COMPANIES ACT 2014
A new Companies Act will come into force on 1 June 2015. The new act, rather than being a reinstatement, is more an amalgamation of a number of existing acts. It is designed to provide clarity and accessibility to the law.
The key innovations in the act are as follows:
1. All existing private companies with shares have 18 months from the coming into force of the act to choose to become either a company limited by shares (called a CLS or LTD) or a designated activity company (DAC). Most small to medium-sized companies will no doubt choose to remain as a company limited by shares (CLS).
2. You must opt out in order to become a designated activity company. (DAC)
You will choose this if your company is carrying on a specific activity (for example an Estate management Company). However, until the transition period is over, companies who have not specifically elected, will be treated as DAC’s.
3. Under the new act, a company limited by shares (LTD or CLS) can have only one director and shareholder along with a company secretary. Children can no longer serve as directors.
4. There will be a simplified one document constitution replacing the cumbersome Articles of Association and Memorandum. There would be no more “Table A”, instead there are a number of statutory defaults which will apply to the company. The application of these can be amended by resolution of the company.
5. There will be no more objects clause and the company will have full unlimited capacity i.e. the rule that a company cannot act outside its own objects will no longer apply. This means that the director or directors will be deemed to have full authority to bind the company. A “registered person” can also be nominated by the Company to bind it.
6. Directors duties have been set out clearly in the act and all offences have been categorised according to their level of seriousness. A new duty appears being the duty to use Company property, information or opportunities only for the interests of the company. Also Directors are now charged with appointing a company secretary with the skills and knowledge necessary to carry out his/ her statutory duties. Directors must ensure the new Constitution complies with the Act and they may need to prepare a “Compliance Statement” (see below) which comes with a very high threshold of obligation.
7. Clarity has been given to directors loans, directors reports, Unwritten loans to directors have a presumption that the loan is payable on demand and bears interest (at 5% or a rate prescribed by the Minister). There is a presumption that a loan from a director if it is not in writing is not a loan.
8. The formalities of company business have been simplified. For example, AGM’s become optional in many cases, all laws regarding meetings voting of registrations have been put on a statutory basis, majority written resolutions are allowed which can take effect. Seven days (ordinary resolution) or 21 days (special resolution) after being passed.
9. New procedures have been added regarding amalgamation, merger or division of companies and there are some changes relating to company insolvency.
9. There are other matters relating to PLC’s and other non-common types of Company which are not set out here.
What should you do?
- Decide which type of Company you wish yours to be (LTD, DAC, PLC etc.)
- Review your existing memorandum and articles with a view to preparing a new constitution, which can be passed as a special resolution and filed in the company’s registration office. You do not have to wait to do this. You can have it ready to go post 1 June.
- Ensure you are up-to-date with the new codified directors’ duties.
- Ensure your company secretary is suitably skilled.
- Ensure any loans to or from directors have proper written terms put in place.
- Make sure your directors are in a position to identify any relevant audit information which should be disclosed and that there is a system put in place to identify this information.
- If your company has a turnover of over 25 million in the balance sheet is worth more than 12.5 million. Directors need to prepare an onerous directors compliance statement.
- Have you any undisclosed shares in the Company? If so there is an opportunity in the act to remedy an inadvertent failure to disclose.
For further information please contact Siobhan Dunne at Dunne Law email@example.com or 053 91 71731.