The Companies Act 2014: What You Need to Know

The Companies Act 2014 (the “Act”) was signed into law in December 2014 and is expected to come into effect on 1 June 2015. Part 14 of the Act codifies the law relating to compliance and enforcement of company law and it mainly re-produces existing provisions under company law. However, there are a few significant changes to note. For the first time, company law offences are classified, according to their gravity, into four categories. Under the previous regime, it was a defence to an application brought to restrict a person from acting as a director or officer of a company if that person acted honestly and responsibly in relation to his dealings with the company. Under the Act, he must also be shown to have cooperated with the liquidator as far as could reasonably be expected in relation to the conduct of the winding up. A final point of note is the introduction in Part 14 of the restriction and disqualification undertakings, which can remove the need for recourse to the court in restriction and disqualification proceedings. 

Categories of Offences

In an effort to increase transparency and enhance enforcement, compliance and enforcement provisions have been grouped together in Part 14 of the Companies Act 2014. Subject to a few exceptions, each company law offence has been classified according to its gravity. The penalties that each category attracts are set out in Part 14 of the Act. At the most serious end of the scale lie the Category One offences, with Category Four offences being less serious:

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Class A fines are defined by the Fines Act 2010 as fines not exceeding €5,000.

Restriction and Disqualification of Directors

Part 14 also contains the law relating to the restriction and disqualification of directors which is contained in the Companies Act 1990, as amended. Of note in relation to restriction of directors is that it is no longer a sufficient defence that the director acted reasonably and responsibly in his dealings with the company. It must also be shown that the director, when requested to do so by the liquidator, cooperated as far as could reasonably be expected in relation to the conduct of the winding up of the insolvent company. Applications for restriction can be brought by the Director of Corporate Enforcement, the liquidator of the insolvent company or a receiver of the property of the company. A person who is the subject of a restriction order may not be appointed as a director or secretary of a company or act in any way in the formation or promotion of a company unless the company meets certain requirements. The company must have an allotted share capital of nominal value not less than €500,000 in the case of a public limited company, other than an investment company, or a public unlimited company, or €100,000 in the case of any other company. Each allotted share must be paid up, in cash, to that aggregate amount, including the whole of any premium on that share.

Similarly to disqualification under the previous regime, a person will be automatically disqualified from being appointed or acting as a director or other officer of a company where the person is convicted on indictment of an offence in relation to a company or an offence involving fraud or dishonesty. A new addition to the disqualification regime is the requirement that a director who is disqualified in another jurisdiction must notify the Registrar of that disqualification or be subject to disqualification in this jurisdiction also. 

Restriction and Disqualification Undertakings

Chapter 5 of the Act contains a new feature and permits restrictions and disqualifications to be made by way of an undertakings procedure. The Office of the Director of Corporate Enforcement can send a notice to the company officer in question requesting that they take the restriction/disqualification as an undertaking without recourse to the court. This process will reduce unnecessary use of resources in making court applications and reduce the costs involved in restriction and disqualification procedures. It is also likely that the introduction of undertakings will restrict or disqualify directors in a more expeditious manner.

Conclusion

The Act provides a useful codification and categorisation of the company law offences. In addition to the categorisation of the offences, the Act contains a number of noteworthy innovations. Of prime importance is the fact that it is no longer a defence to a restriction application for a director to show that he acted reasonably and honestly in relation to his dealings with the company; he must also be shown to have cooperated with the liquidator as far as could reasonably be expected. Another innovation is the introduction of restriction and disqualification undertakings, which is a welcome addition that may potentially avoid recourse to the court in such proceedings.