The Minister for Jobs Enterprise and Innovation published the long-awaited Companies Bill, 2012 on 21 December 2012. The Bill seeks to simplify existing company law and will consolidate the existing 16 Companies Acts, which date from 1963 to 2012, into one Act and it also introduces a number of reforms which are designed to make it easier to operate a company in Ireland. The 2012 Bill is set out across 25 Parts, to ease the accessibility of the law for each different company type, the Bill contains 1,429 sections, and 17 Schedules, the largest in the State to date.
Under the legislation, the private limited company will now form the model company type which (currently) represents 90 per cent of all companies registered in Ireland. The provisions applicable to it represent the majority of the Bill, will be set out logically to follow the life-cycle of a company. The 2012 Bill starts with the provisions governing incorporation, followed by the sections which apply to the ongoing operation of the company, before dealing with the provisions which apply to the closing down, or winding up, of the company.
The following is a brief synopsis of the key changes:
Full and Unlimited Capacity
Like natural persons private companies will have unlimited capacity reflecting what the company can and cannot do. This will effectively abolish the doctrine of ultra vires in relation to companies and will remove any concern companies or lenders may have as to a company’s ability to perform a transaction or grant security. It will also remove the need for an objects clause in its constitutive documents.
Company Constitution
Companies will now be permitted to have a one-document constitution and so there is no longer a requirement for detailed memorandum and articles of association.
Single Director Companies
A major change is the ability to have single director companies. The current legislation requires two directors.
Annual General Meetings
AGMs may be dispensed with in favour of written resolutions.
Directors’ Duties
Directors’ duties will be codified which should ensure this complex area being more easily understood by and accessible to directors.
Offences
All company law offences will be streamlined and categorised from 1 to 4. A category 1 offence will be the most serious and will carry a maximum fine of €500,000 or imprisonment up to a maximum of 10 years. The minister can vary the level of penalties applicable to each category without any need for new legislation.
Transition Period
Any company may convert to another type of company provided for in the 2012 Bill. An existing private company which does not wish to convert into a private company under the 2012 Bill will have a six month period from the time when the relevant section of the 2012 Bill is commenced to convert into a “designated activity company”. After that six month period, every private company will have a 12 month “transition period” to adopt a new constitution. Directors are required to adopt the constitution if the shareholders do not do so. Otherwise, at the end of the transition period, the company will automatically be deemed to have adopted a “default” constitution.
Other Forms of Companies
The remaining parts of the Bill are, for the first time, dedicated to other types of company including; unlimited companies; public limited companies and guarantee companies. This for the first time will set out in the one place the applicable law for each of these types of companies.