Sweeping changes to company law on cards

The Government has introduced the most sweeping reform of company law in the history of the State.

As part of the Action Plan for Jobs, the new Companies Act consolidates an existing 17 companies acts between 1963 and 2013 into one piece of legislation. Set out across 25 parts, the Bill contains 1,448 sections and 17 schedules.

The Minister for Jobs, Enterprise and Innovation, Richard Bruton, said that the initiative was part of the plan to make “Ireland the best small country in the world to do business”.

Among the major reforms in the new bill for private companies limited by shares include that it will now be possible for such a company to have only one director — there will no longer be a requirement to have a second director.

The company will not be required to hold a physical annual general meeting and it will be permitted to have a one-document constitution.

The company will no longer be required to have an objects clause, setting out what the company does and does not have capacity to do — the company will now have the same legal capacity as a natural person.

The new “summary approval procedure” will allow companies to carry out certain activities by means of a directors’ declaration and a shareholders’ resolution, for activities which under the current law would require High Court approval, for example, certain transactions with directors, capital reductions, and solvent windings-up, said the Department in a statement.

Moreover, for the first time private companies will be able to merge. Also, companies can make its annual return in full online, which is aimed at reducing costs.

The department estimates that 200,000 SMEs and 12,000 start-ups will be able to substantially reduce costs and time associated with establishing and running a company.

“The new Companies Act is welcome news for business and will reduce compliance cost in the long term, although there may be a short- term cost in amending existing company formation documents.

“Some may lose out under the new law, such as minority shareholders, but they have an opportunity between now and June 2015 to ensure that their rights are not affected,” said Aidan Clifford, technical director of ACCA Ireland.

The new act has positive and negative implications for creditors, said Mr Clifford.

“The flexibility brought into company law will diminish creditors’ security and ability to collect their debts, but the increase in the penalty for directors by way of personal unlimited liability for the debts of the company, will strengthen the creditors hand.”