One of the most innovative features of the new Companies Bill is the Summary Approvals Procedure which allows certain significant transactions, which would otherwise be restricted under the Bill, to be carried out once the procedure is followed. The relevant transactions include:
- Financial Assistance for Acquisition of own Shares
- Loans to Directors
- Reduction of Capital
- Variation of Capital
- Voluntary Winding-up
- Pre-acquisition Reserves
The exact Summary Approvals Procedure to be used depends on the transaction to be approved but it broadly includes the following key steps:
- A declaration containing the information prescribed for each restricted activity is made by the directors and delivered to the Companies Registration Office within 21 days of the restricted activity. Failure to deliver the Declaration to the CRO within this time period invalidates the activity.
- The members must pass a special resolution (unanimous for mergers) not more than 12 months prior to the restricted activity giving the directors authority to carry out the restricted activity.
Where a director makes a Declaration without having reasonable grounds, the court may declare that the directors shall be personally responsible, without any limitation of liability for all the debts of the company.
For certain activities, a report prepared by an accountant must accompany the declaration going to the members.
The Summary Approvals Procedure will be an extremely useful tool in dealing with transactions which previously could only have been done with an expensive and lengthy Court procedure. However, care will need to be taken in each case to ensure that the procedure is correctly followed as the transaction could be invalidated if this is not done.