We hope that 2013 was a good year for you and your firm and that 2014 brings new opportunities and further success. We saw a number of developments in the Irish market last year and you can watch a short video from IDA Ireland with local highlights here, including updates on a number of our clients.
We have prepared a short overview of key developments in the corporate environment during 2013. We hope this proves helpful and if you require any additional information on these topics do please contact one of our team.
1. Companies Bill 2012 – Preparing for Transition
As the Companies Bill 2012 (the "Bill") nears enactment, Irish companies are beginning to prepare for transition to the new regime. The Bill will repeal more than two dozen statutes (effectively, the entire Companies Acts 1963 to 2013, with the exception of EU-derived securities law) and will consolidate them in a single statute.
We have summarised the Bill in previous editions of this e-zine, but given that enactment is anticipated for as early as July 2014, the focus for most companies is on preparing for transition to the new regime. The Bill is built around the most numerous company type, the private company limited by shares.
These companies will be subject to an 18 month transition period (which can be extended by the Minister for a further 12 months) during which their directors and shareholders must decide whether between registering as a new-form company limited by shares ("CLS") or as registering a designated activity company ("DAC").
For most companies, the decision will be based on whether they want to avail of the new company law procedures that are available to the CLS – such as the abolition of company objects, the availability of a one director minimum and the ability to dispense with AGMs – or whether they want to opt out and retain a more familiar corporate form.
Directors of existing private companies will also have to decide whether to or not to draft a new-form constitution. Thankfully, the consequences of choosing to register an existing constitution (or even of doing nothing) have been alleviated in the latest draft of the Bill, with the result that a private company can continue with a constitution that takes the form of its existing memorandum and articles of association, notwithstanding that this document refers to laws and regulations that will have been repealed.
The Irish Corporate Law Forum will present a practical seminar on the Bill titled "Preparing Private Companies for the Companies Bill: New Company Forms and Drafting Company Constitutions" at Dublin Castle on Friday, 7 February 2014. Senior Associate David Mangan is a member of the advisory board of the Irish Corporate Law Forum and will be among the presenters at the seminar.
We will provide updates on our dedicated Company Law web page as the Bill progresses further.
2. Companies (Miscellaneous Provisions) Act 2013
The Companies (Miscellaneous Provisions) Act 2013 (the "Act") was signed into law on 24 December 2013. One of the Act's main features is that enables small businesses to make applications for examinership to the Circuit Court.
These provisions were originally contained in the Companies Bill 2012; however, it was decided to "fast-track" the enactment of Circuit Court examinerships. The reason stems from the Government's Action Plan for Jobs, which envisages that small companies in financial difficulty will seek court protection in order to facilitate the restructuring of debts.
The ability to apply directly to the Circuit Court instead of the High Court to have an examiner appointed implies lower costs and greater accessibility for small companies. This is attractive alternative to liquidation for small businesses in difficulty. The overall aim is to allow small companies time to restructure debts and save jobs.
For the purposes of the Act, a small company is one that satisfies two out of the following three conditions:
- balance sheet not exceeding €4.4million;
- turnover not exceeding €8.8million; and
- number of employees not exceeding 50.
The Act also contains provisions to facilitate more efficient electronic filings with the Companies Registration Office. The requirement to file a true copy of accounts is abolished; scans can be electronically filed through CORE, reducing a minor administrative burden on companies.
It should be noted that as a result of the Act, the proper citation of the Companies Acts has been amended to "the Companies Acts 1963 to 2013". This citation should appear on all subsequent Memoranda and Articles of Association filed with the CRO, and should be included in auditors' reports, financial statements, etc.
3. Gender Balance on Listed Company Boards
On 20 November 2013, the European Parliament voted in favour of measures which will require listed companies to have women make up at least 40% of their non-executive directors. In order to become law, the Commission's proposal now needs to be adopted jointly by the European Parliament and the EU Member States in the Council.
SMEs remain excluded from the scope of the directive, although Member States are encouraged to support these companies to improve gender balance at all levels of management. The measures will only apply to the non-executive directors of publicly listed companies, due to their economic importance and high visibility.
The main elements are as follows:
- if a publicly listed company does not have 40% of women among its non-executive board members, it will be required to introduce a selection procedure which gives priority to qualified female candidates;
- emphasis is firmly on qualification;
- member States are required to lay down sanctions for companies in breach of the Directive;
- the law is a temporary measure; it will automatically expire in 2028; and
- the law also includes a "flexi quota" - an obligation for companies listed on a stock exchange to set themselves individual, self-regulatory targets regarding the representation of both sexes among executive directors, to be met by 2020 (or 2018 in case of public undertakings). Companies will have to report annually on the progress made.
This will, undoubtedly, mean major changes to the boards of Irish listed companies, especially in light of the fact that, in Ireland, women account for, on average, 11% of board members; a much lower figure than the EU average of 17%.
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.