Charities Towards 2012:
Company Law for the 21st Century –
The Proposed Companies Consolidation
and Reform Bill
Dr Thomas B Courtney
Outline of Presentation
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Company Law Reform in Ireland
The Company Law Review Group
CLRG’s First Report – the New Private Company
Selected Specific Simplifications
The Report on the General Scheme
The Guarantee Company
The Time Frame
Company Law Reform in Ireland
 The McDowell Working Group on Compliance and
Enforcement (1998)
 Only 13% of companies complied with their
obligations to file their annual returns on time.
 Stop-start law reform unacceptable.
 Recommended one comprehensive and
comprehensible company law code.
The Company Law Review Group
 CLRG established on an administrative basis.
 “…shall seek to promote enterprise, facilitate
commerce, simplify the operation of the Companies
Acts, enhance corporate governance and encourage
commercial probity.”
 Minister sets work programmes.
 Currently on fourth work-programme.
CLRG’s First Report – the New Private
Company
 Published February 2002 with 195
Recommendations.
 A unanimous blueprint!
 The “big idea” – segregate the private company.
 Move from legislative after-thought to centre stage.
 Pillar A – Private Company Limited by Shares.
 Pillar B – All other Companies, including Guarantee
Companies.
Selected Specific Simplifications
Allowing All Private Companies Dispense with the
AGM
– Already permitted for single-member
– Proposed to extend to all private companies
Selected Specific Simplifications
Private Companies should be permitted to have only
One Director
– Token directors are anathema to modern corporate
governance;
– Wrong to force people to assume duties and
responsibilities to meet a numeric statutory requirement.
Selected Specific Simplifications
Codification of directors’ duties in statute
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Primarily a codification of the existing common law.
Duty to act honestly and responsibly.
Can have regard to shareholder that appoints director.
But duties only enforceable by the company.
Will also apply to Guarantee Companies.
Selected Specific Simplifications
Replacing Memorandum and Articles of Association
for Private Company
– Providing for a one-document constitution;
– Name clause, liability clause, share capital clause,
association clause and whatever articles as to internal
management as might be desired.
– Table A’s provisions have been migrated to the Act and
will automatically apply to the company “unless the
constitution provides otherwise”.
Selected Specific Simplifications
Ultra Vires should be abolished for Private
Company
 private companies will have the same legal capacity
as a natural person – no more objects clause!
 Other companies (e.g. Guarantee Companies) must,
however, have an objects clause although doctrine
of ultra vires has been mitigated.
Selected Specific Simplifications
Omnibus validation Procedure
– The same validation procedure will facilitate:
 Financial assistance;
 Guarantees and security for directors and connected
persons;
 Redemption of shares;
 Voluntary winding up.
 The Importance of the Other Company Types such
as PLCs, Guarantee Companies, Unlimited
Companies etc
The Report on the General Scheme
 Published in May 2007.
 Accompanies the two-volume Heads.
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Commends General Scheme to Minister;
CLRG and its Work;
Principles: simplification, modernisation & consolidation
Regulatory Impact Analysis;
Architecture;
Exposition of Pillar A;
Exposition of Pillar B.
Pillar A – The Private Company
 The General Scheme will give effect to the primacy
of the private company as the preferred corporate
entity of choice and it will be moved to centre stage
and be the new model company in Irish company
law.
 Pillar A will be self-contained and all law relating to
the private company limited by shares will be here.
Pillar A – 14 Parts
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Definitions and Interpretation
Incorporation and Registration
Shares and Share Capital
Corporate Governance
Duties of Directors and Others
Accounts, Audit and Annual
Return
 Debentures and Charges
 Receivers
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Reconstructions & Arrangements
Examinership
Winding-Up
Strike-Off and Restoration
Compliance, Investigation and
Enforcement
 Powers and Duties of the
Minister and Regulatory and
Advisory Bodies
Pillar A – Key Features of Private
Company
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Limited by shares and must has a share capital.
Same capacity as a natural person.
One-document constitution: no M&A.
99 members.
No prospectus; no listing shares or debenture.
Can have just one director.
Pillar A – Key Features of Private
Company
 Can have just one member.
 Members can waive the requirement to hold an
AGM.
 Members can pass a majority written resolution.
 Eligible for audit exemption.
Pillar B – Other Corporate Forms and
Miscellaneous Provisions
 The public limited company, or PLC – limited by
shares
 The designated activity company or DAC
- limited by shares or
- limited by guarantee having a share capital
 The Guarantee Company – limited by guarantee
without a share capital
Pillar B – Other Corporate Forms and
Miscellaneous Provisions
 The Unlimited Company
– private unlimited company with a share capital (ULC);
– public unlimited company with a share capital (PUC);
– public unlimited company without a share capital (PULC)
 External Companies
 Unregistered Companies
 Investment Companies
Pillar B – Other Corporate Forms and
Miscellaneous Provisions
 legitimate users of each type of company
 company law should be facilitative of business and
the wider community by making appropriate
provision for different types of companies.
 the structure will discipline future thinking on the
appropriateness of particular provisions to the
different types of company.
Guarantee Companies
 In Part 4 in Pillar B, the law that applies to the
private company, as set out in Pillar A is expressly
applied to the Guarantee Company, subject to the
dis-application of certain provisions that are not
relevant to it.
 Also applied to Guarantee Companies are 85
additional Sections that are not contained in Pillar A
(because they are of no relevance to private
companies) but which are relevant to Guarantee
Companies.
Guarantee Companies
 No charity, or other activity-specific, provisions will
be contained in Companies Acts.
 Companies Acts should address formation,
management, membership and other matters integral
to the legal entity that is the company not the
activities which companies engage in.
 Other Departments and regulators are better suited
to legislating for activities which can indeed be
pursued by legal entities other than companies.
Guarantee Companies
 The Companies Acts will continue to be available
for use by charities and to my mind will provide a
far more suitable vehicle than spawning some new
form of legal entity.
 Charities could, however, benefit from a Regulator
fixing upon a standard form of articles of
association (or objects clause) which, the Regulator
could require, be adopted by every registered
corporate charity .
Guarantee Companies
 Appropriate persons (regulators or Departments)
should be able to apply additional requirements over
and above the Companies Acts’ requirements (e.g.
Charities Regulator could require charities that are
companies to state their annual charitable activities
in their Directors’ Report and be empowered to
enforce this).
Guarantee Companies
 A regulator should, with DETE’s consent, be able
also to disapply certain Companies Acts provsions
to companies engaged in activities for which that
regulator is responsible.
 Transparency must be maintained, though, and any
disapplication of a Companies Acts provision to a
particular company would have to be recorded on
the CRO’s register.
The Time Frame…
 General Scheme is currently with the office of the
parliamentary draftsman.
 Hopefully drafted by mid 2008.
 Passage through the houses of the Oireachtas.
 Hopefully enacted in 2009!
 Most likely commencement would be 12 months
later…
Company Law Reform Goes On…
 Minister has set a fourth work programme for the
CLRG.
 Five work streams:
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Registration & Incorporation
Partnership Law
Auditors and Financial Statements
Criminal & Enforcement
Modernisation for Competition
Company Law Reform Goes On…
 Any proposed changes recommended, which are
accepted by the Minister and the Government, will
then be passed on to the parliamentary draftsman to
ensure that the Bill produced reflects state-of-the-art
thinking in company law.
Conclusion
 CLRG is not infallible and there will be gaps in the
heads.
 The time for the users of company law to point
these out is now.
 The prize we are playing for is a state of the art
Company Law Code which will promote Irish
enterprise, facilitate commerce, simplify the
operation of the Companies Acts, enhance corporate
governance and encourage commercial probity.
Arthur Cox
Company Secretarial Services
Dr. Thomas B. Courtney
Partner
Head of Company Secretarial Services
Arthur Cox
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Tel:
(+ 353 1) 618 0000
Fax :
(+ 353 1) 618 3919
Email:
tom.courtney@arthurcox.com
www.arthurcox.com