A new guide to the Companies Act 2014 has been launched today (8 September 2015) by the Law Society of Ireland and Chambers Ireland.
The Companies Act is the largest piece of legislation ever to come into effect in Ireland and substantially changes the legal environment in which businesses operate. The aim of this guide is to highlight the most important pieces of information for companies in a clear and concise manner.
Speaking today, Paul Keane, Chair of the Law Society of Ireland’s Business Law Committee, said, “The changes made will allow businesses to operate more efficiently. The Law Society has equipped solicitors throughout the country with the know-how to assist companies to take advantage of these changes. The bulk of the legislation came into effect on 1 June. However, private companies will have eighteen months to decide which form of company they will choose to be in the future.”
“We have partnered with Chambers Ireland to guide businesses on these changes and to let companies know that if they are in doubt as to how the Act might impact them, they should talk to their solicitor,” he concluded.
Ian Talbot, Chief Executive, Chambers Ireland said, “The Companies Act 2014 brings the most significant changes to company law ever introduced in Ireland and it is vital that businesses know what is required of them. Understanding the implications of the Act could pose difficulties for many businesses, particularly SMEs, given the sheer quantity and complexity of the legislation. We are delighted to partner with the Law Society to provide this concise and business friendly guide to the Companies Act.”
The guide is available for download on the Law Society website.
An overview of changes
The new legislation requires all existing private companies with shares to choose to become either a company limited by shares (CLS or LTD type-company), a Designated Activity Company (DAC), or another type or company such as a PLC. These decisions must be made within an 18-month transition period after the law comes into effect.
Consolidating 30 pieces of legislation – dating from 1963 to 2013 – into one act, the concentration is on private companies to reflect the way business is actually done in Ireland.
Those operating small private companies who opt to convert to a LTD type – through which the majority of business in Ireland is conducted – will benefit from a number of changes, including:
- A simplified constitution, comprising a single document instead of a Memorandum of Association and Articles of Association,
- Only one director will be needed,
- May avoid holding Annual General Meetings,
- Unlimited capacity - removal of ultra vires rule whereby companies cannot operate outside of the activities laid out in the objects clause, and
- Codification of directors’ duties into eight rules.
There are also new rules to consider, including:
- The requirement that a company secretary must have the skills and resources for the role,
- Directors loans will be treated adversely; it will be important that proper loan agreements and board resolutions are in place,
- Directors will be required to confirm that all relevant audit information of which they are aware, having made reasonable enquiries, has been conveyed to the auditors,
- Directors will also need to consider what basic steps they should take to demonstrate compliance, and
- Compliance statements and audit committees for larger companies; directors have new obligations for securing compliance with certain company law provisions and tax law, and to consider whether to appoint an audit committee.