The Government is to significantly water down proposals for company directors to prepare an annual compliance statement. The Minister for Trade and Commerce, Michael Ahern, said the recommendations of the Company Law Review Group (CLRG) - which were published yesterday - would now be taken forward in legislation.

The review group was asked to look at the compliance legislation contained in Companies Act 2003 last April and has recommended significant changes.

It wants the threshold above which companies must prepare compliance statements increased and the number of obligations - under tax and company law - that directors must report compliance with reduced.

The group believes that the threshold should be a balance sheet of more than €12.5 million and a turnover of €25 million.

The original legislation set a threshold of a turnover of €15.2 million or a balance sheet of €7.6 million.

It also proposed that directors certify compliance with all tax and company law. The group has recommended that this is changed to encompass only material tax law and serious company law offences.

In addition the CLRG has said that the law should be "less prescriptive" about the methods a company uses to review its compliance, and that there should not be any requirement for compliance statements to be reviewed by the company's external auditors.

The various business representative bodies that had lobbied against the original legislation warmly welcomed the changes yesterday.

John Greely, president of the Institute of Chartered Accountants, commented: "The CLRG proposals will provide clarity as to the obligations of directors and will, we believe, lead to a more workable and effective compliance model."

His opposite number at the Institute of Directors, Robert Grier, said: "The CLRG report is a pragmatic and very sensible document which recommends that the Directors' Compliance Statement in its current form be revised and a compromise proposal is adopted. The compromise proposal adequately addresses many of IoD's concerns."

Mr Ahern said the "new model of the Directors' Compliance Statement represents an exemplary approach to regulation."

He added: "I believe the introduction of this new legislation will bring certainty to this area and is a proportionate form of regulation."