New Companies Act 2014
After nearly a decade in the making, the Companies Act 2014 came into effect on 1 June 2015. The comprehensive Act is the largest reform of company law the State has seen in half a century (comprising a total of 25 Parts (over 1440 sections) and 17 Schedules) and is intended to make running a business in Ireland easier….
The Act includes a number of radical reforms
- The Act provides for the creation of two types of private limited company:
- a company limited by shares - these companies are expected to be the most widely utilised corporate vehicles; and
- a designated activity company - these most closely resemble current private limited companies
- During an 18 month transition period starting from the commencement of the Act, all existing private limited companies will have to decide to whether to convert into a company limited by shares or a designated activity company.
- Private limited companies will be entitled to have a single director but all companies must retain the office of the company secretary.
- Private limited companies will have a single document constitution to replace the existing memorandum and articles of association and will be deemed to have full and unlimited capacity in the same manner as human persons. All other companies, including designated activity companies, will have to retain a two document constitution similar to their existing two document memorandum and articles of association.
- Provisions relating to shareholder meetings have been greatly simplified with the requirement to hold an annual general meeting being optional and the delivery of notice of general meeting by electronic means being permitted.
- The existing common law duties of directors are codified into eight principle duties which will apply to all directors including shadow directors and de facto directors.
- The Act reintroduces the requirement that directors provide directors compliance statements. This obligation applies to all plcs and certain large private limited companies.
- The Act introduces a single summary approval procedure that may be followed in order to permit companies to partake in certain transactions which might otherwise be restricted or prohibited.
- Certain holding companies will be exempted from the obligation to prepare group financial statements where they and their subsidiaries do not exceed certain thresholds. The audit exemption has been extended to holding companies and their subsidiaries where together they are treated as small companies and in respect of dormant companies.
- For the first time the Act introduces mechanisms whereby mergers and divisions of Irish companies may take place.
- For the first time the Act categorises and classifies the various offences for breach of the provisions of the Act.
- For the first time the Act introduces omnibus statutory validation procedure known as the Summary Approval Procedure - a simplified written approval process which may be undertaken for activities that might prejudice shareholders or creditors (financial assistance for acquisition of own shares, reduction of company capital, variation of capital on reorganisations, treatment of pre-acquisition profits as distributable, transactions with directors and connected persons, mergers and members’ voluntary windings up).
- The audit exemption is extended and is now available in certain group situations (but not for a PLC, PUC, PULC or a company with securities listed on a regulated market). The audit exemption is also extended to dormant companies (ie, companies with no significant accounting transactions during the year and which have only intra-group assets and liabilities). An LTD and a DAC may avail of the audit exemption where two of the three prescribed conditions are met (whereas, under old law, all three conditions needed to be satisfied).
If you would like more information on this please contact us directly and one of our accountancy team will be happy to help