The Bill consolidates, reorganises and reforms company law in a number of respects. The Bill is expected to come into law in 2014. The main changes might be enumerated as follows:-

  1. The most common type of company will be the CLS (company limited by shares), where there will no longer be a Memorandum and Articles of Association (hereinafter memo and arts). In place there will be one written document called the company constitution which will not contain an objects clause therefore the ultra vires rule will not apply and the CLS will have the same contractual capacity as natural persons. The CLS can have just one director and one member. Parts 1-15 of the Bill will apply to CLS companies.
  2. For private companies, the need for and AGM can be dispensed with in favour of a written resolution which inter alia acknowledges receipt of the financial statements and confirms appointment of auditors (s.176).
  3. There is also the option to incorporate companies other than CLS companies including designated activity companies (DAC, Part 16), public limited companies (PLC, Part 17), companies limited by guarantee (CLG, Part 18), external companies (EC, Part 21).  DACs will more closely resemble existing private limited companies in that there will be an object clause which will limit their activities. PLCs are required to have memo and arts. There will be three types of unlimited companies, all referred to as UC (Part 19).
  4. In terms of transition, existing private limited companies will be treated as DACs for a period of 18 months (unless they opt to register as CLS during this period using form N1 and with that adopt a new company constitution) and at this point they will automatically convert to CLS (with the same memo and arts minus the objects clause) unless they register as DAC within 15 months(using a form N2). It is thought that most companies will either register as CLS within the 18 month transition period or fail to register and become a CLS by default. In the former case the new company constitution which is registered will apply and in the latter case the existing memo and arts will apply minus the objects clause. The work for lawyers will be the drawing up of a new constitution for the company in the 15 month period after commencement which might either be the memo and arts minus the objects clause or a very plain constitution in terms set out Schedule 1 to the Bill.
  5. The provisions of company law will apply not only to directors but also shadow directors and de facto directors. The latter is defined as, "A  person who occupies the position of director of ... but who has not been formally appointed as such director...". There is a saving for those who are deemed a de facto director by reason only of giving professional advice (s.223)
  6. In cases of the oppression of a minority shareholders, there is a new remedy of compensation which can be ordered in favour of the shareholder (s.213). It is likely the court will only use this remedy where the court can envisage the parties working together in the future e.g. where the applicant is one of a number of shareholders and does not have the ability to influence the voting rights of the company. Following the commencement of the Bill there will still be a great need for a shareholder agreement and/or a constitution which provides for an exit mechanism for shareholders. This is because neither the Bill itself nor the company constitutions in the schedules to the Bill contain an exit mechanism for shareholders in dispute therefore such disputes will be resolved through oppression or winding up proceedings as has been the case to date
  7. There will be a summary approval procedure for certain activities, such as transactions with directors, financial assistance, capital reductions and voluntary solvent winding up. High Court approval will not be required for these transactions as was the requirement before in some cases. Generally a special resolution is required and directors are required to swear a statutory declaration of solvency. In the case of a reduction or variation in capital or a voluntary solvent wind-up there must also be a report from an independent person (s.201-212).
  8. Directors duties, which were before discernible from case-law, are now codified (s.229).
  9. There is some protection for minorities in that a member holding more than one 10% of the voting rights of the company can require the company accounts to be audited despite the company being otherwise audit exempt (s. 335).
  10. Re priority of charges, where the priority of chargers is not governed by some other regime such as the land registry, priority will be determined by reference to the date of receipt by the registrar of the prescribed particulars (s.413).  Also, a charge holder can do a preliminary registration – first send a notice of the company's intention to create a charge then follow up by further notification within 21 days of the creation of the charge to prevent a third party gaining priority after preliminary registration and before final registration (s.410).
  11. There is a new statutory  mechanism whereby Irish companies can merge so the assets and liabilities of one can be transferred to the another before the former is dissolved. To date this was only possible where there was a cross-border element. The merger will be effected through the summary approval procedure and a High Court order is not required (ss.462-485).
  12. It will now be possible to apply for examinership in the Circuit Court. This will apply to companies where the balance sheet is less than €4.4 million, the turnover is less than €8.8 million and there are less than 50 employees (s.518)

I will update this page as the Bill gets amended in passing the Committee stages and the Seanad stages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.