The long awaited Consolidated Companies Bill that came into force on the 1st June 2015 has affected huge numbers of businesses throughout Ireland. The new law essentially consolidates the existing Companies Acts of 1963-2013 into a single piece of legislation that requires business owners to make a number of changes over the next 18 months.
It’s the largest reform of company law in over 50 years and is intended to make the process of registering and operating a business in Ireland easier. Some of the key changes include:
The creation of two types of Private Limited Company
Any business currently registered as a Private Limited Company (PrC) will have to decide between one of two new options.
Private Company Limited by Shares (LTD)
Expected to be used by corporations, under the new law an LTD company requires:
- Only one director as long as they’re a member of the EU and over eighteen years of age.
- If a LTD company has one director it must appoint a separate company secretary that can either be an individual, or a corporate body. If you chose an individual, this cannot be the same person who fulfills the role of director.
- A new LTD company will have “Limited” after its name.
- Previously, businesses had to state their business objectives in the Memorandum and Articles of Association document. This will be replaced by a single document (commonly referred to as the “constitution”) and businesses will no longer be required to state their objectives to the government.
- The omission of the objects clause allows the company to trade in any lawful business or activity.
- Companies are no longer required to hold an Annual General Meeting.
- May pass written resolutions by the relevant majority.
Designated Activity Company (DAC)
Certain companies are expected to become a DAC including charities, management companies, regulated financial institutions and companies limited by guarantee.
- You must have at least 2 directors both over the age of eighteen.
- All DAC companies (except charities) will require a change of title that includes Designated Activity Company at the end of the company name.
- A DAC must still hold Annual General Meetings.
- Companies will have a two-page constitution that states the objects for which the company is incorporated.
- A DAC can claim eligibility for an audit exemption.
Codification of Directors
To clearly outline responsibilities, under the new law there are now eight principle duties that all directors must adhere to:
- Act in good faith.
- Act honestly and responsibly.
- Act in accordance with the company’s constitution.
- Not to use company property unless approved by the constitution.
- Not to fetter discretion unless permitted by the constitution.
- To avoid conflicts of interest.
- To exercise care skill and diligence.
- To have regard for the interests of members as well as employees.
For anyone found to be breaking the new laws, fines will range from €5,000 – €500,000 depending on the severity of the offence.
Loans to and from Directors
The rules surrounding loans to and from a director has also been amended. If there is no appropriate documentation surrounding the terms of the loans, the following will be presumed:
- Loans to a director will be subject to interest and repayable on demand.
- Loans from a director will not be considered a loan and won’t bear any interest.
For foreign companies with a presence in Ireland, the new Companies Act has abandoned the concept of “place of business” cancelling the registration numbers of any existing business.
For foreign companies that meet certain requirements you may want to consider registering the business as a branch.
There will be an 18-month transition period from the 1st June 2015 and any company failing to act within this timeframe will automatically be deemed to be a DAC during the transition period, and a LTD after the transition deadline. Failure to convert to the appropriate company type may cause legal issues for the company, shareholders and directors.
This post was written by Open A European Company.com. Helping entrepreneurs, startups and businesses with company incorporation and formation in Ireland and the rest of Europe.