The Seanad Committee Stage of the Companies Bill commenced yesterday afternoon, 17 June, and was completed yesterday evening. All of the 170 amendments tabled by the Department of Jobs, Enterprise and Innovation were agreed to.
The next step will be for the Bill to be considered again by the Seanad at the Report Stage, for which no date has yet been fixed. It was indicated during yesterday's debates that further amendments may be proposed at the Report Stage.
As was the case during the previous stages in the Dáil, many of the changes proposed and agreed to yesterday in the Seanad were of a technical nature, or are being inserted for the purposes of clarification. The following is a summary of the more interesting amendments:
- The reduction of company capital by means of a capital reduction, either under the new Summary Approval Procedure or on foot of a Court application, or by extinguishing or reducing the liability of any of the members on any shares in respect of shares not paid up, or by paying off paid up share capital, will be a "distribution" for company law purposes, and so will need to be made out of distributable profits. The Bill previously excluded these actions from the definition of a "distribution". This will have implications for some types of corporate transactions.
- As is currently the case in Table A in the Companies Act 1963 and the articles of association of many companies, a director can be required to vacate his or her office if he or she "becomes of unsound mind". This outdated terminology is now to be modernised and replaced by language which refers to the health of the director being such "that he or she can no longer be reasonably regarded as possessing an adequate decision making capacity".
- The Minister is to be given power to make regulations to permit the removal of the usual residential address of a director from the register to be kept by the Registrar of Companies, or from the register of directors and secretaries required to be kept by a company, if this is warranted by circumstances concerning the personal safety or security of the director. This is a welcome development which ought to bring our law into line with the position under English law. However, the proposed amendment contains language which suggests that the regulations may contain provisions restricting the exemption to future situations where such entries are required to be entered in such registers, which raises the question of what the position is to be where a director wishes to remove existing details of his residential address from these registers, for reasons of personal safety or security.
- In line with the recommendations of the Company Law Review Group, the Bill is to be amended to provide that it will be sufficient if the company satisfies at least two of the three conditions currently required to be met before the audit exemption under section 360 will be available (balance sheet not to exceed €4.4 million, turnover not to exceed €8.8 million and average number of employees not to exceed 50).
- "Relevant securitisation companies" such as "section 110" qualifying companies or financial vehicle corporations will not be entitled to the small company audit exemption.
- The Bill currently contains a requirement for the disclosure of certain information by directors and secretaries who have interests in share options granted by parent companies, even where the number of shares is below the new 1% exemption threshold. As drafted, this residual disclosure obligation would have been a trap for the unwary director or secretary, and a concern for multinational corporations which have selected or are considering selecting Ireland as a base of operations. Consequently the Law Society's Business Law Committee as well as others made representations that the requirement be deleted. The Minister indicated during last night's debates that this disclosure requirement was not intended, and is to be removed, which is another welcome development.
In relation to the further amendments which it was indicated are being considered for the Report Stage in the Seanad, these include a proposal that a credit institution or an insurance company which is currently a limited company will be compulsorily required to re- register as a "designated activity company" (DAC), and will not be allowed to "default" to the new " LTD" or "CLS" (company limited by shares) status. Another proposal is to provide that a single-member DAC can dispense with the requirement to hold a physical AGM. Currently, the Bill provides in effect that all DACs must hold a physical AGM.