What is it

The Summary Approval Procedure (“SAP”) which was introduced by the Companies Act 2014 (the “Act”), constitutes a “procedure” for authorising a company to take seven specified actions which would otherwise be prohibited, or (in some cases) only be permitted with High Court approval. Notably, one of those actions which may be authorised using the SAP is the provision of guarantees/security by a company in respect of loans provided to a “connected” company – a regular requirement in financing transactions.

Actions authorised using the SAP

The seven actions which may be authorised using the SAP are as follows:

  1. Financial assistance (inclusive of loans, guarantees and security) by a company for the purpose of acquiring its own shares
  2. Reduction in issued share capital
  3. Variation of share capital on a re-organisation
  4. The treatment of a subsidiary’s pre-acquisition profits or losses in a holding company’s financial statements as profits available for distribution
  5. Certain transactions in favour of directors and connected persons (e.g. loans, guarantees, security)
  6. Domestic mergers
  7. The commencement of a members voluntary winding up

The procedure

The “procedure” varies in certain respects depending on the nature of the restricted activity being approved, however, generally speaking, it involves the following:

  1. A declaration of solvency by the directors
  2. In some cases, an independent person’s report will be required to confirm that the directors declaration of solvency is not unreasonable
  3. Shareholder approval
  4. Companies Registration Office filings

Conclusion

The SAP comprises a very welcome addition into Irish company law. It provides a clear step-by-step “procedure” for approving each of the transactions to which it relates, and furthermore, its inclusion in just one chapter of the Act (Chapter 7 or Part 4) for all activities to which it relates makes it very easily accessible for any interested parties. Please click here for a more detailed synopsis of the SAP.