The Bill’s primary focus of simplification is spearheaded by the introduction of the new model form of private company limited by shares (“CLS”). Some key features of the CLS will include its ability to have a single director (as opposed to the current minimum of two directors) and one, standard form constitutional document. Significantly, a CLS will not have an objects clause under its new constitution and therefore will have unlimited corporate capacity. The obligation to hold a physical AGM may also be dispensed with.
Companies who wish to retain an objects clause will be required to convert to a form of corporate entity to be known as a designated activity company (“DAC”). The rules applicable to DACs will largely resemble those governing existing private limited companies.
The Bill provides for an 18 month transition period for private limited liability companies that exist on the date on which it comes into force. During that transition period, existing private limited companies can convert to a CLS by passing a special resolution or re-register as a DAC by passing an ordinary resolution at any time within 15 months of the legislation coming into force (or by passing a special resolution if outside that 15 month period). If, by the end of the transition period, a private limited company has not converted to a type recognised by the Bill, the company will automatically become a CLS.
The Bill introduces a number of other key innovative features to Irish company law including:
- a Summary Approval Procedure (“SAP”) which will provide a streamlined method for companies to authorise certain “restricted activities” such as capital reductions, the giving of financial assistance and the distribution of pre-acquisition profits
- a domestic merger regime modelled on the EC (Cross-Border Mergers) Regulations 2008;
- the codification of eight principal fiduciary duties of directors
- a duty on directors to ensure that the company secretary has the requisite skills and qualifications to fulfil the role
- the requirement of directors of certain limited liability companies to include a “compliance statement” in their annual directors’ report
- the ability of limited liability companies to return capital to their shareholders without having to obtain court approval to do so as is currently required
- removal of the requirement for unlimited companies to have distributable profits (retained earnings) in order to make distributions
- the requirement for all unlimited companies to include “Unlimited Company” or “UC” at the end their name
With enactment due shortly, now is the time for organisations with Irish companies to consider how the introduction of the new legislation will affect their businesses.