companies bill 2012: focus on the main new provisions contained in parts 1-16 of the bill

COMPANIES BILL 2012: FOCUS ON THE MAIN NEW PROVISIONS CONTAINED IN

PARTS 1-16 OF THE BILL

Colm KearneySolicitor

INTRODUCTION

Most Significant Overhaul of Company Law in History of State Consolidation of most Statutory Reforms since 1963 Act Vision and Work – Dr. Thomas Courtney and CLRG Current State of Companies Acts is Cumbersome New Companies Bill – Simplify Legislation and Easy to Navigate Enhance Competitiveness for Ireland on International StageEnhance Competitiveness for Ireland on International Stage Substantiating Ireland’s Position as Hub for Large Indigenous and Foreign Substantiating Ireland’s Position as Hub for Large Indigenous and Foreign

Corporates with More Transparent and Understandable Company Law StructureCorporates with More Transparent and Understandable Company Law Structure Largest Piece of Legislation to Come Before Houses of Oireachtas – Over 1100 Largest Piece of Legislation to Come Before Houses of Oireachtas – Over 1100

Pages Pages Bill Passed by the Dail – Currently with SeanadBill Passed by the Dail – Currently with Seanad Primary Focus – Private Companies Limited by Share Capital – Approximately 85% Primary Focus – Private Companies Limited by Share Capital – Approximately 85%

of all Companies Registered in Irelandof all Companies Registered in Ireland Autumn 2014 – start of 2015 with a commencement order issuing somewhere

between 3-6 months after enactment

STRUCTURE – Focus: Parts 1-16

Parts 1 – 25 of the Bill are laid out as follows:-Part 1 Preliminary and GeneralPart 2 Incorporation and RegistrationPart 3 Share Capital, Shares and Certain Other InstrumentsPart 4 Corporate GovernancePart 5 Duties of Directors and Other OfficersPart 6 Financial Statements, Annual Return and AuditPart 7 Charges and DebenturesPart 8 ReceiversPart 9 Reorganisations, Acquisitions, Mergers and DivisionsPart 10 ExaminershipsPart 11 Winding UpPart 12 Strike Off and RestorationPart 13 Investigations

STRUCTURESTRUCTURE

Part 14 Compliance and Enforcement Part 15 Functions of Registrar and of Regulatory and Advisory Bodies Part 16 Designated Activity Companies (“DAC”) Part 17 Public Limited Companies Part 18 Guarantee Companies Part 19 Unlimited Companies Part 20 Re-registration Part 21 External Companies Part 22 Unregistered Companies and Joint Stock Companies Part 23 Public Offers of Securities, Financial Reporting by Traded Companies,

Prevention of Market Abuse, etc. Part 24 Investment Companies Part 25 Miscellaneous

PART 1 PRELIMINARY AND GENERAL

Interpretation and Defined Terms Generally

PART 2 - INCORPORATION AND REGISTRATION

Transition Period: Allows for a Company to Achieve the Necessary Status of the Revised Format of Registration under the BillLength of Transition Period: 18 Months from the Commencement of the Act (Minister Option to Extend to 30 Months)During Transition Period Only: Every Existing Private Company Limited by Shares assumes the status of a DAC until/if it opts to convert to a New CLS/LTDThree Options for Private Companies Limited by SharesOption 1 - Conversion to New Company Limited by Shares (New CLS/LTD)Option 2 - Conversion to Designated Activity Company (DAC)Option 3 – Take no Action


Company Type RelevantSection Of the Bill

Transition Period Constitution Objects Clause Steps to conversion

Conversion - New LTD/CLS

Sections 59, 60 & 61

18 Months No objects clause and Single Document Constitution

Absent Special Resolution of the members of the Company to re-register before expiry of Transition Period Where Members do nothing, Directors obliged to act and pass the resolutions to adopt the new constitution, deliver constitution to members and make the filings with the CRO

Conversion - DAC Section 57 18 Months Memorandum and Articles of Association including specific objects

Present Voluntary: Option to pass Ordinary Resolution not less than 3 months before end of Transition Period to become a DAC and re-register with the CRO. Compulsory: Company must re-register as DAC if notice by members or member holding more than 25% voting rights directing re-registration as DAC is served on a Company not less than 3 months before the end of the Transition Period. Compulsory for the company to re-register as DAC before the end of Transition Period if it offers securities to the public. Application to Court Option by Members or Creditors (15%) in the event of no re-registration as DAC

Do Nothing Option - LTD/CLS

Section 62 18 Months No objects clause but memorandum and articles of association only if exercising of option is not taken

Absent If existing LTD does nothing at the end of the Transition Period still regulated by existing memorandum and articles of association but no objects clause but existing memorandum and articles of association may conflict with the Bill and advice should be sought

PART 2 - INCORPORATION AND REGISTRATION Option 1: Conversion to New CLS/LTD New Constitution – Schedule 1 of the Bill – One Page Document Details contained in New Constitution: Company’s Name Limited by Shares Supplemental Regulations (advice on what supplementary regulations to include with the re-registration insofar as they

mimic the existing memorandum and articles of association but do not fall foul of the compulsory provisions in the Bill - left blank, a company’s internal regulations will default to the voluntary and compulsory provisions in the Bill (Table A Type Scenario ie Transfer of Shares)

Share Capital Subscriber(s) Details and No. of Shares Subscribed For Executed and Witnessed By Subscriber(s) Statement with Constitutional Documents Detailing Directors, Secretary, Assistant Deputy Secretary, Registered Address, Trading Address New LTD/CLS: Section 59 - 61 – During Transition Period - Members Adopt New

Constitution – Special Resolution – Where Members do nothing, Directors Resolution to Convert and Deliver Constitution to Members and Documents to Registrar

PART 2 – INCORPORATION AND REGISTRATION PART 2 – INCORPORATION AND REGISTRATION Option 2 – Conversion to DAC – Part 16 of the Bill DAC can be Limited by Shares or Guarantee - DAC: Section 57 – During Transition Period

– Ordinary Resolution to Become DAC DAC retains it’s Objects Clause and is Formed for a Specific Object ie a joint venture

company or a trustee company, companies with charitable objects, insurance undertaking or credit institution, companies with negotiated different classes of shares (ie Tax driven companies)

Regardless of Presence of Objects Clause, Ultra Vires does not apply to DAC – Lack of Capacity cannot Negate DAC Actions

Section 976 – Potential Personal Liability for Directors of DAC where DAC acts outside Corporate Capacity

Compulsory for DAC to Re-Register before end of Transition Period Conversion to the DAC will mean a change of name instead of such a company ending

with limited the name now must end in Designated Activity Company, DAC, D.A.C.,dac, d.a.c. or the Irish equivalent

DAC – Section 986: Min. 2 Directors and AGM – Old Method – Formal Meeting - No Written Resolution Available

PART 2 - INCORPORATION AND REGISTRATION Option 3 – Take No Action

LTD: Sections 56 and 62 – End of Transition Period – No Action Taken: No Objects Clause, Existing Memorandum and Articles Unless Provisions Specifically Repealed by the Bill

Table A Not in Bill but Mostly Replicated in Bill save for Voluntary Provisions that do not Conflict with the Bill

Voluntary Provisions in Bill can be Opted Out of but need to be Specifically Disapplied in Company’s Constitution or Articles

Advices on Supplementary Regulations/Memorandum and Articles Should be sought Third Parties Assessing Constitution ie financial institutions and contracting parties need to be properly

informed – potential to paint misleading picture

Members can Apply to Court if Rights Prejudiced by Inaction of Directors (Section 212 equivalent of old Section 205 oppression on a minority)Presumption of Oppression on Members by Directors due to inaction and Directors will be obliged to rebut the presumption - Large Burden of Proof on DirectorsDirectors need to be informed

PART 2 - INCORPORATION AND REGISTRATION New: Sections 39 – 40 – Person Appointed by the Board to Bind the Company

Generally and Details to be Notified to the Registrar of Companies (Such Persons have Unqualified Legal Authority )

New: Section 17 – Increase of Number of Members from 99 to 149

Section 33 – New - Documents to be Published in CRO Gazette are as follows: Cert of Incorporation Constitution Amendment to Constitution Change in Directors/Secretaries Persons Authorise to Bind a Company Annual Returns and Financial Statements Change of Registered Office Published within 10 Days of Document Delivery


New: Section 38 – Deletion of the Ultra Vires Doctrine Significant Change and Text of Section 38 as follows: “…notwithstanding anything contained in its Constitution a Company shall

have, whether acting inside or outside of the State – a full and unlimited capacity to carry on or undertake any business or activity, do any act or enter into any transaction and (b) for the purpose of paragraph (a) full rights, powers and privileges.”

Doctrine of ultra vires questioned the capacity of Companies to contract where they were acting outside of their principal objects

Legislative provision finally obliterates a cumbersome common law uncertainty and allows all entities to trade with Companies without having to consider such an unfavourable outcome

Companies now have Contractual Capacity of an Individual DAC will still have an Objects Clause as outlined above but cannot rely on

doctrine of ultra vires

PART 3 – SHARE CAPITAL, SHARES AND CERTAIN OTHER PART 3 – SHARE CAPITAL, SHARES AND CERTAIN OTHER INSTRUMENTS INSTRUMENTS

Section 19 – New CLS/LTD not required to have an Authorised Share CapitalSection 19 – New CLS/LTD not required to have an Authorised Share Capital

Section 70 – Re-enacts SS. 20-24 Companies Act, 1983 – Director Authority to Allot Shares Section 70 – Re-enacts SS. 20-24 Companies Act, 1983 – Director Authority to Allot Shares and Pre-Emption – New: 5 Year Authorisation Renewal No Longer Applicableand Pre-Emption – New: 5 Year Authorisation Renewal No Longer Applicable

Section 71 – Where Allotment of Shares is Other Than Cash – New: Copy Contract No Section 71 – Where Allotment of Shares is Other Than Cash – New: Copy Contract No Longer RequiredLonger Required

New: Section 67 - a Company may allot shares in different nominal values, different currencies and/or with different amounts payable on them

New: Section 69 states that an allotment of shares by directors must be in the best interests of the Company and it’s members

New: A Company does not now have to maintain 10% of it’s issued share capital as non-redeemable


Section 73 – New – Mergers and Group Reorganisations Section 73 – New – Mergers and Group Reorganisations Currently: Where company issues shares for cash or other consideration ie shares, Currently: Where company issues shares for cash or other consideration ie shares,

the value of the consideration received over the nominal value must be accounted for the value of the consideration received over the nominal value must be accounted for in the share premium accountin the share premium account

New: Exceptions to this rule to allow for distributions to shareholders instead of New: Exceptions to this rule to allow for distributions to shareholders instead of locking the funds in the share premium account:locking the funds in the share premium account:

1) Mergers: Where Issuing Company has secured at least 90% of Equity in Another 1) Mergers: Where Issuing Company has secured at least 90% of Equity in Another Company;Company;

2) Group Reconstructions: Where assets are transferred between two group 2) Group Reconstructions: Where assets are transferred between two group companies and the consideration is the issuing of shares;companies and the consideration is the issuing of shares;

3) Acquisition: Shares allotted by the target are acquired by the purchaser such that 3) Acquisition: Shares allotted by the target are acquired by the purchaser such that the target becomes a wholly owned subsidiary of the purchaser. the target becomes a wholly owned subsidiary of the purchaser.


Section 83 is the New “Section 60” – Financial Assistance for the Acquisition of SharesSection 83 is the New “Section 60” – Financial Assistance for the Acquisition of Shares S60.-(1) Subject to subsections (2), (12) and (13), it shall not be lawful for a company

to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company, or, where the company is a subsidiary company, in its holding company.

S83 “….it shall not be lawful for a company to give any financial assistance for the purpose of an acquisition made or to be made by any person of any shares in the company, or, where the company is a subsidiary company, in its holding company ….”

“acquisition” and “financial assistance” have been defined so are affectively the same meaning in the old section but the words “in connection with” have been removed

The assumption is that these words have been removed to tighten up the section so that it relates only to specific purpose of the acquisition and not any ancillary matter relating to the purpose

Use of Summary Approval Procedure – No Major Change but formalises “Whitewash”Use of Summary Approval Procedure – No Major Change but formalises “Whitewash” Special Resolution of the Members of the Company and a Declaration by the Directors Contents of Section 83 Declaration are as follows: the circumstances in which the transaction or arrangement is to be entered into; the nature of the transaction or arrangement; the person or persons to or for whom the transaction or arrangement is to be made; the total amount of the company’s assets and liabilities as at the latest practicable date before

the making of the declaration and in any event at a date not more than 3 months before the date of the making of the declaration;

the anticipated total amount of the company’s assets and liabilities immediately after the restricted activity having taken place;

that the declarants have made a full inquiry into the affairs of the company and that, having done so, they have formed the opinion that the company is able to pay its debts in full; and

that the declarants do not have actual or constructive notice that the company will incur any material, extraordinary, future liability within the period of 12 months after the date of the making of the declaration;

No Material Change from Existing Position

PART 3 – SHARE CAPITAL, SHARES AND CERTAIN OTHER PART 3 – SHARE CAPITAL, SHARES AND CERTAIN OTHER INSTRUMENTSINSTRUMENTS


New: Section 85 re-enacts Section 72 (Power of a Company to reduce it’s Share New: Section 85 re-enacts Section 72 (Power of a Company to reduce it’s Share Capital) Capital) Use of Summary Approval Procedure as alternative to Special Resolution and High Use of Summary Approval Procedure as alternative to Special Resolution and High Court Application ConfirmationCourt Application Confirmation

New: Section 84 Variation of company capital It recognizes that share capital, share premium account, capital redemption reserve fund and capital conversion reserve fund are all in similar distributable terms, of the same set, and moving amounts out of one subset into another should be treated unremarkably


Sections 103 – 117 Acquisition of own Shares (Share Buy-Backs)

New: By cancellation pursuant to a reduction of company capital by either of the means referred to in Section 85 (as detailed above)

New: No longer a minimum 10% of issued share capital non-redeemable

New: Displaying of Share Buyback Contracts and Documents for 21 Days also Abolished – Speeds Up the Share Buyback Process


Section 95 – No change in the Transferring of Shares save for replicating Table A in Bill

Suggestion here was to enforce registration of transfer of shares in the CRO

Section 98 transmission of shares: in special circumstances (including cases of mergers) is new, empowering the minister to prescribe procedures to effect the transfer of shares:

in the case of a death of the sole member of a single-member company where that member had been the only director of the company;

and in other cases of difficulty.

PART 4 – CORPORATE GOVERNANCEPART 4 – CORPORATE GOVERNANCE

Significant Overhaul New: Section 129: Minimum of One Director Section 130: Companies must have a Secretary - In One Director Companies, Separate

Secretary who may also be an Additional Director Section 126: Directors to ensure Secretaries Suitably Qualified Legal Commentators see Offering Secretarial Services as a Potential Revenue Source for

Law Firms given Option of One Director Companies Section 43 which states the seal must still be attested by two officers of the Company Made

up of directors, secretary and authorised persons No longer be a requirement that at least one director attests the affixing of the seal New: Sections 159 – 166 - Internal Management Rules Notoriously in Table A (Regulation 80)

Codified in Bill: Business of the company is managed by the directors and that they have the ability to

delegate to the office of Managing Director and manage the Company accordingly Note: Sections 159-166 of the Bill are optional to the extent that the Company’s

constitution/articles provides otherwise or the same are made illegal/compulsory by overriding provisions in the Bill

PART 4 – CORPORATE GOVERNANCE

New: Section 176 - Section 176 allows for Annual General Meetings to be Dispensed With and Matters Resolved by Written Resolution

Note: Not Applicable to all Company Types ie DAC and Criteria to be Adhered to More practical solution for smaller Companies where the member base is small and

where in such Companies, Directors and Shareholders are one and the same people

New: Section 194 – 195: Codifies the written resolution procedure and there is no stipulation that same has to be allowed for in the Company’s Articles of Association

New: The written resolution procedure is also further amended to allow for written resolutions to be passed on a majority basis as opposed to the unanimous vote ie only 50% to pass Ordinary Resolutions and only 75% to pass Special Resolutions

All Members entitled to vote must receive text of resolution and explanation of it’s effects

PART 4 – CORPORATE GOVERNANCE Allows for these Resolutions to be effective 7 Days (Ordinary Resolutions) and 21

days (Special Resolutions) after the last member has signed

In it’s attempt to protect dissenting members, this part of the provision negates the potential benefit of majority written resolution voting by slowing the process down

Distinction between majority and unanimous voting by way of written resolutions is that unanimous resolutions, as before, become effective immediately

Resolutions can be signed on several different documents is codified in the Bill Delivery of resolutions by way of fax or email is codified in the Bill

These procedures attempt take account of modern business life and the international element of Irish business

New: Section 203 – Summary Approval Procedure (As outlined above) - an approval mechanism which formally validates legislatively an action otherwise considered a “Restricted Activity”

“Restricted Activity” is defined in Section 201 and includes the following: Financial Assistance for the Acquisition of the Company’s Own Shares Reduction in the Company’s Share Capital Variation of Capital in a Re-Organisation Loans to Directors and others and Intra-Group Company Loans Mergers Voluntary Winding up Summary Approval Procedure allows for Companies to enter these types of transactions Form: Approval by Shareholders’ Special Resolution, Director’s approval and Directors swear a

Statutory Declaration of Solvency (Valid for 12 months before restricted activity) Declaration at Meeting of Director’s 30 Days before Special Resolution Passed Additional reports required of independent people in the case of certain other Restricted Activities As before both civil and criminal sanctions where the swearing of a Declaration of Solvency was done

on the basis to protect specific shareholders, creditors and/or to paint a false picture of the financial position of the Company

PART 4 – CORPORATE GOVERNANCE

PART 5 – DUTIES OF DIRECTORS AND OTHER OFFICERS New: Section 223 - encapsulates in legislation the concept of the “de facto director”

stating that it is a person who occupies the role of director but who has not been formally appointed

A de facto director shall have the same legal obligations as a normal director

Section 226 – Directors’ Compliance Statements of Large Private Companies - €12.5M Balance Sheet or €25M Turnover – Compliance with Companies Acts, Serious Market Abuse or Prospectus Offence and Tax

Directors obliged to put in place the necessary internal systems to ensure compliance and conduct an annual review

Compliance Statement annexed to annual return with the Director’s Report and filed with the CRO

New: Codification of the Common Law Position on Directors’ Duties Sections 228 – 229 – Directors’ Fiduciary Duties

Directors’ Fiduciary Duties Section 229 “(1) A director of a company shall— (a) act in good faith in what the director considers to be the interests of the company; (b) act honestly and responsibly in relation to the conduct of the affairs of the company; (c) act in accordance with the company’s constitution and exercise his or her powers

only for the purposes allowed by law; (d) not use the company’s property, information or opportunities for his or her own or

anyone else’s benefit unless – (i) this is expressly permitted by the company’s constitution; or (ii) the use has been approved by a resolution of the company in general meeting; (e) not agree to restrict the director’s power to exercise an independent judgment unless (i) this is expressly permitted by the company’s constitution; or (ii) the case concerned falls within subsection (2); (f) avoid any conflict between the director’s duties to the company and the director’s

other (including personal) interests unless the director is released from his or her duty to the company in relation to the matter concerned by a resolution of it in general meeting;

PART 5 – DUTIES OF DIRECTORS AND OTHER OFFICERSPART 5 – DUTIES OF DIRECTORS AND OTHER OFFICERS


(g) exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both –

(i) the knowledge and experience that may reasonably be expected of a person in the same position as the director; and

(ii) the knowledge and experience which the director has; and (h) in addition to the general duty owed to employees under Section 225, have regard to

the interests of its members; (2) If a director of a company considers in good faith that it is in the interests of the company for a

transaction or engagement to be entered into and carried into effect, a director may restrict the director’s power to exercise an independent judgment in the future by agreeing to act in a particular way to achieve this.

(3) Without prejudice to the director's duty under subsection (1)(a) to act in good faith in what the director considers to be the interests of the company, a director of a company may have regard to the interests of a particular member of the company in the following circumstances.

(4) Those circumstances are where the director has been appointed or nominated for appointment by that member, being a member who has an entitlement to so appoint or nominate under the company’s constitution or a shareholders’ agreement.”

New: Section 232: Interests of the Director’s duties that might cause some form of a conflict, full disclosure of the interest of such a director are to be made to the Company and voted on in such a situation

New: Section 233: In the case of a breach of Section 229 (1) (d), using the Company’s information and property for his/her own gain without approval, a Director may be required to indemnify the Company for breach which increases the potential liability of becoming a director

New: Section 237 deals with loans by a Company to a Director. It is assumed that if such a loan has not been reflected in writing then it is repayable on demand and bears interest. The interest rate is referred to as the “appropriate rate” which is not clear

New: Section 238 is the converse position of Section 237, and states that where a director loans money to a Company and is not in writing together with ambiguity surrounding the claimed loan, such a loan bears no interest or security rights and is subordinated to all other indebtedness of the Company



New Section 245: Director’s Expenses now allowed for - Directors are entitled to have funds which are provided to meet properly vouched expenditure in respect of the performance of their duties to the Company as Directors – Previously Optional Under Articles

PART 6 – FINANCIAL STATEMENTS, ANNUAL RETURN AND PART 6 – FINANCIAL STATEMENTS, ANNUAL RETURN AND AUDITAUDIT

This section is predominately for the use of accountancy and audit practitioners

What this section serves to do is to consolidate the legislative amendments in this area

PART 7 – CHARGES AND DEBENTURESPART 7 – CHARGES AND DEBENTURES

New Section 409: Definition of ChargeNew Section 409: Definition of Charge “means a mortgage or a charge, in an agreement (written or oral), that is created over an

interest in any property, assets or undertaking of the company (and …….includes a judgment mortgage) but does not include a mortgage or a charge, in an agreement (written or oral), that is created over an interest in –

(a) cash; (b) money credited to an account of a financial institution, or any

other deposits, shares, bonds or debt instruments; (c) units in collective investment undertakings or money market

instruments; or (d) claims and rights (such as dividends or interest) in respect of

anything referred to in any of the foregoing paragraphs.”

New Definition Clarifies that a charge over a bank account, cash or shares do not require New Definition Clarifies that a charge over a bank account, cash or shares do not require registrationregistration

All Charges require registration bar these 4 exceptionsAll Charges require registration bar these 4 exceptions


New: Section 413 - Priority of ChargesNew: Section 413 - Priority of Charges Date of receipt of the particulars regarding the charge by the Registrar of Companies

will determine the priority in respect of charges not the date that the charge is created which is currently the case

New Section 410 – Registration of Charges “One-Stage Procedure” and “Two-Stage Procedure” in relation to the registration of

Charges One-Stage Procedure identical to the current mechanism in place for entering a

charge whereby within 21 days of its creation New Two-Stage Procedure - notice can be sent to the Registrar stating the

Company’s intention to create a charge followed by a further notification within 21 days of the creation (even before the creation of the charge)

The ability to gain enhanced priority only apply where the creditor knows sufficient detail about the assets to be charged

The time and date of receipt by the CRO will determine priority (unless determined by some other legislative provision)


The two – stage procedure will probably be used by most advisors

Stage 1 allows the advisor to notify the CRO that a charge is intended to be created on a certain date

Stage 2 is the actual filing of the prescribed form within 21 days after its creation, as per the current C1 return

Using the two stage approach, the charge takes effect in terms of priority on the date of the first preliminary filing, or where there is no preliminary filing, the date the C1 is filed

A third party interested in the charge may now deliver the charge to the CRO not just the company or its representative

Negative pledge provisions or the amount charged will no longer be included on the prescribed form

The above procedure is subject to other registries ie Property Registration Authority etc.

PART 8 – RECEIVERS New: Section 438 – Powers of Receivers - Codifies in Bill the Common Law PositionNew: Section 438 – Powers of Receivers - Codifies in Bill the Common Law Position Bill specifies that the Powers of a Receiver under the Bill are Subject to a Court Order or Debenture appointing a ReceiverBill specifies that the Powers of a Receiver under the Bill are Subject to a Court Order or Debenture appointing a Receiver

Powers of a ReceiverPowers of a Receiver “to enter into possession and take control of property of the company in accordance with the terms of the order or instrument ; to lease, let on hire or dispose of property of the company; to grant options over property of the company on such conditions as the receiver thinks fit; to borrow money on the security of property of the company; to insure property of the company; to repair, renew or enlarge property of the company; to convert property of the company into money; to carry on any business of the company; to take on lease or on hire, or to acquire, any property necessary or convenient in connection with the carrying on of a business of the

company; to execute any document, bring or defend any proceedings or do any other act or thing in the name of and on behalf of the company; to draw, accept, make and endorse a bill of exchange or promissory note; to use a seal of the company; to engage or discharge employees on behalf of the company; to appoint a solicitor, accountant or other professionally qualified person to assist the receiver; to appoint an agent to do any business that the receiver is unable to do, or that it is unreasonable to expect the receiver to do, in person; where a debt or liability is owed to the company, to prove the debt or liability in a bankruptcy, insolvency or winding up and, in connection

therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement; if the receiver was appointed under an instrument that created a charge on uncalled share capital of the company- to make a call in the name of the company for the payment of money unpaid on the company’s shares; or on giving a proper indemnity to a liquidator of the company, to make a call in the liquidator’s name for the payment of money unpaid on

the company’s shares; to enforce payment of any call that is due and unpaid, whether the calls were made by the receiver or otherwise; to make or defend an application for the winding up of the company; to refer to arbitration or mediation, any question affecting the company.”

PART 9 - REORGANISATION, ACQUISITIONS, MERGERS AND PART 9 - REORGANISATION, ACQUISITIONS, MERGERS AND DIVISIONSDIVISIONS

New: Based on the EC (Cross-Border Mergers) Regulations 2008 and allows for two Irish companies to merge so that the assets and liabilities of the Transferor can be transferred to the Transferee before the Transferor is dissolved

A merger is defined as – a merger by acquisition; a merger by absorption; or a merger by formation of a new company New Section 465: Summary Approval Procedure or where agreement cannot be

reached under Summary Approval Procedure then alternatively applications to Court can be utilised

Terms of Merger and Explanatory Note Required by Directors, experts’ reports on draft terms and explanation to shareholders, merger financial statements of the merging entities (may be required), filings in the CRO, notice in the CRO Gazette, Advertisement in daily newspaper, merger documentation available for inspection for 30 days

Divisions are the converse of the merger procedure and require Court Approval, Summary Approval Procedure does not suffice

PART 10 - EXAMINERSHIPSPART 10 - EXAMINERSHIPS

Consolidates any amendments in this area since then into this one section of the Bill

Encompasses the amendments made in the Companies (Miscellaneous Provision), Act, 2013 regarding small and medium sized enterprises applying to the Circuit Court for protection under the Examinership process

PART 11 - WINDING UPPART 11 - WINDING UP More Structured Layout as follows:More Structured Layout as follows: Chapter One – Preliminary Interpretation Chapter Two – Winding Up by Court Chapter Three – Members’ Voluntary Winding Up Chapter Four – Creditors’ Voluntary Winding Up Chapter Five – Conduct of Winding Up Chapter Six – Realisation of Assets and Related Matters Chapter Seven – Distribution Chapter Eight – Liquidations Chapter Nine – Contributories Chapter Ten – Committees of Inspection Chapter Eleven – Court’s Powers Chapter Twelve – Provisions Supplemental to Conduct of Winding Up Chapter Thirteen – General Rules as to Meetings of Members, Contributories and Creditors Chapter Fourteen – Completion of Winding Up Chapter Fifteen – Provisions Relating to Insolvency Regulations Chapter Sixteen – Offences by Officers of Companies in Liquidation etc.

PART 11 - WINDING UPPART 11 - WINDING UP

New: Section 559(1)(g) if the Court is satisfied, on a petition by the Director of Corporate Enforcement, that it is in the public interest that the Company should be wound up, a company can be wound up

New: Section 571 - a Creditor must be indebted to the Company in excess of €10,000 for over 21 days in order for it to be considered unable to pay its debts as they fall due

New: Section 634 proposes that for the first time all Liquidators must hold a recognised qualification

Broad categories being defined as Member of Prescribed Accountancy Body, Practicing Solicitor or a member of other supervisory body or professional body recognised by the Supervisory Authority and also another category of persons with practical experience in winding ups and knowledge of relevant law

Final category of persons must also be approved by the Supervisory Authority prior to his/her appointment

Supervisory Authority being defined as the Irish Auditing and Accounting Supervisory Authority as per Section 901 of the Bill

New: Section 614 (3) states that the duties of Provisional Liquidator in a Court Winding Up shall be provided and limited to the order appointing him or her, or any subsequent order of such Court

PART 12 - STRIKE OFF AND RESTORATIONPART 12 - STRIKE OFF AND RESTORATION

New: Section 726 – 736 outline a distinction between voluntary and involuntary striking off the register of companies

Clear Now from a Search on CRO file why a company struck off

PART 13- INVESTIGATIONS

The area of investigations of the Company’s affairs by Court appointed inspectors is not very different under the Bill and just serves to repeat the position as outlined in the Companies Act, 1990

PART 14 – COMPLIANCE AND ENFORCEMENT

Chapter 1 This deals with Compliance and protective orders Chapter 2 This deals with Court ordered disclosures whereby the Court has the ability to make disclosures of information to

persons interested in the Company but would not necessarily be entitled to information i.e. shareholders Chapter 3 This deals with the area of restriction on Directors of insolvent companies Chapter 4 This deals with disqualification generally Chapter 5 This deals with the disqualifications and restrictions undertakings Chapter 6 This deals with enforcement in relation to disqualification and restriction Chapter 7 This deals with the provisions relating to offences generally under the Companies Acts Chapter 8 This goes through general additional offences like improper use of the word Limited, providing false information in

Company returns, reports, balance sheets, destruction and falsification or mutilation of Company books to mention but a few

New: Section 820 states that the defence of acting honestly and responsibly is no longer sufficient on its own for a director not to be subject to restriction

Furthermore, Such directors must also be able to demonstrate that they complied with the liquidator and conducted themselves in a cooperative way during the winding up of the Company

PART 14 – COMPLAINCE AND ENFORCEMENTPART 14 – COMPLAINCE AND ENFORCEMENT

New Section 872 - Compliance and enforcement has now been codified into one area which allows for the various offences referred to above to be graded in terms of seriousnessWelcome reprieve from the current position whereby the offences for various different breaches of the Companies Acts are attached to various different provisions and it is hard to keep track of how they move from one offence to the other “(1) A person guilty of an offence under this Act that is stated to be a category 1 offence shall be liable –(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months or both; or(b) on conviction on indictment, to a fine not exceeding €500,000 or imprisonment for a term not exceeding 10 years or both.(2) A person guilty of an offence under this Act that is stated to be a category 2 offence shall be liable –(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months or both; or(b) on conviction on indictment, to a fine not exceeding €50,000 or imprisonment for a term not exceeding 5 years or both. (3) A person guilty of an offence under this Act that is stated to be a category 3 offence shall be liable, on summary conviction, to a class A fine or imprisonment for a term not exceeding 6 months or both.(4) A person guilty of an offence under this Act that is stated to be a category 4 offence shall be liable, on summary conviction, to a class A fine.” As you can see there is a scale from 1 to 4 depending on the seriousness of the breach and the category of breach is detailed in each part of the Bill The categories refer to a class A fine which under the Fines Act, 2010 is defined currently as an amount not exceeding €5,000

PART 15 – FUNCTIONS OF REGISTRAR AND OF REGULATORY AND ADVISORY BODIES

Provisions relating to the Companies Registration Office, the Registrar, the CRO, Gazette, the Irish Auditing and Accounting Supervisory Authority, the Role of the Director of Corporate Enforcement and the role of the Company Law Review Group are all dealt with in this section

Chapter 1 – Registrar of Companies This chapter goes through all such items as performance of the duties of the Registrar, fees to

the Registrar is entitled to, that the registrar must produce an annual report, that the Registrar inspect documents produced, among others

Chapter 2 – The Irish Auditing and Supervisory Authority This deals with the Irish Auditing and Supervisory Authority’s role in the administration and its

role regarding the policing of the Companies Acts Chapter 3 – Director of Corporate Enforcement Chapter 4 – Company Law Review Group This chapter deals with the Company Law Review Group and its role in relation to the Companies

Acts and also its functions, duties and membership

CONCLUSION

As you can see from this analysis of Parts 1-16 of the Bill, this a far more easy to navigate proposed Act than its former counterparts spread over so many amendments and Acts. Commentators believe that an Act like this can only further allow for doing business in Ireland to be a more attractive proposition to foreign companies especially given its increased transparency and clarity

Inform ourselves, inform our clients, identify advisory opportunities

Questions from the Floor

companies bill 2012: focus on the main new provisions contained in parts 1-16 of the bill

Documents

private companies

new company limited

unregistered companies

cumbersomenew companies

public limited companiespart

new constitution

external companiespart

unlimited companiespart