THE COMPANIES ACT 2014
WHAT IT MEANS FOR SMEsDERMOT SHERLOCK
Lee & Sherlock Solicitors
5-F Nutgrove Office Park
Rathfarnham
Dublin 14. Tel: 012960931 email: dermot@leeandsherlock.ie
Mob 087 9172469
The Companies Act 2014
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What is it? Some old law and some new law, packaged together to try to simplify
Company Law. Great for lawyers but do you really need to know this? The simple
answer is: yes
A company is a separate legal entity and its very existence A Consolidation,
restatement and amendment to all Acts directly affecting Company law
All company law under one piece of primary legislation.
The format means you can exclude large sections of the new law that don’t and
won’t affect you
1st June 2015 it will begin and will affect all existing Companies.
WHO ARE YOU?
• Private Company Limited by Shares
• Group of Companies
• Company Limited by Guarantee
• Sole Trader
• Person who deals with an Irish registered Company
IMMEDIATE STEPS- EXISTING COMPANIES
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What must you do?
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Choose a designationAdopt new or existing rules (the Constitution)
What should you do?
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Review your situation and adapt to the new regime
review your current Corporate status – Documents, Shareholder Agreements, Designation
Adopt the model that suits you. LTD, DAC etc
Adopt a Constitution that suits you.
There are opportunities
ACROYNMS
PRIVATE COMPANIES
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LTD -the new model form of Private Company
LIMITED BY SHARES
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DAC - Designated activity company
CLG - Company limited by guarantee
PUBLIC COMPANIES
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PLC
Public limited company
ULC - Private unlimited company having a
share capital
PUC - Public unlimited company having a
share capital
PULC - Public unlimited company not having a
share capital
ACROYNMS
COMPANIES 2 out of 3 will do
JARGON
SMALL COMPANY
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Turnover less than €8.8m
Balance sheet not more than €4.4m
Average number of employees under 50
MEDIUM COMPANY
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Turnover less than €20m
Balance sheet not more than €10m
Average number of employees under 250
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Constitution. The rules and regulations of the
Company, replaces the “memorandum and
articles of association”
Financial Statements. Includes account
information and necessary reports
CHANGE TO A NEW LTD COMPANY
• For private companies there is a new regime available requiring only one
director and one shareholder.
• This is an attractive proposition to sole traders and one person
entrepreneurs
• The tax advantages vary but well worth investigating
• The legal advantages are much more beneficial in the new Act
Which Company will you be?
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PRIVATE:
LTD - Private company limited by shares
DAC - Designated activity company limited by shares /limited by guarantee with share
capital
CLG - Company limited by guarantee
PUBLIC –
PLC - Public limited company
ULC - Private unlimited company having a share capital
PUC - Public unlimited company having a share capital
PULC - Public unlimited company not having a share capita
PRIVATE COMPANY LIMITED BY SHARES
Current Private Company
Limited by Shares
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Minimum of two directors
Limited powers
Written resolutions have to be unanimous
New LTD – Model Company
Limited by shares
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Can have only one director
Power to appoint a person entitled to bind the
Company
No “Ultra vires”. No activity is outside the power
of the Company
Does not have to hold an AGM
Resolutions can now be passed by majority, in
writing
Transition
From 1 June 2015 to 30 Nov 2016
• Private Company Limited by shares
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Select to be a new LTD company or Designated Activity company
• If you don’t select then during the next 18 months you cannot operate with
one director
• During the 18 months the Company is subject to DAC regulations
• After 18 months the existing company will be deemed a new LTD
Transition
From 1 June 2015 to 30 Nov 2016
After Transition
• Can have one director only.
• Many companies have family members as non executive directors because 2
are required
• If you are a one person operation this can limits liability and exposure to
spouses
COMPANY LIMITED BY GUARANTEE
Common for charities and
management companies
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Relevant not only if you are active in a charity
organisation or management company
If you own an apartment or property in a
managed estate
If your business premises is in a managed
development (eg holder of a Lease in a
shopping centre)
NEW - COMPANY LIMITED
BY GUARANTEE – CLG
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New name
Will still have an “Objects Clause”
Minimum 2 directors
May have only 1 member (previous minimum
was 7
No limit on the number of permitted members
SPECIFIED DIRECTORS DUTIES
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to act in good faith, in what the director considers to be the best interests of the company.
to act honestly and responsibly in relation to the company's affairs.
to act in accordance with the company's constitution and to exercise powers only for lawful purposes.
not to use company property for their own or others' personal gain unless approved by the company's members or agreed
to in the company's constitution.
not to fetter discretion unless permitted by the company's constitution or entered into in the company's interests.
to avoid conflicts of interest.
to exercise care, skill and diligence.
to have regard to the interests of the company's members.
GENERAL DIRECTORS DUTIES
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Ensure compliance with the Companies Act and the various tax acts
Ensure the Company Secretary is suitably qualified
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Sign a declaration to acknowledge their duties
Take into account the interests of the members of the Company
Have regard to the interest of the employees of the Company
Disclose interests – (contracts and shares)
Further duties such as Director’s Compliance Statement for larger companies
CONSEQUENCE OF A BREACH OF DUTIES
OF DIRECTORS
• to account for any gains accrued
• Indemnify the Company for losses resulting from a breach
• A Court may grant relief it the Court is satisfied
• The Director acted honestly and responsibly
FINANCIAL STATEMENTS
• ACCOUNTS AND REPORT
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Relevant not only if you are active in a charity organisation or management company
If you own an apartment or property in a managed estate
If your business premises is in a managed development (eg shopping centre)
GOVERNANCE
MEMBERS DECISIONS
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LTD can dispense without an AGM
Majority decisions can be made in writing
A decision will not be effective for a period of
time: 7 days for an Ordinary Resolution 21 days
for a special resolution
For urgent cases a unanimous decision will be
essential
BOARD DECISIONS
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The default position allows directors to use
written resolutions
Majority Board decisions in writing are valid if
the other director(s) are excluded from voting
eg conflict of interest (S161)
A valid meeting includes video conferencing
and e mail attendance
SUMMARY APPROVAL PROCEDURE
RESTRICTED ACTIVITIES
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the financial assistance for the acquisition of shares
(section 82),
reduction in company capital (section 84),
variation of company capital on re-organisations
(section 91),
DECLARATION
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prohibition on pre-acquisition profits or losses being
treated in holding company’s financial statements as
profits available for distribution (section 118),
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prohibition of loans to directors and connected
persons (section 239),
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domestic merger (section 464),
members voluntary winding up
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 purpose for which the company is entering into the
arrangement or transaction;
the nature of the benefit which will accrue to the company
directly or indirectly from entering into the transaction or
arrangement; and
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, having entered into the transaction or
arrangement, will be able to pay or discharge its debts and other
liabilities in full as they fall due within a 12 month period from the
date of entering into the transaction or arrangement.
SUMMARY APPROVAL PROCEDURE
FORMAT
CONSEQUENCES
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SPECIAL RESOLUTION OF MEMBERS
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DECLARATION BY DIRECTORS
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FILED WITHIN 21 DAYS
FORMAL REQUIREMENTS MUST BE
FOLLOWED
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Civil liability on the application of a creditor/
liquidator or ODCE
Personal Liability for directors potentially
unlimited
Any director found to have made the
declaration without having reasonable
grounds for the opinion
If company is wound up within 12 months it is
presumed the Directors did not have
reasonable grounds
CHARGES
NEW PROVISIONS
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2 STEP REGISTRATION PROCEDURE
AVAILABLE
CLEARER DEFINITION OF PRIORITY OF
CHARGES
WILL ALTER HOW LENDERS DEAL WITH
SECURITY
OBSERVATIONS
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Consider carefully terms of security
Priority registration could back fire if Bank A
registers priority while you try to negotiate
with Bank B
Offences
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CATEGORY
Sentence-
Fine
Up to
Upto
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1
10 years
2
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5 years
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Example
S. 281. Failure to keep or cause to
€500,000
be kept adequate accounting
recordsS-722. Fraudulent Trading
Breach of S 102. purchase of own
€50,000
shares by a company
Breach of S 239- loans to directors
etc.
S 324 Statutory Financial
Statements
S.406 – false statements
S 716 et al. Offences relating to
liquidations
OFFENCES
CATEGORY
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SENTENCE
FINE
6 months
Class A fine
(€5000)
nil
Class A fine
(€5000)
EXAMPLE
S 175(10) failing to hold an AGM
S335 directors’ report – audit
exemption certificate
S 348 documents to accompany
annual returns for certain holding
companies
S 199 failing to record minutes of
AGM and resolutions made
S 355(5) ODCE
INSOLVENCY
•Increased duties to co operate with liquidators
•Possible to avoid a High Court appearance for restriction of
director
•Obligations on liquidator to report suspected Category 1 or
Category 2 offences to the Office of the Director of Corporate
Enforcement.
Ten Novel Points
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Majority decisions can be made in writing
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Removal of the requirement to apply to the High Court to reduce a Company’s
share capital
New Provision permits a Company to correct defective financial statements .
(S366)
4. A Company can re-register . An LTD can become a CLG.
5. Audit Exemption: relaxed definitions.
6. A Group of Companies may now qualify for Audit exemption
7. Single Approval Procedure has “cure all” potential
8. Qualify as a Small or Medium Company by 2 out of 3 criteria only.
9. One person Corporation
10. LTD has no legal restriction on activities. The Memorandum of Association is gone