Ireland – New Companies Law
The Companies Act 2014, which comes into force on 1 June 2015, represents the most significant reform of company law since 1963.
The new legislation creates two new and distinct types of private limited company, and existing companies must choose which of these they will convert to.
The new legislation also simplifies the existing cumbersome and outdated legislation making it easier to understand, and removing unnecessary red tape, paperwork and costs for the majority of businesses.
THE NEW COMPANY TYPES
All companies currently registered as private companies limited by shares must convert to one of two new company types- LTD (Private Company Limited by Shares) or DAC (Designated Activity Company).
KEY PROVISIONS
Written resolutions may be passed by the relevant majority of members (75% for special resolutions or 50% for ordinary resolutions).
A new “summary approval procedure” will allow companies to carry out certain activities by means of a directors’ declaration and a shareholders’ resolution for activities which under the current law would require High Court approval (e.g. certain transactions with directors, capital reductions, and solvent windings up).
Private companies will be able, for the first time, to engage in mergers and divisions (under the current law there is no facility for two private Irish companies to merge).
Loans to directors by the company or by directors to the company must comply with new formalities, encouraging them to be documented clearly in writing.
The availability of the audit exemption will be extended to group companies, and to dormant companies.
WHAT DO DIRECTORS NEED TO KNOW?
Directors’ duties are codified, thereby making the law in this area more transparent and accessible. All offences under company law are streamlined and categorised into four categories.
The directors must ensure that the company secretary has the necessary skills or resources for this role.
Penalties for non-compliance with company law by directors are increased. For example, if a company is in arrears of filing accounts and annual returns in one or more years, and is then involuntarily struck off, a director faces an immediate disqualification period of 5 years by accepting a disqualification letter to this effect, and up to 25 years if the matter is heard in court.
If a director disobeys a court order (e.g. in relation to non-payment of a debt of a company) there is an option to seize the personal assets of the director.
ACTION TO BE TAKEN
A period of time will be allowed for an existing private company limited by shares to opt for conversion to either an LTD or a DAC (18 months from 1 June 2015 for LTDs, 15 months for DACs) and a new electronic certificate of incorporation will be issued by the Companies Registration Office.
