LKG Seminar
Companies Act 2014
Westbury Hotel
7 May 2015
THE TEAM AT LKG
James Flynn
Neil Keenan
Edon Byrnes
Dorian Rees
SERVICE EXCELLENCE
SERVICE EXCELLENCE
INFORMATION
www.lkgsolicitors.ie
www.lkgsolicitors.ie/companies-act-2014.html
Introduction to Companies
Act 2014
• Consolidates all existing company law
• Welcome consolidation and reform
– but many additional duties and obligations
• 25 Parts, nearly 1500 sections and
17 schedules
• Is the largest piece of legislation ever on the
statute book
• Built around the Ltd default model company
• Relevant to all companies no matter how small
The new types of company
and re-registrations
• Default model company the Ltd – existing private
companies automatically convert to Ltd after 18
months (1 December 2016)
• New type of company the DAC
– Regulated by Part 16
– Decision to convert by 1 September 2016
• Law on DACS applies to existing private limited
companies until they re-register or are deemed LTDs
Limited v DAC
• Limited
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–
–
–
–
–
–
Name is Limited, Ltd or Irish equivalent
Single document constitution
No limit on its activities
Can have one Director (but separate secretary)
Can opt out of limit on its share capital
Can opt out of physical AGMs
Cannot list debt securities
Limited v DAC
• DAC
– Name is DAC, “designated activity company” or Irish
equivalent
– Must have at least two directors
– Will retain a Memorandum and Articles
– Is limited in its activities
– Can list debt securities
– Must have physical AGMs (if multi member)
– Must have a limit on its share capital
Conversion to DAC
• Conversion
– Ordinary shareholders resolution
– Directors if shareholders more than 25% of
votes require it
– Shareholders or debenture holders holding
more than 15% can petition to court for
conversion
Other types of companies
• The CLG (Part 18)
– Will register a change of name
• Company limited by guarantee, clg, c.l.g. etc.
• Affects many apartment owner management companies
– Law on DACs applies to those with a share capital
– Will have a Memorandum and Articles of Association
– Will be restricted in its activities
Unlimited companies
• Ucs (Part 19)
– Will register a change of name as unlimited company,
uc, u.c. or similar
– Private unlimited (ULC)
– Public unlimited with a share capital (PUC)
– Public unlimited without a share capital (PULC)
– Requirements to file financials will soon be widened
Other types of companies
Include
• Public limited companies (Part 17)
• Investment companies (Part 24)
• External companies (Part 21)
– Only branches now have to be registered
Company constitutions
• The Companies Act will contain various provisions
deemed incorporated in a constitution (replaces Table A)
• There will be opt out or opt in for many of these
– 151 optional provisions on last count
Company constitutions
• There will be a deemed constitution for Ltd at the end of
18 months but Directors do have an obligation to deliver
new constitution strictly to comply with Act (Section 19)
• Members can adopt new form constitution by special
resolution to dis-apply or vary optional provisions –
recommended approach
Re-registration
• Options for existing private limited companies
– Pass shareholder special resolution to adopt a s.19
constitution and re-register as Ltd (Form N1)
– Directors resolution to make minimum changes to
adopt s.19 constitution (obligation) (Form N1)
– Re-register as a DAC by ordinary resolution within 15
months (Form N2)
– Do nothing – automatic conversion after 18 months
• Deemed constitution
• Essentially existing Memorandum and Articles
without the objects clause
Offences and enforcement
• Now four categories of offences
– Category 1 indictment 10 years in jail
and/or €500k fine
– Category 2 indictment 5 years and/or €50k fine
– Category 3 summary 6 months and/or 5k fine
(class A fine)
– Category 4 summary class A fine
• Judgments against companies may be enforced against
personal assets of directors - Section 53
Other key changes
Summary approval procedure
• Allows approval of various restricted matters
– Loans to Directors and guarantees and security
– Financial assistance for shares
– Reduction of capital and variation on reorganisations*
– Treatment of pre-acquisition profits as distributable*
– Voluntary winding up*
– Statutory mergers and divisions
• * requires independent persons report
Summary approval procedure
• Requires
– Directors Declaration of Solvency
– Shareholders approval
– Independent accountants report for some
transactions
– Personal liability potentially for all debts if Declaration
of Solvency
not given on reasonable grounds!
Corporate Governance
• Ltd no longer requires AGM provided all members
pass resolution with AGM business
• Majority written resolutions now available for
companies and will take effect after the requisite
notice periods
– Follow procedures carefully
Corporate Governance
• Plcs and large private companies must have audit
committee [b/s >25m and turnover >50m]
– or explain publicly why not
• All procedures around board and shareholder
meetings now statutory subject to opt outs
• Majority shareholders have a direct right to convene
EGMs
Director’s compliance statement
(Section 225)
• All Plcs and larger limited private companies
– Balance sheet over €12.5m and turnover over €25m for large private
companies
• Directors acknowledge responsibility to secure compliance
with tax law and more serious company law obligations
(categories 1 and 2)
• Directors report must confirm that the following has been
done or explain why not
– Compliance policy statement setting out relevant policies concerning
compliance
– Arrangements/structures put in place designed to secure material
compliance or explain why not
– Conducting a review of the arrangements and structures during the
financial year.
Directors loans
• Loans, credit transactions, guarantees and security to
directors and connected persons cannot be made if
greater than 10% of net assets (old s.31)
– All can now be done with SAP
• Loans from directors if not evidenced in writing
presumed not to be a loan and fully subordinate and
interest free
• Loans to directors if not evidenced in writing presumed
to be repayable on demand and bear interest
Secretary
• Directors have duty to ensure that the secretary has
skills and resources required to discharge their
secretarial duties including maintenance of nonfinancial records
– Training
– Professional secretary?
Shares and offering shares
• Ltd cannot issue shares to public as before but
offences increased
– 150 people or more (other than qualified)
is offer to public
– Separate to Prospectus Directive
– Category 2 offence so now a serious matter
• Issued share capital can be reduced using SAP
Shares and offering shares
(contd)
• Notification of officers’ interests in shares
– 1% minimum threshold
– Now applies to grant and exercise of share
options
– Rights can’t be exercised if non compliance
– Inadvertent breaches of existing legislation
can be remedied within 18 months
Financial Assistance
• Financial assistance for purchase of shares reformed
– Tighter definition
– Company can pay costs and expenses of buyer
Mortages and charges
• Optional two stage process
• Priority of charges will now be based on filing dates
– Risks for banks and other lenders
Statutory mergers and divisions
• Statutory mergers and divisions now possible
• Merger by acquisition, merger by absorption or merger
by forming new company
– the old entity or entities will be dissolved
• Can be done through SAP
– Division requires court order
Audit Exemption
• Audit exemption can now apply to groups, dormant
companies and CLGs
• Thresholds
– Balance sheet <€4.4m, turnover <€8.8m average
employees <50
• Two tests only for DAC or Ltd
• 10% of shareholders can require an audit
• Audit still required where annual return late
Winding up/insolvency
• Liquidators must now have qualifications
• Examinership in Circuit Court
– Since last December
– Same thresholds as audit exemption
• Directors can be restricted for not co-operating with
liquidator even if they have acted honestly and
responsibly
• Director can voluntarily become restricted or
disqualified to avoid court application by liquidator
Key steps
• Key steps on commencement
– Decide type of company to convert into
• Register new name if required
– Preparation of new constitution
• Bank/investor approval may be required
– Evidence Directors’ loans in writing
– Is Audit committee or Directors compliance statement required
• Start preparing
– Review procedures on audit information
– Check compliance with share disclosure requirements
– Consider and minute skills and resources of secretary
Questions