Overview

Volume 1 Analysis

Volume 1 Analysis

Part 1 – Preliminary and General

Part 1 of the Companies Act 2014 is largely devoted to house-keeping and defines terms which are used throughout the Act.

One innovation here is the combination of the definition of “subsidiary company” which is defined in the Companies Act 1963 (s 155) for general purposes with the definition of “subsidiary undertaking” which is defined in the European Communities (Companies: Group Accounts) Regulations 1992 (reg 4) for the purposes of group accounts so that there will be a common definition.

In this Part “wholly-owned subsidiary” is also defined.

[pc-pvt-content allow=”25″ warning=”1″ message=”To view content, please register or log in.”]

[/pc-pvt-content]

Part 2 – Incorporation and Registration

Part 2 contains the law concerning the formation and registration of companies, and in particular sets out the provisions regarding conversion to the new regime. If existing private companies do not “opt out”, they will be deemed to have become a new model private company with a constitution in the form specified in the Act. Existing companies may also proactively opt in, either by requesting the CRO to issue a new constitution based on their existing memorandum and articles of association, minus the objects clause, or by adopting specifically-tailored new constitutional documents.

Arthur Cox will assist clients well in advance of all deadlines with cost-effective and streamlined compliance with the new regime. Further details will be found here.

[pc-pvt-content allow=”25″ warning=”1″]

[/pc-pvt-content]

Part 3 – Share Capital, Shares and Certain Other Instruments

Part 3 of the Companies Act 2014 sets out in one place all of the law relating to shares and share capital, as opposed to it being spread across several different enactments, which has been the case since 1983.

It contains what is perhaps the most important distinguishing feature between the new model private company and existing private companies: whereas private companies have been permitted under the existing legislation to list debt securities, the new private company may not offer any securities, whether shares (equity) or bonds (debt) to the public in any circumstances. A private company which wishes to be able to offer securities will have to reregister as DACs – designated activity companies – which have an objects clause. The fact that the new private company cannot make public offerings allows the law applicable to it to be simplified.

In addition, the new Act sets out a number of provisions whereby if a private company’s constitution is silent, it defaults to what is provided for in the Act. This will reduce the need for companies to have detailed provisions in their constitutions. A number of such provisions are stated in this Part.
[pc-pvt-content allow=”25″ warning=”1″ message=”To view content, please register or log in.”]

[/pc-pvt-content]

Part 4 – Corporate Governance

Part 4 of the Companies Act 2014 sets out in one place all of the law relating to appointment and proceedings (including meetings) of officers (directors and secretaries) and members.

The Part sets out a number of provisions which might be considered “standard” and have been adopted by most companies in their articles of association, and provides that these shall apply “save to the extent that the company’s constitution provides otherwise”, allowing for the simplification of such documents.

One straightforward change proposed by the Act is that the new model private company limited by shares will be permitted to have only one director.

Another important innovation is the Summary Approval Procedure, which allows the following activities to be carried out when validated by the persons whom those restrictions are designed to protect (shareholders and creditors):

  • Financial assistance for acquisition of own shares
  • Reduction of company capital
  • Variation of capital in reorganisations
  • Loans, etc, to directors and others
  • Mergers
  • Voluntary windings up

[pc-pvt-content allow=”25″ warning=”1″ message=”To view content, please register or log in.”]

[/pc-pvt-content]

Part 5 – Duties of Directors and Other Officers

Part 5 of the Companies Act 2014 sets out a new regime on directors’ duties. The general rule will be that duties and requirements of directors will apply to all directors, whether they have been formally appointed as such or whether they fall to be classified as de facto or shadow directors.

The Act will confirm that it is the duty of directors to ensure compliance with the Companies Act (the obligation on secretaries to do this has been removed since secretaries have little or no statutory power to procure compliance) and codifies directors fiduciary duties (based largely on common law and equitable principles) into eight main duties, which will be owed to the company.

In addition, directors of private companies that meet certain thresholds will be required to draw up a statement setting out the company’s policies respecting compliance with its relevant obligations, to put in place appropriate arrangements or structures designed to secure material compliance with such obligations, and to conduct a review during each financial year of those arrangements and structures; and will be required to confirm in their directors’ report that they have done so.

[pc-pvt-content allow=”25″ warning=”1″ message=”To view text, please register or log in.”]

[/pc-pvt-content]

Part 6 – Financial Statement, Annual Return and Audit

Part 6 of the Companies Act sets out in one place the statutory provisions regarding the keeping of accounting records, and the preparation, audit and filing of financial statements, by companies, which until now have been spread over a number of pieces of legislation, and substantially amended over the years, often resulting in a lack of clarity as to what requirements apply to Companies Act and IFRS, and to individual and group, accounts.

The Part amends or clarifies key terms such as “financial statements”, “accounting records”, “financial year” and “annual return date”, and gives greater prominence to important terms such as “realised profits” and “true and fair view”, to the requirements that the financial statements be audited and that the company make an annual return.

Finally, the Part allows for the first time for the directors of a company in whose accounts a deficiency has become apparent to prepare revised financial statements or a revised directors’ report, or in certain circumstances will allow revision by supplementary note, and provides for related matters.

[pc-pvt-content allow=”25″ warning=”1″ message=”To view content, please register or log in.”]

[/pc-pvt-content]

Part 7 – Charges and Debentures

Part 7 of the Companies Act 2014 proposes to be consolidate and reform the law relating to security created by companies. One of the first changes relates to the definition of “charge” itself. While the general rule will be that all charges must be registered in order to avoid being void, a charge over cash in say a bank account will not have to be registered.

Another significant proposed change is that there will be two separate procedures for registration of charges. A one-stage procedure, similar to the current procedure, will require that particulars of all charges created be delivered to the CRO within 21 days of their creation, while a new two-stage procedure will provide that a notice can be sent to the Registrar stating the company’s intention to create a charge, followed up by a further notification within 21 days of its creation, stating that fact.

[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 8 – Receivers

Part 8 of the Companies Act consolidates and reforms the law relating to receivers.

One of the changes to the law is that the powers of receivers of the property of a company are enumerated in a non-exhaustive list of receivers’ powers, which will be without prejudice to the powers which may be granted by a debenture.

[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 9 – Reorganisations, Acquisitions, Mergers and Divisions

Part 9 of the Companies Act sets out the existing means for reorganising companies, such as Court sanctioned schemes of arrangement and compulsory purchase of minority interests (with some amendments), alongside two new means for effecting reorganisations of Irish incorporated private companies: mergers and divisions.

For the first time in Irish law, a statutory mechanism is provided whereby two Irish private companies (previously a cross-border element was required) can merge so that the assets and liabilities (and corporate identity) of one are transferred by operation of law to the other, before the former is dissolved. Moreover, it will be possible for an Irish company to be “divided” so that its undertaking is split between two other Irish companies.

In addition the Act allows that the Summary Approval Procedure could be utilised to effect the merger (i.e. a High Court order would not be required, resulting in a significant saving of time and money).
[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 10 – Examinerships

Part 10 of the Companies Act 2014 sets out the law in relation to examinerships, an area which has become of increased importance in recent years. The Part follows closely the current regime and reform of the existing law is relatively modest.
[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 11 – Winding Up

Part 11 of the Companies Act 2014 consolidates and modernises much of the law relating to the winding up of companies.

The Part seeks to introduce greater consistency between the three different methods of winding up (members’ voluntary, creditors’ voluntary and official). One of the objectives is to align Court-initiated liquidations with creditors’ voluntary windings up so as to reduce the Court’s supervisory involvement. It also sets out a number of additional reforms.
[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 12 – Strike Off and Restoration

Part 12 of the Companies Act radically overhauls the law relating to strike off and restoration of companies that have been struck off.

In the first place, the law in this area – which has been scattered across a number of different Companies Acts – will be brought together. Secondly, for the first time there will be a statutory distinction drawn between voluntary and involuntary strike off. The new voluntary strike off mechanism will formalise the ability of companies to apply to be struck off where certain conditions have been met.

No significant changes are set out in the Act in relation to restoration.
[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in”]

[/pc-pvt-content]

Part 13 – Investigations

Part 13 of the Companies Act sets out the law relating to the appointment of inspectors to companies. This is largely a re-enactment of the law, without significant amendment.
[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 14 – Compliance and Enforcement

Part 14 of the Companies Act gathers together provisions relating to compliance and enforcement, a change which will provide greater transparency.

While the Part is largely concerned with bringing together provisions regarding various orders which may be made in respect of a company, it also sets out one of the most far-reaching reforms provided for in the Act. This concerns the streamlining of the criminal offences that will be created by the Act into four categories each of which will attract a particular category of penalty, as follows:

  • Category 1 offence – conviction on indictment can result in a term of imprisonment of up to ten years or a fine of up to €500,000 or both;
  • Category 2 offence – conviction on indictment can result in a term of imprisonment of up to five years or a fine of up to €50,000 or both;
  • Category 3 offence – a summary offence only, attracting a term of imprisonment of up to six months and a “Class A fine” (or both); and
  • Category 4 offence – also a summary offence only, punishable by the imposition of a Class A fine.
  • A “Class A fine” is a fine within the meaning of the Fines Act 2010 (i.e. a fine not exceeding €5,000).

[pc-pvt-content allow=”25″ warning=”1″ message=”To view additional content, please register or log in.”]

[/pc-pvt-content]

Part 15 – Functions of Registrar and Regulatory Advisory Bodies