I listened with great interest to the comments of Paul Keane, Managing Partner of Reddy Charlton Solicitors, on Friday the 10th May at the Law Society Conference. The new Bill has been coming for some time, and it has the distinction of being the largest piece of legislation ever introduced to the Orieachtas. This is hardly surprising as there has been a mass of legislation since 1963, over 30 different pieces, including Acts and Statutory Instruments which have greatly over-complicated an already complex area of law. This has been under review since 2000, and the Companies Bill is a product of that very hard endeavour, stretching to 1,136 pages and 1,429 Sections. The Bill reforms the area greatly and broadly as follows;
There will now be five types of company, the private limited company, the designated activity company, the company limited by guarantee, the public limited company, and the unlimited company.
The new Bill reflects the reality of Irish business, and in particular that over 85% of all companies are small private companies. The new Bill allows for a company with one director and one shareholder, and allows the company to operate in the circumstances without an AGM. Companies will have full and unlimited capacity to carry on any business activity and to do any transaction. The documentation forming the company, such as the Memorandum and Articles, will be reduced to a single constitutional document, and there will be no limit to the Objects Clause.
Of interest is the removal of the various traps which beset those practising in company law. Generations of lawyers have wrestled with the doctrine of ultra vires, the distinction between the objects and powers, and extent of the authority of directors or others purported to act on its behalf. This is all rendered redundant by the new Bill.
It also removes Section 60 of the Act, which was a restriction of financial assistance.
Security and registration of security is simplified in so far as any charge created by the company must be registered. Priority is more confusing, although should be simplified as priority will be ranked by the order of registration.
To make life simpler for the directors, their duties have been codified. They will now be restated in the Act, and while appear to be relatively straightforward, such as acting in good faith, acting honestly and responsibly, acting in accordance with the Constitution and not using the company property for their own benefit, these merely reflect the common law position that has existed to date.
Finally, restructuring has been facilitated. Mergers and divisions will now become much easier, and share for undertaking swaps, which is a very tax efficient way of carrying out one’s restructuring, allowed.
Although the Bill is voluminous it is very well laid out, clear, and reflects current day to day practice. It is to be hoped that this can only be a benefit to Irish company law.