On Tuesday 30 September 2014, the Companies Bill 2012 completed the report and final stages in Seanad Eireann. The Bill will now be sent back to Dail Eireann where all 164 amendments proposed by the Seanad are expected to be approved and it is anticipated that the Bill will be enacted in mid 2015.
The Bill, once enacted, will consolidate all existing Irish company acts, stretching over a 50 year period, into one single Act. While this article isn’t intended to explain or demystify the Bill, it does summarise some key points you should be familiar with.
In Ireland, approx. 90% of companies are private companies limited by shares. The Bill, in making the new model company a private company limited by shares (CLS), recognises the vital role a CLS plays in promoting business in Ireland. Parts 1–15 of the Bill set out the law governing the CLS. Parts 16–25 deal with other company types (including, public companies and guarantee companies).
A CLS will now have a single constitution and will have the same legal capacity as a natural person. This will allow it unlimited capacity to carry on any business or activity. If you wish to vary this, you will need to use an alternative company, called a Designated Activity Company.
While a CLS need have only one director, where a CLS has only one director that person may not also act as secretary. Directors duties are now set out in the Bill and this should assist in making the law on this clearer. In addition, directors of a company meeting certain financial thresholds will be required to prepare an annual directors’ compliance statement confirming that certain matters have been done or explaining why not.
A new Summary Approval Process will allow a CLS to carry out certain restricted activities if validated by means of a directors' declaration and a shareholders' resolution (including, financial assistance, capital reductions etc). And, for the first time under Irish law, the merger of Irish companies will be permitted. Previously, a merger would only have been possible under Irish law if there was a cross-border element.
The Bill expressly provides that, where a company has availed of the audit exemption, the Director of Corporate Enforcement (DOCE) can access books and documents and obtain information as required to satisfy the DOCE that the company has complied with the conditions to avail of the audit exemption.
Offences will fall into four Categories. Category 4 offences will be summary in nature and punishable by a Class A fine (not exceeding €5,000), Category 1 offences, being the most serious, will carry a maximum fine of €500,000 with a maximum term of imprisonment of 10 years on indictment.
The Bill provides for an 18 month transition period, after which time if no action is taken to re-register your company, it will automatically be deemed to be a CLS. Your company will then have a constitution comprising of its existing memorandum, but excluding its objects clause, and its existing articles of association. While the Bill itself is lengthy (now consisting of 1,448 sections) in consolidating the relevant law in one place it will, without doubt, improve the accessibility and visibility of Irish company law for all!