This briefing is based on the Companies Bill as it has completed Report Stage and Final Stage in Seanad Éireann (30 September 2014).
A general briefing on the Companies Bill 2012 (the “Bill”) is available here. The Bill has been amended at various stages to date as it has progressed through the Houses of the Oireachtas. This note provides an overview of the principal amendments that have been made to the Bill at each key stage since the Bill was initiated in December 2012.
In this briefing “CLS” means a company limited by shares, a “DAC” means a designated activity company and “PLC” means a public limited company.
The Principal Amendments made to the Bill as Passed by Dáil Éireann
- Reserving a Company Name Pre- Incorporation: The entitlement of a company to apply to the Registrar of Companies to reserve a name pre- incorporation has been clarified.
- Sealing: The default requirements for the application and witnessing of the application of the company’s common seal (ie unless provided otherwise in the company’s constitution) have been clarified.
- Bearer Shares: While a PLC will continue to be permitted to issue bearer shares, a private company will not.
- Securities Seal: A private limited company may no longer have a securities seal although a PLC may do so.
- Reductions of Capital: A reserve arising from a reduction of capital will be treated as realised profits, including for the purposes of distributions.
- Powers of the Board: By default, the directors will have a power to borrow money and to charge the property of the company as security.
- Restricted Activities: Restrictions have been introduced on a company carrying on the activity of a credit institution and an insurance undertaking.
- Directors (Legal Form): An unincorporated body of persons may not be a director of a company.
- Directors (Restriction Orders): The minimum paid-up capital of a company that has a restricted director has been increased to €0.5m in the case of a PLC and a public unlimited company and€100,000 in every other case.
- Directors (Disclosure of Interests): A director need not disclose his or her interest in a contract made by the company if the decision to enter the contract is taken otherwise than by (a) the board or (b) a committee of the board of which the relevant director is a member.
- Company Secretarial: In the case of electronic records, the obligation to keep the relevant computer in the State does not apply if the relevant service is provided from a computer outside the State which is accessible readily from within the State.
- Transfers and Disposals of Assets and Liabilities: A transfer or disposal of an asset or liability using the Summary Approval Procedure may be for any purpose and not merely for the reorganisation of the company’s capital, subject to the company’s capital being reorganised in the process.
- Summary Approval Procedure (Reductions of Capital and Disposals on Group Reorganisations): To address concerns of the accountancy profession, the directors’ declaration has been amended so that the company’s ability to pay its debts as they fall due is limited to the pre-ascertained assets and liabilities of the company.
- Summary Approval Procedure (Failure to File Declaration): The High Court may, where it is just and equitable to do so, declare to be valid the provision of financial assistance or the entering by a company into a transaction with a director even if there has, in the course of the Summary Approval Procedure, been a failure to register the statutory declaration in the Companies Registration Office (the “CRO”).
- Winding Up (Priority Taxes): The taxes that must be paid in priority in a winding up have been expanded.
- Winding Up (Records of a Liquidator): The period of time post-liquidation for which a liquidator must retain records has been extended (from three years to six years).
The Principal Amendments made to the Bill as Passed at Committee Stage in Seanad Éireann
- Single Directors: A CLS will be regarded as a single-director company if, for any reason, the CLS in fact has only a single director, irrespective of the number of directors for which the company’s constitution may provide.
- Safety of Directors: The Minister may by regulations provide that the usual residential address of a director or secretary need not appear on a company register or on a register kept by the CRO if, following stipulated considerations, it is determined that the circumstances of the relevant officer’s personal safety or security warrant such an exemption.
- Company Secretary: The directors must ensure that the company secretary has either the skills or the resources necessary to discharge his or her statutory and other legal duties.
- Participation in Profits of a DAC: A person other than a member may participate in the divisible profits of a DAC.
- Reduction of Company Capital: Any reduction of a company’s capital1 will be a “distribution” for company law purposes and so may only be made out of the company’s distributable profits.
- Written Resolutions: The written resolution procedure (whether unanimous or majority) may be invoked notwithstanding any provisions to the contrary in the Act (as opposed to merely anything to the contrary in the relevant Parts of the Bill).
- Disclosure of Interests in Shares, Share Options, etc: The obligation of a director and secretary to disclose interests in options in shares (as well as interests in shares) has been eased, now applying only to interests of over 1% of the share capital of the relevant group entity.
- Audit Exemption (Conditions): A CLS and a DAC may avail of the audit exemption where merely two (and not all three) of the prescribed conditions are satisfied (ie any two of (a) balance sheet ≤€4.4m, (b) turnover ≤€8.8m or (c) employees ≤50).
- Audit Exemption (SPVs): No “relevant securitisation company” may avail of the small company audit exemption.
- Priority of Charges: The priority of charges created by a company, and the transitional arrangements for the introduction of the new regime, have been modified, principally to recognise in statutory company law the concept of “tacking of further advances”, as applies already in land law.
- Prospectuses – Local Offers: The ceiling for a “local offer” for the purpose of prospectus law has been increased from €2.5m to €5m.
- Financial Collateral Arrangements: The Minister may by regulations vary the scope of the exclusion from the definition of a “charge” in order to give effect to EU law on financial collateral arrangements.
- Liquidation (Members’ Voluntary): If, in a members’ voluntary liquidation, a copy of the directors’ declaration of solvency is not delivered to the Registrar of Companies within 14 days, the winding up will be invalid, subject to an application being made to the High Court to avoid this rule if the court determines that it is just and equitable to do so.
- Liquidation (Creditors’ Voluntary): If a company resolves to commence a creditors’ voluntary liquidation, it must within 14 days give notice of the resolution in Iris Oifigiúil.
- Liquidation (Unclaimed Dividends and Balances): Unclaimed dividends and unapplied balances in a winding up will be lodged to an account to be nominated by the Minister and will be treated in a manner similar to unclaimed policies of life assurance, defaulting to the Exchequer after seven years but subject to any court order to restore the money to any person who satisfies the court that he or she is the rightful owner.
- Captive Insurers: A captive insurer need not have an audit committee.
The Principal Amendments made to the Bill as Passed at Report Stage and Final Stage in Seanad Éireann
- Registered Persons: The requirement to register with the CRO the name of every person who has unqualified legal authority to bind the company and to authorise others to do so is no longer obligatory.
- Powers of Attorney: The appointment by a company of any person as its attorney, to execute deeds or do any matter on its behalf either within or outside the State, no longer needs to be made under the company’s seal. The person executing such a deed, as attorney for the company, no longer needs to use his or her personal seal.
- Annual general meeting (“AGM”): No DAC, PLC, company limited by guarantee or unlimited company having two or more members may dispense with the requirement to hold an AGM.
- Audit Exemptions: A company, which has availed itself of the audit exemption, must, if requested, provide to the Director of Corporate Enforcement, necessary access to and facilities for inspecting and taking copies of the books and documents of the company and furnish any such information as the Director may reasonably require to satisfy himself that the company was entitled to avail of the audit exemption.
- Director’s right to vote on contracts (DACs): A director of a DAC may vote in respect of any contract, appointment or arrangement in which he or she is interested and shall be counted in the quorum, unless the company’s constitution provides otherwise.
- Director’s right to hold office or place of profit under the Company (DACs): A DAC director may hold any such position (other than that of the statutory auditor of the company) in conjunction with his or her office of director for such time and on such terms as the company’s directors may determine, unless the company’s constitution provides otherwise.
- Director’s liability to account and indemnify (DACs): The requirement for a director to account to the company for any gain made from a breach of the director’s statutory fiduciary duties and / or to indemnify the company for any loss or damage resulting from such breach can apply to all of the statutory fiduciary duties with the exception of the duty to act honestly and responsibly in relation to the conduct of the affairs of the company.
- Unlimited Companies: The Minister has the authority to grant an exemption to an unlimited company from having to use the words “unlimited company” (or the Irish language equivalent) at the end of its name.
- Directors of Unlimited Companies: The Bill confirms the exceptions to the prohibition on a director of a PLC voting in respect of any contract or arrangement in which he or she is interested and to be counted in the quorum. These exceptions include any contract by the director to subscribe for shares or debentures of the PLC.
- PLCs and Proxies: The instrument appointing a proxy may be notified to the PLC by electronic means.
- Stock Transfers: To transfer shares in an unlimited company (whether public or private) instruments of transfer must be executed by both the transferee and the transferor.
As the Bill has completed a substantial part of its legislative journey it is likely to be enacted in November 2014 and, we understand, to come into effect on 1 June 2015.