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Companies Act 2014: What Directors Need to Know

By: CKT | Posted on: 13 Jul 2015

 

The Companies Act 2014 - Ten Things Owners/ Directors Should Know

The Companies Act 2014 was signed into law on 23rd December 2014. It was commenced in June 2015 and is the largest consolidation of company law ever undertaken. Thirty three pieces of legislation are consolidated into one Act comprising 1,400 pages.

However, in addition to consolidation, the Act introduces some important changes into Irish Company Law. Some of the main changes being introduced are:

  • Each current private limited company (the most common type of company) will be obliged to change its structure into either the new company limited by shares (CLS), or the new designated activity company (DAC). A transition period of 18 months will apply and at the end of that period if a company has done nothing it will automatically become a CLS.
  • The new CLS form of company will have have a more simplified form of structure and will have a one document constitution. The CLS may only have 1 director but if it only has 1 director will have to have a separate company secretary. The company will have the same legal capacity as a natural person and the doctrine of “ultra vires” will no longer apply. This form of company can dispense with having to physically hold an AGM.
  • The DAC form of company will still have a Memorandum and Articles of Association and will still only have the capacity to act in accordance with its powers in its Memorandum. It will still have a minimum of 2 directors and cannot dispense with the requirement to hold AGM’s. It will be a format of company suitable for banks, insurance companies, charities or management companies.
  •  Companies will be able to pass written resolution by appropriate majority (special or ordinary resolution) and no longer will have to pass these written resolutions with all shareholders.
  • Directors compliance statements will be required for large companies and plc’s.
  • It will be possible for companies to register a person with the Companies Registration Office, a person who is authorised to bind the company to contracts.
  • The restriction of companies providing financial assistance for the purchase of its own shares (Section 60 of the Companies Act 1963) will be relaxed.
  • A summary compliance procedure can be used by a company to authorise certain actions which previously required a court application. This involves the company passing a special resolution and the directors swearing a statutory declaration.
  • The current voluntary strike off procedure operated at the company registrar’s discretion will be put on a formal basis in the legislation. This allows companies which have no assets or liabilities and do not trade to be struck off on a voluntary basis rather than going into liquidation.
  • The duties of directors have been codified for the first time and company law offences have been classified in one part of the Act. This allows company directors have more certainty as to their responsibilities and potential liabilities.

Conor Lupton,

 

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