NOW EASIER TO SETUP AND RUN A COMPANY IN IRELAND
The Companies Act 2014 represents the most significant reform of company law since 1963, replacing the existing 16 Companies Acts, and will come into force on 1 June 2015. Set out across 25 parts, to ease the accessibility of the law for each different company type, the Act contains over 1,400 sections and 17 schedules.
The new legislation simplifies the existing cumbersome and outdated legislation making it easier to understand, and removing unnecessary red tape, paperwork and costs for the majority of businesses.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).
|LTD (NEW PRIVATE
COMPANY LIMITED BY SHARES)
This company has a one document constitution with no objects clause; it may have a single director and there is no need to physically hold an AGM.
A private company limited by shares with an objects clause and Memorandum and Articles of Association. This is similar to private companies under existing legislation and must have two directors and hold an AGM.
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.
Verfides welcomes this streamlining and modernisation of Irish company law and is well positioned to assist all its clients well in advance of the deadlines, and to provide cost effective and streamlined compliance with the new regime. We will arrange all the necessary documentation, Companies Registration Office filings, and tailored advice to ensure a smooth transition to the new regime.
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.