Business Opinion: The news that the Company Law Review Group has recommended a significant watering down of proposed new compliance rules for directors has been met with widespread relief.

The Institute of Chartered Accountants has not even waited until the official publication of the CLRG report to congratulate it "for seeing that common sense has prevailed".

Indeed, the CLRG recommendations seem eminently sensible. They relate to the nature of the formal compliance policy that a company must put in place and the extent to which directors must then certify that they are adhering to their own policy.

The main recommendations of the CLRG are as follows:

• The exemption thresholds for companies should be raised from a turnover of €15.2 million or balance sheet of €7.6 million to a turnover of €25 million or balance sheet of €12.5 million.

• The obligations under which directors must certify compliance should be restricted to material tax law and serious company law offences.

• The compliance policy statement should only cover procedures and arrangements that are appropriate to the company's circumstances in the opinion of the directors.

• Auditors should not be required to assess the reasonableness of this statement.

• Introduction of the requirement for compliance statements should be put back to 2007.

If implemented, these recommendations will indeed address the main gripe of the ICAI, Ibec and all the other opponents of the new legislation, namely the additional costs that businesses will incur, both financial and otherwise. They have all pointed out that the level of regulation envisioned in the original Bill exceeded the norms elsewhere.

The CLRG report will shortly go to Cabinet, at which point the Government will have to make a decision. The problem, if that is not too strong a word, is that the changes also represent a significant climb down from the position adopted by the Government - in the person of the Tánaiste - in 2002 when they brought forward the legislation.

It is worth remembering the context in which the legislation came forward. The DIRT inquiry, which found the major banks facilitated wholesale tax evasion, was still fresh in people's minds. In addition, the report of High Court inspectors into Ansbacher Bank and related companies had been published in 2002.

It revealed a staggering array of breaches of company law, including the operation of an unlicensed bank from the boardroom of Ireland's largest company, CRH.

Also in the background lurked issues such as the scandals at National Irish Bank, and the collapse of Tony Taylor's investment business and Morrogh Stockbrokers.

If there was a common thread in all of these scandals it was the extent to which basic company law had been ignored, and the individuals who broke company law had by and large gone unpunished.

It was hardly surprising that such stern measures were brought when set against this backdrop, particularly when you consider what was going on in the wider world at companies such as Enron.

Indeed, the Companies Act 2003 was the last part of a comprehensive programme which, in the words of the Tánaiste, were intended to rectify a situation where the enforcement of company law had been regarded as a joke. Other key initiatives included the establishment of the Office of Corporate Enforcement.

But that was then and this is now. And the way for a significant climbdown has been paved for the Government by a number of influential figures.

Sean FitzPatrick, the chairman of Anglo Irish Bank and one of the countries most respected businessmen, voiced a widely held sentiment in a recent speech in which he warned that too much regulation could strangle the "can do" spirit that gave birth to the Celtic Tiger.

Dermot Gleeson SC, the chairman of AIB and a former attorney general also used a recent speaking engagement to make the case for light touch regulation.

But perhaps the most persuasive argument is in the recent judgement given by Mr Justice Peart. In considering whether or not to restrict the directors of the USIT group, he came down firmly on the side of entrepreneurs and the need for them to be able to take risks.

Although Justice Peart was dealing with a fairly narrow issue, his judgement was one of the most high profile in what could be called the new era of company law enforcement.

Intentionally or otherwise he sent a signal that the courts would be alive to the realities of business when interpreting any new company legislation coming their way.

In this climate it is hard to see the Government doing anything other than implementing the recommendations of the CLRG. Corporate Ireland would appear to be getting a second chance to show that it can be trusted. It should not be squandered.