The Report Stage of the Companies Bill commenced in the Dail yesterday, 25 March at 6.25 pm and adjourned just over an hour later. Approximately half of the amendments tabled by the Department of Jobs, Enterprise and Innovation were agreed to during this session.
We have set out below a summary of some of the major amendments agreed to be made to the Bill following yesterday's debates:
- Private limited companies will no longer be permitted to have a securities seal, but it is proposed that PLCs will;
- Stock Transfers, in respect of shares that are not fully paid, will have to be executed by or on behalf of the transferee, as well as the transferor (section 95);
- Reserves arising from the reduction of company capital are to be treated for all purposes as realised profits- this is a very useful amendment, which will bring our law into line with the position in the UK (Section 118);
- There will be clarification that the general power of management of a company by its directors includes the power to borrow and to mortgage or charge property (Section 159);
- In relation to the "Summary Approval Procedure", applicable for (i) reductions of company capital, or (ii) transfers or disposals arising on group reorganisations, the required directors' declaration, to the effect that the company can pay its debts as they fall due, will be amended so that the debts in question will be limited to pre-ascertained debts and liabilities of the company (Section 205). This is intended to address a concern raised on behalf of the accountancy profession that, as the Bill stood, a company's auditors would have been unable to provide the necessary confirmation, as required in connection with these transactions, that the directors' declaration was "not unreasonable", which in turn would have effectively rendered the procedure unworkable, as far as those transactions were concerned;
- The requirement in Section 215 to keep in the State a server computer, providing services necessary for the keeping of company records, will not apply if these services are provided via "cloud computing" or by any other distance hosting solution;
- An exception is to be included in Section 232 (dealing with the duty of directors to disclose interests in contracts etc. made by the company) where the decision as to whether to enter into the contract etc. is taken other than by the board of directors, or a committee of which the director with the relevant interest is a member. This partly addresses a concern that the duty to disclose such interests was drafted too widely, and that as a result, contracts such as service contracts, already approved by or on behalf of the company, or known to it, would be caught. It was confirmed during the debates that this was not the intention.
- Transfers or disposals of assets and liabilities using the Summary Approval Procedure (Section 92) will no longer have to be "for the purpose of" a reorganisation of company capital – they can be for any purpose, so long as the capital is thereby reorganised. The Section had originally been drafted too narrowly, and this is a welcome amendment.
When the Report Stage is concluded, we will summarise any further changes of note.