The Companies Bill 2012, published by the Minister for Jobs, Enterprise and Innovation, Mr Richard Bruton TD, on 21 December 2012, will revolutionise Irish company law and provide a state of the art company law code for Ireland. The heads of Bill were drafted by the Company Law Review Group (CLRG) and its innovations are based on its recommendations. Dr Tom Courtney, head of Arthur Cox's Company Compliance and Governance Group has been chairperson of the CLRG and William Johnston, banking partner, has been a member of it, since its establishment in 2000. In this issue of 'The Company Agenda' Dr Tom Courtney outlines the architecture of the Bill and provides an overview of its main innovations.

THE COMPANIES BILL 2012

The publication of the Companies Bill 2012 is a very significant step in the reform of Irish company law.

The draft bill published in 2011 only set out the proposed law now contained in Parts 1 to 15. These Parts have been published as Volume 1 of the Bill and, in addition, Parts 16 to 25 have been published also as Volume 2. Volume 2 of the Bill deals, in turn, with additional provisions applying to types of companies other than the new model private company limited by shares – such as the new designated activity companies (DACs), public limited companies (PLCs), guarantee companies (CLGs), unlimited companies (UCs), external companies and investment companies. In each case, the provisions of the relevant part applicable to each other type of company must be read in conjunction with Parts 1 to 14. Additionally, the means by which companies can re-register as another type of company, the rules relating to public offers and miscellaneous other provisions are contained in Volume 2.

The Bill both consolidates and reforms the law relating to Irish companies. The private company has been the work-horse of commercial life in Ireland since it was first possible to register private companies in 1908, the year the Companies Act 1907 was commenced. Prior to then, it had been only possible to form a public company which had to have seven members. In Ireland, the private company has become by far the most common type of corporate entity used by business. Of the 185,181 companies on the register as at 31 December 2011, 86% were private companies limited by shares; less than 1% were public limited companies, the balance being made up primarily of guarantee companies and unlimited companies.

Ironically, the current Companies Acts view the private company as a peculiar variation of the public company, giving rise to a classic case of the tail wagging the dog. If there is one single recommendation of the CLRG which stands out, it is the very first recommendation of the First Report published on 31 December 2001, that "The private company limited by shares...should be the primary focus of simplification" (at paragraph 3.2.3).

That recommendation was accepted and is reflected in the Bill. Whereas there are currently 30 company law enactments (Acts and statutory instruments) applicable to various types of company, the first 15 Parts of the Bill provide an almost exhaustive statement of the law applicable to the private company.

Part 1 – Preliminary and General

This Part is largely devoted to house-keeping and defines terms which are used throughout the Bill. Some of the more important terms which are defined include "subsidiary" and "holding company". 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.

Part 2 – Incorporation and Registration

Part 2 contains the law concerning the formation and registration of companies and it is here that some of the most fundamental changes to the law relating to the model private company are to be found.

The new model private company (referred to here as an 'LTD' because it will be so identified from its name) will have a one-document constitution in place of the current two document memorandum and articles of association and will have "full and unlimited capacity" since it will not have an objects clause. If people wish to have a private company with a memorandum and articles of association and an objects clause they will have to use the alternative form of private company provided for in Chapter 16 - the DAC or designated activity company.

Private companies can authorise "registered persons" to bind the company to facilitate the conclusion of contracts. This does not mean that every employee with authority to bind a company (for example, a cashier in a supermarket) must be registered as certain people will have limited authority arising only in particular circumstances, but some senior employees authorised to bind the company will have to be registered.

Contracting with LTDs will be greatly simplified especially in a one-director company, since because the board of directors is deemed to have authority to bind the company, there should be no necessity to seek sight of a board resolution.

Initially, one of the most important sets of provisions will be those dealing with the conversion of existing private companies (see Fig. 1). This will become hugely important for existing private companies after the enactment of the Bill. Arthur Cox will be contacting clients for whom we provide company secretarial services well in advance of all deadlines to assist them with cost-effective and streamlined compliance with the new regime.

Fig 1. Conversion of existing private companies to the new model private company

  • Transition period is 18 months after commencement
  • Existing private companies can "opt out" of new regime and re-register as DACs (designated activity companies) by passing an ordinary resolution at any time up to three months before the end of the transition period (thereafter, re-registration must be by special resolution in accordance with Part 20 of the Bill)
  • An existing private company must re-register as a DAC if a member holding more than 25% of the voting rights in the company serves a notice requiring it to become a DAC not later than three months before the end of the transition period
  • Existing private companies that want to "opt in" can adopt a new one-document constitution in lieu of their existing memorandum and articles of association by passing a special resolution
  • Directors of existing private companies that have not opted out are obliged to prepare a new constitution (derived from its memorandum and articles of association, except its objects clause or clauses prohibiting their alteration), deliver a copy of it to the members and file it in the CRO
  • At the end of the transition period, every existing private company limited by shares that has not taken any action will be deemed to have adopted a constitution in the form provided in the Bill and to have become an LTD

Part 3 – Share Capital, Shares and Certain Other Instruments

One of the most striking things about Part 3 is that for the first time since 1983, all of the law relating to shares and share capital is contained in one place as opposed to being spread across several different enactments (see Fig. 2).

Fig 2. Contents of Part 3, Shares

  1. Preliminary and interpretation
  2. Offers of securities to the public
  3. Allotment of shares
  4. Variation in capital
  5. Transfer of shares
  6. Acquisition of own shares
  7. Distributions

Perhaps the most important distinguishing feature between the new model private company and existing private companies is that the LTD may not list any securities, whether shares (equity) or bonds (debt).

Since 2005 private companies have been a number permitted to list debt securities and have done so. Under the Bill, existing private companies will still be able to do this but they will have to reregister as DACs. By making this distinction, the LTD can be the subject of a less complicated regime.

One of the central concepts in the new Bill is that where a company's constitution is silent, it defaults to what is provided for in the Bill. This will reduce the need for companies to have detailed provisions in their constitutions as are currently required to be set out in articles of association. Provisions relating to calls on shares, lien, forfeiture, etc, are all now contained in the Bill and expressed to apply "save to the extent that the company's constitution provides otherwise".

Other significant changes to the law relating to shares include: reform of the law relating to the giving of financial assistance in line with the CLRG's recommendations; reducing share capital by following the Summary Approval Procedure (see Fig. 3) without the need for a court order and the modernisation of the law relating to own-share acquisition. A form of merger relief is also provided for, enabling distributions to members of amounts that would otherwise be required to stand to the credit of the share premium account created following an acquisition.

Part 4 – Corporate Governance

This Part sets out in one place the law relating to the appointment and proceedings (including meetings) of directors and members. In addition, the new Summary Approval Procedure whereby restricted activities can be carried out when validated is contained in Chapter 7 of Part 4 (see Fig. 3).

Many of the provisions which are to be found in Part 4 are currently contained in companies' articles of association. The approach proposed by the Bill is to include in Part 4 what might be seen as standard provisions, in that they are adopted by most companies, and to provide that these shall apply "save to the extent that the company's constitution provides otherwise". One of the clearest examples of this is in Chapter 4 – proceedings of directors – where what is now model Regulation 80 of Part I of Table A, and the cornerstone of corporate governance, is set out as the default position. So, section 159 provides that the business of the company shall be managed by its directors subject to certain carve-outs.

One of the more obvious changes which the Bill proposes to introduce is to permit an LTD to have only one director. Far from relaxing corporate governance, it is thought that this will enhance accountability of the sole director. It is a fact that in many small private companies the 'second' director is a nominee, appointed only to meet a numeric statutory requirement. The area of members' meetings is also the subject of reform under the Bill. One of the innovations proposed is that majority written ordinary and special resolutions will be permitted; at present, only unanimous written resolutions are allowed.

Fig 3. Summary Approval Procedure (Chapter 7 of Part 4)

The Summary Approval Procedure is a means by which companies can engage in restricted action by ensuring that the persons those restrictions are designed to protect, consent. The Bill identifies seven "restricted activities" which the procedure can be used to validate:

  • Financial assistance for acquisition of own shares
  • Reduction of company capital
  • Variation of capital in reorganisations
  • Treatment of pre-acquisition profits or losses in holding company's financial statements as profits available for distribution
  • Loans, etc, to directors and others
  • Mergers
  • Members' voluntary windings up

These activities may be carried out in specified circumstances where shareholder approval by special resolution (in the case of a merger, a unanimous resolution) is obtained and where the directors make a declaration of solvency. In addition, certain of the activities (reduction/ variation of capital, treatment of pre-acquisition profits as distributable and voluntary winding up) will also require the report of an independent person to be drawn up. There are both civil and criminal sanctions where directors make declarations based on unreasonable grounds. In this way the persons whom the restrictions are designed to protect – shareholders and creditors - continue to be protected whilst companies are allowed to pursue lawful activity.

Part 5 – Duties of Directors and Other Officers

The proposed new regime on directors' duties is set out in six chapters comprising 53 sections of law. 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 Bill 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, their role being no more or no less than that set by the board of directors. Directors of certain companies will be required to prepare directors' compliance statements (see Fig. 4). One of the very significant innovations is the codification of directors' duties. These fiduciary duties will be owed to the company and are based largely on common law and equitable principles (see Fig. 5).

Fig 4. Directors' Compliance Statements

The Bill proposes the introduction of directors' compliance statements following in most respects the report of the CLRG which recommended a more proportionate approach than that contained in the Companies (Auditing and Accounting) Act 2003. The key features of the compliance statement will be:

  • The obligations will apply to:
    • all PLCs ; and
    • LTDs, DACs and CLGs where both their balance sheet exceeds €12.5 million and their turnover exceeds €25 million.

LTDs, DACs and CLGs which do not meet these thresholds as well as all UCs and investment companies will not be subject to the directors' compliance statement requirements.

  • The statement, to be included in the directors' report, must acknowledge that the directors are responsible for securing the company's compliance with its relevant obligations, i.e. provisions of the Companies Act, the contravention of which is a category 1 or 2 offence, or a serious Market Abuse or Prospectus offence, and tax law. Where a company has securities traded on a regulated market, the relevant Companies Act provisions will also include where contravention is a serious Transparency offence.
  • The directors' report must confirm that the directors have taken each of the following measures, or must explain why this is not the case:
    • drawn up a compliance policy statement setting out the company's policies respecting compliance with its relevant obligations,
    • put in place appropriate arrangements or structures that are designed to secure material compliance with relevant obligations, and
    • conducted a review during the financial year of the arrangements and structures put in place.


The enforcement of duties has also been revised and updated and provision made for directors to be liable to account to the company for unlawful gains made by directors and to indemnify the company for losses resulting from certain breaches of duty.

The restrictions on loans, quasi-loans, credit transactions (and certain guarantees and security) has been retained broadly in line with what is now Part III of the Companies Act 1990 as have the exceptions to those restrictions, which now include the Summary Approval Procedure. New provisions seek to encourage that loans (whether to directors by their companies or by directors to their companies) be put in writing. Where a loan is made to a director which is not in writing, there will be a statutory presumption that it is repayable on demand and bears interest. Where loans are alleged to have been made to companies by directors (as sometimes happens in a winding up, where the effect is to make the director a creditor of the company entitled to share its assets with other creditors) there will be a presumption that any amount advanced is not a loan and therefore not repayable or, if it is a loan, that it is interest free, unsecured and subordinated to all other creditors. The intention, it appears, is not to prevent loans from directors but to ensure they are properly documented.

A very welcome reform relates to the disclosure of interests in shares so that de minimis interests of less than 1% are not required to be notified.

Fig 5. Directors' Fiduciary Duties

The Bill has codified directors' fiduciary duties into eight main duties:

  • to act in good faith in what the director considers to be the company's interests;
  • to act honestly and responsibly;
  • to act in accordance with the company's constitution and to exercise powers only for lawful purposes;
  • not to use company property for own or others' use unless approved by the members or the constitution;
  • not to fetter discretion unless permitted by the constitution or entered into in the company's interests;
  • to avoid conflicts of interest unless released by members or by the company's constitution;
  • to exercise care, skill and diligence; and
  • to have regard to the interests of the members as well as employees.

Part 6 – Financial Statements, Annual Return and Audit

This Part 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 states clearly the requirements for each such set of financial statements, and where there are provisions common to all financial statements, sets them out as such, avoiding duplication. Some key terms amended or clarified by this Part are set out in Fig 6.

Fig 6. Changes to key accounting terms

  • Part 6 refers to "financial statements" and "accounting records", where legislation previously referred respectively to "accounts" and "books of account". This reduces the risk of confusion arising from the use in practice of "accounts" to refer both to "financial statements" and "accounting records".
  • In defining the term "financial year", Chapter 3 of Part 6 brings together information previously scattered between various pieces of legislation.
  • Chapter 13 of Part 6 consolidates the provisions defining the "annual return date" and clarifies the language surrounding its alteration.

Part 6 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. It also resolves the anomaly whereby amendments had frustrated the original intention that penalties for failing to keep proper books of account would be more severe where the failure caused particular problems in the context of a winding up, than where the company continued trading normally.

Other new provisions include:

  • Provisions regarding the signing of financial statements and the directors' report respectively allow for the possibility of a single-director company.
  • The obligation to deliver an annual return is removed while a company is being wound up, or being voluntarily struck off (unless it is then restored to the register).
  • A holding or subsidiary company (excluding a PLC, PUC, PULC, or a company with securities listed on a regulated market) will be able to avail of an exemption from audit, where the holding and subsidiary companies taken as a whole do not exceed the relevant thresholds.
  • A "dormant" company (i.e. with no significant accounting transactions during the year, and which has only intra-group assets and liabilities) will (subject to the exceptions set out above in respect of the audit exemption) also be able to avail of an audit exemption.

Moreover, to date, where a set of statutory financial statements have been filed and a deficiency in them becomes apparent, there is no statutory procedure to allow their revision. Chapter 17 will allow the directors prepare revised financial statements or a revised directors' report, or in certain circumstances will allow revision by supplementary note. It provides for the approval by the directors of the revised financial statements which shall have effect from the date of approval, in place of the original financial statements.

The Chapter also provides for the audit of the revised financial statements, their laying before a general meeting of the company, and their delivery to the Registrar.

Part 7 – Charges and Debentures

The law relating to security created by companies is proposed to be consolidated and reformed in Part 7. 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.

A significant proposed change to the law relating to the registration of charges is that there will be two separate procedures for registration: the one-stage procedure and the two-stage procedure (see Fig. 7).

Fig 7. Registration of charges: using the one-stage or two-stage procedure?

The Bill provides for a one-stage or two-stage procedure in relation to the registration of charges. The one-stage procedure is similar to the current procedure, namely that particular of all charges created must be delivered to the Registrar of Companies in the CRO within 21 days of their creation.

The proposed two-stage procedure provides 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. In this way lenders may be more willing to advance funds if they can achieve an enhanced security priority to a company's assets.

Another significant change in law is that where the priority of charges is not governed by some other regime (e.g. priority in respect of charges over land will be governed by a separate regime) the priority of charges created by a company will be determined by reference to the date of receipt by the Registrar of the prescribed particulars.

Part 8 – Receivers

The law relating to receivers will also be consolidated and reformed. One of the proposed changes to the law is that the powers of receivers of the property of a company will be enumerated in a non-exhaustive list of receivers' powers, which will be without prejudice to the powers which may be granted by a debenture.

Part 9 – Reorganisations, Acquisitions, Mergers and Divisions

In this Part, existing means for reorganising companies, such as Court-sanctioned schemes of arrangement and compulsory purchase of minority interests, sit alongside two new means for effecting reorganisations: mergers and divisions. For the first time in Irish law outside a court scheme of arrangement, a statutory mechanism is provided whereby two Irish private companies 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.

Mergers and divisions involving Irish public limited companies have been possible since 1987 and cross border mergers involving Irish private companies since 2008. Importantly, however, a cross-border element was required in the case of private company mergers so that whilst there have been a number of very successful mergers of Irish companies, these have all involved mergers of companies from two different EU Member States.

Not only is it proposed to allow two Irish companies to merge but it is proposed that merger may be effected without the necessity for a High Court order. So, where a merger meets the requirements of the legislation, it is proposed that the Summary Approval Procedure can be utilised to effect the merger, which will result in a significant saving of time and money.

Part 10 – Examinerships

The current recession has brought a renewed reliance upon the process of examinership by which a company may be placed under the protection of the court in order to give time to an examiner to attempt its rescue through restructuring. The law on examinerships contained in Part 10 largely follows the current regime, save for one significant change, whereby all proceedings in relation to 'small' companies can be brought in the Circuit Court. This follows the Government's acceptance of the recommendations of the CLRG, made to Minister Bruton in September 2012, which are intended to provide small private companies that are in difficulties with a less expensive alternative to the High Court.

Part 11 – Winding Up

Part 11 of the Bill consolidates and modernises much of the law relating to the winding up of companies. In the first place, the law relating to winding up has been reordered in a more logically coherent way (see Fig. 8)

The Bill also seeks to introduce greater consistency between the three different methods of winding up (members' voluntary, creditors' voluntary and official). Another objective is to align Court-initiated liquidations with creditors' voluntary windings up so as to reduce the Court's supervisory involvement.

Fig 8. Reordering of provisions in law of winding up

Ch 1 Preliminary and Interpretation
Ch 2 Winding up by court
Ch 3 Members' voluntary winding up
Ch 4 Creditors' voluntary winding up
Ch 5 Conduct of winding up
Ch 6 Realisation of assets and related matters
Ch 7 Distribution
Ch 8 Liquidators
Ch 9 Contributories
Ch 10 Committee of Inspection
Ch 11 Court's powers
Ch 12 Provisions supplemental to conduct of winding up
Ch 13 General rules as to meetings of members, contributories and creditors
Ch 14 Completion of winding up
Ch 15 Provisions related to the Insolvency Regulation
Ch 16 Offences by officers of companies in liquidation

Some of the many other proposed reforms include: that the Director of Corporate Enforcement will have the right to petition to have a company wound up on the grounds that such is in the public interest; the minimum amount of indebtedness to entitle a creditor to serve a statutory demand will be increased to €10,000; for the first time liquidators will be required to be qualified (member of prescribed accountancy body or other professional body recognised by IAASA, practising solicitor, person qualified in another EEA State or person with suitable experience (grandfather provision)); a provisional liquidator will only have such powers as are provided for by the court order appointing him or her etc.

Part 12 – Strike Off and Restoration

The law relating to strike off and restoration of companies that have been struck off will be radically overhauled. In the first place, it will be brought together – at present it is scattered across a number of different Companies Acts. Secondly, for the first time there will be a statutory distinction drawn between voluntary and involuntary strike off.

Whereas the Registrar will initiate involuntary strike offs (see Fig. 9), the new voluntary strike off mechanism will formalise the ability of companies to apply to be struck off where certain conditions have been met (see Fig. 10).

Fig 9. Grounds for involuntary strike off

  • Failure to make annual return
  • Failure to comply with Taxes Act registration
  • Registrar believes that company does not have an EEA resident director
  • Company is being wound up and there is no liquidator
  • Company is being wound up and Registrar believes its affairs have been wound up and liquidator has not made returns for six consecutive months
  • There are no persons recorded as being director



Fig 10. Conditions for voluntary strike off

  • The Registrar believes that the company has never carried on, or has ceased to carry on, business
  • The company has in the previous three months passed a special resolution to apply to be struck off on the grounds that it has never carried on, or has ceased to carry on, business, and resolving that until then, the company will not carry on business or incur any liabilities
  • The company delivers all annual returns to the Registrar
  • The company certifies to the Registrar in a form signed by each director that its assets do not exceed €150, its liabilities do not exceed €150, and that it is not party to ongoing or pending litigation
  • The Registrar has received written confirmation of no objection from the Revenue Commissioners, issued within the preceding 30 days
  • The company has advertised in the prescribed form in one daily newspaper

No significant changes are proposed in relation to restoration – the Court will continue to have jurisdiction to restore a company where it has been struck off within the preceding 20 years and the Registrar will continue to be able to effect an administrative restoration within 12 months of the company having been dissolved.

Part 13 – Investigations

The Bill proposes to substantially re-enact without significant amendment the law relating to the appointment of inspectors to companies.

Part 14 – Compliance and Enforcement

In keeping with the stricter approach to the enforcement of company law, this Part gathers together provisions relating to compliance and enforcement, a change which will provide greater transparency.

Chapters 1 and 2 of this Part facilitate the making of orders – under Chapter 1, the Court can order that a company or an officer must comply with a provision of the Act, and can order directors not to reduce their assets or remove them from the State as relief to persons with certain claims against directors; under Chapter 2 the Court can make a disclosure order to facilitate the discovery of the beneficial ownership of shares or debentures.

Chapters 3 and 4 set out the law relating to the restriction and disqualification of directors, respectively. One significant proposed change to the restriction of directors is that it will no longer simply be enough to have acted "honestly and responsibly": in order to avoid the Court making an order it will also be necessary to satisfy the Court that the director has, when requested to do so by the liquidator, cooperated as far as could reasonably be expected in relation to the conduct of the winding up of the insolvent company. Chapter 5 facilitates the giving and acceptance of restriction and disqualification undertakings from directors, measures which will facilitate the saving of both cost and Court time.

One of the most far-reaching reforms provided for in the Bill concerns the streamlining of the criminal offences that will be created (see Fig. 11).

Fig 11. Codification of Companies Acts Offences

The Bill provides for a four-fold categorisation of offences created by the Bill into Categories 1 to 4. Throughout the Bill, offences are, as created, categorised as attracting a particular category of penalty. In Chapter 7 of Part 14, those penalties are set out:

Category 1 offence – conviction on indictment can result in a term of imprisonment of up to 10 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).

Part 15 – Functions of Registrar and of Regulatory and Advisory Bodies

Provisions relating to the Registrar of Companies, IAASA, the Director of Corporate Enforcement and the CLRG are contained in Part 15.

Part 16 – Designated Activity Companies (DACs)

The law in relation to DACs is that applicable to LTDs (i.e. as set out in Parts 1 to 14) subject to certain modifications, disapplications and supplementary provisions set out in Part 16.

The key features of a DAC are that it must have a memorandum and articles of association, including an objects clause, and will be permitted to have its debentures listed. A DAC is the type of company most closely related to the existing private company and will not benefit from all of the reforms of the Bill. It must have two directors, and may not dispense with holding an AGM.

It is anticipated that the advantage of being a LTD as opposed to a DAC will prompt most existing private companies to convert to the new LTD type of company and the users of DACs will largely be persons who require the company to:

  • Have an objects clause (e.g. a joint venture vehicle which has agreed on a specific object, or a bank); or
  • List debt securities on a stock exchange

Part 17 – Public Limited Companies (PLCs)

The law applicable to PLCs (and their close European relation, the SE) is that applicable to LTDs (i.e. as set out in Parts 1 to 14) subject to certain modifications, disapplications and supplementary provisions set out in Part 17.

PLCs and SEs are the only companies which can have shares listed on a stock exchange. A PLC or SE must still have two directors, and a memorandum and articles of association, including an objects clause, but will only need to have one member (currently the minimum is seven).

Part 18 – Guarantee Companies (CLGs)

Again, the law in relation to CLGs is that applicable to LTDs (i.e. as set out in Parts 1 to 14) subject to certain modifications, disapplications and supplementary provisions set out in Part 18.

CLGs will be equivalent to existing companies limited by guarantee and not having a share capital, currently the preferred form of company used by charities, sports and social clubs and management companies. As well as not having a share capital, a CLG will continue to have a memorandum and articles of association, including an objects clause, but will only need to have one member (currently, the minimum is seven). For the first time it is proposed that CLGs can avail of the audit exemption, although any one member may object. The key features of CLGs are set out in Fig 12.

Fig 12. Key features of the company limited by guarantee (CLG) include:

The Companies Bill proposes the following features for CLGs as they will be termed:

  • They cannot have a share capital
  • They are limited liability companies and the liability of their member or members will be limited to the amount they undertake to contribute in the event of their being wound up
  • They can have just one member and there is no maximum number of members
  • CLGs may not dispense with holding an AGM (section 1197)
  • They will have a two-document constitution, consisting of a memorandum and articles of association (note, they are collectively referred to as its constitution)
  • The memorandum of association must contain an objects clause
  • Although CLGs must have an objects clause, the Bill seeks to oust the operation of the doctrine of ultra vires by providing that the validity of an act done by a CLG shall not be called into question on the ground of lack of capacity by reason of anything contained in the CLG's objects
  • Save for certain cases where application is made to dispense with this requirement (section 1175), their name must end with the words "company limited by guarantee" or the abbreviation "CLG" (whether capitalised or lower case and with or without punctuation marks, i.e. CLG, C.L.G, clg or c.l.g. are all acceptable abbreviations) or the Irish equivalent
  • CLGs must have at least two directors
  • Unless its constitution provides otherwise, the directors of a CLG shall retire by rotation
  • Unless its constitution provides otherwise the remuneration (if any) of directors of a CLG must be determined in general meeting by its members
  • For the first time, CLGs can avail of the audit exemption where they meet certain conditions, however any one member may object and insist upon an audit.

Part 19 – Unlimited Companies (UCs)

The law in relation to private unlimited companies with a share capital (ULCs) and public unlimited companies with or without a share capital (PUCs and PULCs respectively), collectively referred to as UCs, is that applicable to LTDs (i.e. as set out in Parts 1 to 14) subject to certain modifications, disapplications and supplementary provisions set out in Part 19.

A UC will continue to have a memorandum and articles of association, including an objects clause, but may have just one member (currently the minimum is two in the case of an ULC and is seven in the case of PUCs and PULCs). It is proposed that UCs' directors will not be subject to the compliance statement regime.

Part 20 – Re-registration

A company will generally be permitted to re-register as another type of company subject to complying with the requirements applicable to the latter type of company. In all cases, re-registration will involve the passing of a special resolution and the delivery of certain documents, including a compliance statement, to the CRO (see Fig. 13); additional requirements may apply depending on the type of the company following the re-registration.

Fig 13 Re-registration Documents

  • Special resolution that the company be so re-registered, and making necessary alterations to the company's constitution
  • Application to re-register in the prescribed form, signed by a director or secretary
  • Copy of the altered constitution
  • Statement of compliance in the prescribed form by a director or secretary stating that the requirements of Part 20 have been met.

Part 21 – External Companies

This Part provides that only external companies (whether EEA or non-EEA) whose members have limited liability, and which establish a 'branch' in Ireland will be required to register. There will no longer be an obligation to register the establishment of a mere 'place of business', and unlimited foreign companies with an Irish branch will not be required to register. Part 21 also proposes the abolition of the socalled 'Slavenburg file', so that where external companies that have established, but failed to register, a branch in Ireland create charges over Irish property, neither they nor anyone else will be required or permitted to deliver particulars of that charge to the CRO.

Part 22 – Unregistered Companies and Joint Stock Companies

This Part provides for the application of certain provisions of the Bill (set out in Schedule 14) to unregistered companies, the most important of which is The Governor and Company of the Bank of Ireland. It also provides for a means by which an unregistered company can convert to a PLC. This Part also clarifies the application of company law to certain other older types of companies.

Part 23 – Public offers of securities, financial reporting by traded companies, prevention of market abuse, etc.

Provisions are set out in this Part in relation to prospectus law, market abuse law, and transparency law, in particular regarding the consequences of a breach of a measure forming part of any of these, and largely deriving from Parts 4 and 5 of the Investment Companies, Funds and Miscellaneous Provisions Act 2005 and Part 3 of the Investment Companies, Funds and Miscellaneous Provisions Act 2006.

Part 24 – Investment Companies

This Part provides for investment companies with variable capital, which are a particular type of PLC and currently addressed in Part XIII of the Companies Act 1990, and is largely a re-statement of the existing law as it applies to such 'Part XIII companies'.

Part 25 – Miscellaneous

The provisions in this Part are those that do not fall naturally into any other Part, and largely restate existing law.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.