by June 2017
• Companies
• Industrial & Provident Societies
• Trusts
• ICAVs
• CRO is likely to host the central register for companies
and industrial and provident societies

OBLIGATIONS ON COMPANIES AND
I&PS
• Statutory Instrument S.I. 560 of 2016 sets out requirements
for companies and industrial and provident societies
• Take all reasonable steps to obtain and hold adequate, accurate and
current information in respect of its beneficial owners
• The information required is
• Name, date of birth, nationality and residential address of each
beneficial owner
• A statement of the nature and extent of the interest held by each
beneficial owner
• This information must be kept in the company’s own
Beneficial Ownership Register, as well as
• Date on which a person was entered in the register
• Date on which the person ceased to be a beneficial owner

CENTRAL REGISTER
• Four aspects to implementation
• Awareness campaign for companies and I&Ps
• Receipt of information on the register
• Availability of information
• What if information is not given to the Registrar?
• Companies and I&Ps will be obliged to file the
information from their registers with the central register
• This obligation will come through a further S.I. from
D/Finance which is currently being prepared

ARRANGEMENTS
• Information will be filed online through a dedicated portal
not through CRO or CORE
• Filing will be free
• Register will open on 26th June and there will a 3 month
period in which to file without being in breach of the
statutory duty to file
• Next steps:
• Finalise design of portal and filing facility
• Awareness campaign
• Decisions remain to be made around access to the information
and compliance measures

REQUESTS FOR FURTHER
INFORMATION
• For general queries on the Directive and SI 560 contact
the Department of Finance at:
aml@finance.gov.ie

CRO - WHERE TO FIND FURTHER
INFORMATION
• Website www.cro.ie
• E zine – subscribe at www.cro.ie/publications/newsletter
• Twitter @cro_ie
• Youtube channel
https://www.youtube.com/channel/UCkvQn-
QKT1bRaSmL3SPAJDg

Companies under scrutiny:
Persons of Significant Control and
Ultimate Beneficial Ownership
Salvador Nash FCIS, Director, KPMG Legal
Services and Head of Company Secretarial
Andrea Sherlock ACIS, Associate Director,
KPMG Legal Services

Companies Under
Scrutiny:
Persons of Significant
Control &
Beneficial Ownership
Salvador Nash and Andrea Sherlock
23 May 2017
12687829v4

Persons with
Significant Control
The Small Business, Enterprise and Employment Act
2016
23 May 2017
12687829v4

90© 2017 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved. Printed in Ireland.
Overview – UK rules
• The requirement to UK companies, societies Europaeae and limited liability
partnerships, to maintain a Register of People with Significant Control was
introduced by the Small Business, Enterprise and Employment Act 2015
• The Small Business, Enterprise and Employment Act 2015 amended the
Companies Act 2006 by the insertion of a new Part 21A after the existing Part 21
of the Companies Act 2006 and by the insertion of a new Schedule 1A to the
Companies Act 2006
• The Small Business, Enterprise and Employment Act 2015 was supplemented by
The Register of People with Significant Control Regulations 2016 which
commenced on 6 April 2016

Exempt entities
• Companies subject to Chapter 5 of the Financial Conduct Authority Disclosure
and Transparency (DTR5) and
• Companies listed on EEA regulated market or other specified markets

Some Key Points in Legislation
• Obligation from 6 April 2016, for all UK Companies (unless exempt) to create and
maintain PSC Register.
• Criteria to identify your PSC.
• Obligation on Companies to issue investigative notices to person believed to be a
PSC seeking confirmation of same (if confirmation has not been supplied).
• Obligation on Companies to issue investigative notices to person believed to have
knowledge of a PSC seeking confirmation of same.
• Power to Companies to impose restriction on shares or rights for failure to
respond to notices issued.
• Sanctions and penalties for breach of the legislation
• Obligation from 30 June 2016, to disclose information on PSC Register to central
public register at Companies House in Cardiff.

Criteria to Identify Person With Significant Control
Legislation sets out specific Conditions
Condition 1 Over 25% of shares – The individual holds, directly or indirectly, more
than 25% of shares in Company.
Condition 2 Over 25% of voting rights – The individual holds, directly or indirectly,
more than 25% of voting rights in Company that are exercisable on
all or substantially all matters.
Conditions 3 Right to appoint or remove majority of the board – The individual
holds, directly or indirectly, to appoint or remove a majority of the
board of directors of the Company.
Condition 4 Significant influence or control over the company directly – The
individual has the right to exercise, or actually exercises, significant
influence or control over the Company.
Condition 5 Significant influence or control via a trust, partnership or other entity –
The trustees of a trust or the members of a partnership or another
entity that is not a legal person meet (or would if they were
individuals meet) one or more of the other specified conditions in their
capacity as such, and the individual has the right to exercise, or
actually exercises, significant influence or control over the activities of
that trust, partnership or other entity.

Holding Shares or Rights Indirectly
A person holds shares or rights indirectly
if they have a “majority stake” in an
another entity and that entity (or chain of
entities) holds the rights or shares in
question in the Company.
A person has “majority stake” in an
entity if:-
• holds majority Voting Rights
• Is a member and has right to appoint
or remove a majority of the board
• Is a member and controls alone
(pursuant to an agreement (with other
members) a majority of voting rights
• Has the right to exercise dominant
influence or control
Individual
Irish Co
UK Co
70%
30%

Individual
UK Co 2
UK Co1
PSC does not have to be an Individual
In this example
UK Co 2 (rather
than individual)
will be entered in
the PSC Register
of UK Co 1 as it is
a registerable
Relevant Legal
Entity
A PSC Register may include a corporate
entity if it is a registerable relevant legal
entity
An entity is a Relevant Legal Entity
(RLE) if:-
• meets the specified conditions to be a
PSC if it was an individual and
• is required to keep it’s own PSC
register;
or
• is subject to DTR5 or is listed on an
EEA market or other specified markets.
An RLE is registerable when it is the first
RLE in the corporate chain.
70%
30%

Example 1
In this example UK Company has four
individual shareholders
Mr Blue, Mr Green and Mr Red each own
20% of the votes and shares
Mrs Yellow owns 40% of the votes and
shares
Mrs Yellow –
40%
Mr Green
– 20%
UK
COMPANY
Mr Blue –
20%
Mr Red –
20%

Example 1
Mrs Yellow is a PSC because she holds
over 25% of Shares and votes in UK
Company directly.
Are there any other PSCs?
Mrs Yellow –
40%
Mr Green
– 20%
UK
COMPANY
Mr Blue –
20%
Mr Red –
20%

Questions to be asked to determine:-
a) Is there a joint arrangement between
any of the various members?
b) Is there any other person who has
the right to exercise significant
influence or control?
c) Is any person acting as nominee for
another?
d) Does anyone have the right, directly
or indirectly, to appoint or remove a
majority of Board?
Mr
Green –
20%
Mrs Yellow –
40%
UK
COMPANY
Mr Blue –
20%
Mr Red –
20%

Example 2
In this example Mr Green and Mr Red
are shareholders in HoldCo2 an Irish
incorporated Company.
HoldCo2 owns 60% of the shares and
votes in HoldCo 1, another Irish
incorporated Company.
HoldCo 1 owns 30% of the shares and
votes in UKCo, a trading company
operating in Manchester.
UKCo
Mr Green Mr Red
30%
HoldCo 2
IRELAND
HoldCo 1
IRELAND
60%
74% of
shares
and votes
UKCo
26%
Shares and
votes and
no other
rights or
influence

Example 2
Is Mr Red Registerable as a PSC ?
Is Mr Green Registerable as a PSC?
Answer 1 – Mr Red, has a majority stake
in HoldCo 2, which in turn has a majority
stake in HoldCo 1. HoldCo 1 holds over
25% of the shares in UKCo, Mr Red
therefore indirectly holds sufficient
percentage in UKCo, and should
therefore be entered in UKCo’s PSC
Register.
Answer 2 – Mr Green does not have a
majority stake in HoldCo 2, so he is not
treated as holding indirectly the shares in
UKCo held by HoldCo 1.UKCo
Mr Green Mr Red
30%
HoldCo 2
IRELAND
HoldCo 1
IRELAND
60%
UKCo
26%
Shares and
votes and
no other
rights or
influence
74% of
shares
and votes

Proposed New Developments in PSC Regime
From 26 June 2017 Annual
Confirmation Statements will no longer
include PSC information, notifications
and updates to Companies House will
be event driven.
• Companies obliged 14 days from
change to update PSC register;
• and another 14 days to file form with
Companies House
• New statutory Forms are required to
update and notify changes in PSC
information PSC01- PSC09
No lead in time to change to
Confirmation Statement
UK Company confirmation statement
date: 20 June 2017
Deadline for filing: 4 July 2017
File prior to 26 June 2017 – obliged to
provide PSC information
File post 26 June 2017 – No PSC
information required

Proposed New Developments in PSC Regime
Scope Extended to include more entities
• From 26 June 2017 - if listed on AIM no longer exempt
• From 24 July 2017 - Scottish Limited Partnership required to maintain PSC
Register
• From 24 July 2017 - General Scottish Partnerships (all partners corporate bodies)
also required also to maintain PSC Register
New Rules for UK Trusts
• From 26 June 2017 - new rules for UK Express Trusts.
• From 26 June 2017 - similar new rules for Non UK Express Trusts that have UK
source income or UK assets that generate a tax liability.

Summary / Key Takeaways
• Identifying your PSC and requirement for PSC Register to be adequate, accurate
and current
• Increased obligations – change to filing requirements of PSC information to event
driven obligation

Background
• On 15 November 2016 the Minister for Finance introduced Statutory Instrument
S.I. No. 560 of 2016, the European Union (Anti-Money Laundering: Beneficial
Ownership of Corporate Entities) Regulations 2016 (the “Regulations”).
• The Regulations gave effect to the first sub paragraph of Article 30(1) of
Directive (EU) 2015/849 of the European Parliament and of the Council 20 May
2015 (“AMLD4”).
• Article 30(1) of AMLD4 requires Member States of the EU to ensure that
corporate and other legal entities incorporated within their territory are required
to obtain and hold adequate, accurate and current information on their Beneficial
Ownership, including the details of the beneficial interests held.
• Member States must ensure that the information held on the Beneficial
Ownership Register of corporate and other legal entities is held in a central
register. It is likely that the Companies Registration Office may maintain the
central register in Ireland and that the information will be publicly available. The
deadline for the creation of the central register is 26 June 2017.

Impact on Irish Companies
• From 15 November 2016 all Irish corporate entities, unless they are exempt, must
take steps to maintain a Beneficial Ownership Register (the “Register”) and
ensure that the information contained therein is adequate, accurate and current.
• The Regulations do not apply to a company or other body corporate which is:
 Listed on a regulated market that is subject to disclosure requirements
consistent with the law of the European Union; or
 Subject to equivalent international standards which ensure adequate
transparency of ownership information, such as a company listed on the
NASDAQ.
• Therefore the Regulations do not apply to Companies listed on the Irish Stock
Exchange but their subsidiaries are not so exempt.

What is a Beneficial Owner?
Under Article 3, paragraph 6 of AMLD4, a Beneficial Owner is any individual on
whose behalf a transaction or activity is being conducted and/or an individual who
owns or controls directly or indirectly, a legal entity through ownership of a sufficient
percentage of the shares or voting rights, ownership interest or controls it by any
other means.
• Therefore, a body corporate, trust, company or other legal entity can not be a
Beneficial Owner of an EU incorporated company.
• An individual may be a Beneficial Owner of a legal entity through direct or indirect
ownership. Therefore, an individual who owns shares in a company through other
corporate entities may be deemed to be a Beneficial Owner, even though the
individual owns no shares directly in the company itself.
• A direct shareholding of over 25% held by a individual is an indication of direct
ownership.
• Similarly, a shareholding of over 25% held by a corporate entity, which is under
the control of an individual, or by multiple corporate entities, which are under the
control of the same individual, is an indication of indirect ownership.

Elements of Beneficial Ownership
(a) Direct ownership;
(b) indirect ownership; and
(c) control via other means.

Beneficial Ownership - (a) Direct Ownership
An individual is a Beneficial Owner if they own or control, a sufficient percentage of
the shares, voting rights or ownership interest in the Company.
Direct Ownership can be demonstrated by:
• A shareholding of 25% plus one share; or
• Voting rights of more than 25%; or
• An ownership interest of more than 25%.
N.B. A shareholding of exactly 25% is not caught by the Regulations

Beneficial Ownership – (b) Indirect Ownership
An individual is a Beneficial Owner if they hold indirectly a sufficient percentage in
the shares, voting rights or ownership interest in the Company.
Indirect ownership shall be demonstrated by any holdings above the sufficient
percentage (25%) that are held in the Company:-
• by another corporate entity which is under the control of the individual; or
• by multiple corporate entities, whose interests are aggregated, which are under
the control of the same individual.

Beneficial Ownership – (c) Control via Other Means
Indicators of control via other means:-
• a majority of the shareholders’ or members’ voting rights in a company;
• the right to appoint or remove a majority of the members of the administrative,
management or supervisory body of an entity;
• has the right to exercise dominant influence over an entity; and
• the parent undertaking and the subsidiary undertaking are managed on a unified
basis.
Section 7 of the Companies Act 2014 incorporates a similar definition for subsidiary
companies.

Direct Ownership – Example 1
• Individual owns 100% of the shares in
the capital of IRCO
• Accordingly, Individual is the
Beneficial Owner of IRCO
Individual
IRCO
100%

Direct Ownership – Example 2
• No shareholder directly holding a sufficient percentage to be a Beneficial Owner
• However, consider other factors that could result in any one of the Individuals
being the Beneficial Owner of IRCO
• If no factors exist, the Directors of IRCO are entered on the Beneficial Ownership
Register
Individual
2
IRCO
Individual
1
Individual
3
Individual
4
25% 25% 25% 25%

Indirect Ownership – Example 1
• As the Individual controls IRCO, who
has a sufficient percentage of shares
in SubCo, the Individual is recorded
as a Beneficial Owner of IRCO and
SubCo
Individual
IRCO
SubCo
100%
26%

Duty to maintain a Register – Regulation 14
Every Company is under a duty to establish and maintain a Beneficial Ownership
Register and keep it up to date.
Failure to comply is an offence and the Company shall be liable, on summary
conviction, to a Class A fine, of up to €5,000.
A person aggrieved or any other interested party may apply to the High Court.

Example of Beneficial Ownership Register

Beneficial Ownership - Steps to Take –
Regulation 6
Unless exempt, every Irish Company is required to take steps to identify its
Beneficial Owners and to insert the relevant particulars of the Beneficial Owners into
a Beneficial Ownership Register.
Regulation 6 Notice

Beneficial Ownership - Steps to Take –
Regulation 8
In situations where a Company has reasonable cause to believe that a person has
knowledge of who may be a Beneficial Owner of it or would likely have that
knowledge, it may write to that person (natural or legal) requesting:-
• a statement of whether or not that person knows the identity of:-
 the Beneficial Owner; or
 any person likely to know the identity of the Beneficial Owner.
The addressee of the notice must then supply any of the particulars of which it is
aware to the Company and state whether or not the information has been supplied
with the knowledge of the person concerned.
If the relevant particulars have not been supplied with the knowledge of the person
concerned the Company must issue a Regulation 6 Notice.

No Beneficial Owners?
• Exhausted all Possible Means
• Senior Managers
• Records

Duties of Beneficial Owner – Regulation 11
An Individual:-
• who is a Beneficial Owner of a Company;
• knows that to be the case or ought reasonably to do so;
• whose relevant particulars are not contained in the Beneficial Ownership
Register of the Company;
• who has not received a notice under Regulation 6; and
• the foregoing circumstances have continued for a period of at least one
month.
shall, not later than one month after the date on which each of the circumstances
were first met, notify the Company in writing and the notice shall state:-
i. the date on which the Individual acquired the status as the Beneficial Owner;
and
ii. the relevant particulars to be held in the Beneficial Ownership Register.

Changes to the Register
• Where a change in the particulars of a Beneficial Owner occurs the Company
must write to the Beneficial Owner to set out particulars subject to the change
and set out the particulars as they now believe them to be.
• This notice should be sent within one month of the Company becoming aware of
a change.
• If the Beneficial Owner is aware of a change in their relevant particulars and that
the Company has not updated the Beneficial Ownership Register, the Beneficial
Owner has a duty to notify the Company of the change within 2 months of the
change.
• It is an offence for the Company to fail to keep the Beneficial Ownership Register
updated and it is an offence for the Beneficial Owner to not inform the Company
of the relevant change when required. Each offence is punishable by a Class A
fine.

Penalties
• Failure by the Company to comply with the Regulations (e.g. the requirement to
maintain a Register, or the requirement to take steps to identify the Beneficial
Owner or the issuance of the relevant notices to the Beneficial Owner) is an
offence and penalties for non compliance include, on summary conviction, a
Class A fine of up to €5,000.
• Failure by any individual to comply with the Regulations (e.g. failing to respond to
a notice served on them or to make a statement that is false in a material
particular knowing it to be false or being reckless as to whether it is so false) is an
offence and the penalties include a Class A fine of up to €5,000.

Some Quick Points
• Central Register:-
 26 June 2017
 CRO
 Access
• Trusts
• Fund Structures

Primary Distinctions UK / Ireland
If no PSC is identified the
Company may state this fact in
the Register
PSC does not have to be a
natural person and allows
registerable relevant legal
entities to be entered in
Register
Specified prescribed wording
for entry in PSC Register
required in regard to level of
interest held
Central Register held at
Companies house and
accessible to the public
If no Beneficial Owner
identified, senior managing
officials entered in Register
Beneficial Ownership Register
must only contain details of
natural persons
No prescribed wording for entry
in Beneficial Ownership
Register provided as of yet
Central Register will be held by
Companies Registration Office
but unlikely if it will be
accessible to public

Key Takeaways and Wrap up
• Identification and disclosure of beneficial owners
• Creating and maintaining Registers
• Transparency
• Amendments to AMLD4
• Credibility of Information

Any Questions?

kpmg.ie
© 2017 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Ireland.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.
Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date
it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice
after a thorough examination of the particular situation.
The KPMG name and logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.
THIS ADVICE CAN ONLY BE RELIED UPON BY OUR CLIENT ON THE TERMS AND CONDITIONS AGREED
AND RECORDED IN OUR ENGAGEMENT LETTER AND SHALL NOT BE COPIED, REFERRED TO OR
DISCLOSED, IN WHOLE OR IN PART, TO ANY OTHER PARTY WITHOUT OUR PRIOR WRITTEN CONSENT.
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Governance, Risk and
Compliance: Key issues for the
Central Bank
Camille Blackburn, Deputy Head, Risk and
Policy, Central Bank of Ireland

Cyber/IT Risks
Camille Blackburn
Deputy Head, Policy and Risk Directorate
Central Bank of Ireland
Governance, Risk and Compliance: Key issues for the Central Bank
Brexit
Central Bank of Ireland - PUBLIC

Untangling Corporate Governance
Chris Hodge, Policy Advisor, ICSA and
former Director of Corporate Governance
FRC

What I am going to cover
• How our expectations of corporate governance have changed over the
last 25 years.
• The potential impact of Brexit on how the regulation of governance
develops in the UK and EU.
• The implications of possible governance reform in the UK for Irish
companies.

Corporate Governance: the 1992 view
Corporate governance was defined as “the system by which companies are
directed and controlled”.
As a result, the first UK code addressed only “the control and reporting
functions of boards”.
It also dampened down expectations: “Raising standards of corporate
governance cannot be achieved by structures and rules alone. They are
important because they provide a framework which will encourage and
support good governance, but what counts is the way in which they are put
to use.”
- Cadbury Committee, 1992

Corporate governance: the view now
The purpose of corporate governance is “to help build an environment of
trust, transparency and accountability necessary for fostering long-term
investment, financial stability and business integrity, thereby supporting
stronger growth and more inclusive societies.”
- OECD Principles of Corporate Governance (2015)
“Business must rise to the challenge of restoring faith in what they do, and in
the power of the market economy to deliver growth, opportunity and choice
for all”. The issues the government is consulting on are “issues of
competitiveness… as much as they are issues about fairness.”
- UK Government consultation on governance reform (2016)

How expectations have increased
• The definition of corporate governance has been expanded to include
“everything that companies do, and every impact that they have”.
• This has created a tendency to treat all business failures and scandals as
governance failures, and as being caused by systemic weaknesses not just
individual behaviour; but also a tendency by policy makers to turn to the
corporate governance framework when faced with a new public policy issue.
• This in turn has led to more regulation, codes and reporting applying to all
companies.
• While general standards of governance have been improved, there is a
significant downside as well…

Why is this a problem?
• Using a system designed for one purpose (protecting the interests of the
owners) to address a different one (promoting the public interest) is setting
yourself up for failure.
• It means both that important public policy issues are not being adequately
addressed, and that the regulatory approach to governance is seen as
failing, which leads to…
• Ever more regulation and reporting requirements, which increase burdens
on all companies without eliminating or punishing the bad behaviour of the
few.

The governance implications of Brexit
• For the EU: Will corporate governance regulation at the EU level move from
‘comply or explain’ to more mandatory requirements without the restraining
influence of the UK?
• For the UK: How will the UK position itself in order to attract international
companies and investment – high standards or low cost?
• For Irish companies: What will be the impact on companies with London
listings? Will the ISE continue to use the UK Code as its governance
standard?

FCA primary markets review
• The UK FCA is consulting on whether to introduce an ‘international segment’
to the London market.
• The background is the decline in secondary listings in the UK, and the lack of
interest shown by overseas companies in a standard listing of equity shares.
But Brexit has created greater interest in the proposal.
• The consultation document asks whether there should be an new segment
for overseas companies which would be less onerous in governance terms
than a premium listing (e.g. lower free float requirements, not required to
apply the UK Corporate Governance Code).

Potential changes to the UK Code
• Any incoming UK Government may ask the FRC to use the Code to
introduce new standards or reporting requirements.
• Possible areas would include some aspects of the remuneration process
(e.g. remuneration committee composition, what happens after a vote
against), and stakeholder engagement (e.g. getting the worker voice on
boards)
• The FRC itself has identified areas where it will probably strengthen the
Code (e.g. corporate culture, succession planning, diversity)
• The FRC has also said it will conduct “a fundamental review of the Code to
consider the balance between its principles, provisions and guidance.”

Closing speaker: Facing challenges
Bernard Dunne, World Champion Boxer,
TV & Radio Broadcaster and Author

ICSA Ireland Conference 2017, 23 May

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Editor's Notes