The new Companies Act 2014 was enacted in December 2014. The new Companies Act will replace the current Companies Acts 1963-2013 and will be commenced at the beginning of June 2015.
The Act will ultimately make it easy to register and operate a limited company in Ireland and will simplify and improve many aspects of Irish company law.
Summary/Points of Interest
- The 5 types of companies under the new Bill will be:-
- Private Company Limited by Shares; these will be known as ‘CLS’ companies but will retain limited at the end of their names. There will be no objects clause for these companies and the company constitutional documents will consist of a one page document. All existing Private Limited Companies will be automatically converted into CLS companies unless the shareholders object to same. A CLS company will be allowed have one director and one shareholder.
- Designated Activity Company; these types of companies will continue to have object clauses but there will be no ultra vires rule.
- Company Limited by Guarantee;
- Public Limited Company;
- Unlimited Company.
- Director’s duties will be codified in legislation for the first time. The application of doctrines such as ultra vires and constructive notice which have created uncertainty as to the capacity and authority of companies is fully removed and each private company will have full unlimited capacity to carry and undertaking any business and activity, do any act or enter into any transaction and for that purpose the company will have full rights, powers and privileges. This clears up certain ambiguity in relation to the capacity of companies to enter into certain transactions.
- There will be no requirement for a company to have authorised share capital.
- Share allotments may be authorised by ordinary resolution or by the constitution and authorisation may now be for a period greater than five years. Pre-emption rights may be disapplied by the constitution and the automatic pre-emption period is down from 21 to 14 days.
- The current rules governing financial assistance in relation to the acquisition of shares currently under Section 60 are retained but modified slightly.
- Although there is a single director option for a CLS company there must also be a company secretary and there is a new duty on the board of directors to ensure the secretary has the skills necessary to do the job. There is also a new 18 years minimum age requirement for directors and secretaries.
- Large companies are obligated to have audit committees in place.
- A CLS can dispense with holding a physical AGM and can instead have a written AGM and also unanimous written members resolution dealing with AGM issues. There is a new concept of ‘majority written resolutions’, 50% or more of shareholders can pass an ordinary written resolution and 75% or more of shareholders can pass special resolution and this replaces the current system where unanimous approval is needed to pass a written resolution.
- The Bill introduces the summary approval procedure which will be a very convenient way of validating certain restricted activities i.e. financial assistance, reduction in company capital, members voluntary winding up, loans to directors.
- In summary the Bill is largely a consolidation/ re-enactment of existing provisions however a number of new measures are introduced to include some important new duties and obligations for directors to include new audit committee requirements (directors compliance statements, new duties regarding secretary’s, statements regarding audit information, directors report), useful pro business reforms (i.e. ability for a CLS companies to have only one director, ability for CLS to dispense with a psychical AGM, extensions of audit exemption and particularly the new summary approval procedure) and increased liabilities and penalties for directors (i.e. personal responsibility for a company’s liabilities where a declaration made under summary approval procedure without reasonable grounds.)
For more information on the new Companies Consolidation Bill 2012 please contact John O’Connor Solicitors.