The Companies Consolidation and Reform Bill will bring about the greatest shake up in Company Law in the past 60 years. The Bill, which is currently making its way through the Houses of the Oireachtas, aims to simplify the law in relation to companies and increase the corporate capacity of private companies. This brief article aims to provide you with a general overview of some of these changes and what it means for your company.
Radical Reform
Private Companies will be limited by shares (CLS) and its capacity to contract will no longer be subject to an objects clause. The Bill will remove the need for Articles or Memoranda of Association in favour of one “Company Constitution”. This will allow for a more streamlined approach to Corporate Governance. Following the introduction of the Bill companies will thus possess unlimited capacity, allowing the company to contract on the same basis as a private individual. This will have the effect of abolishing the ultra vires rule and making it easier to transact in confidence with companies.
For those companies who wish to continue with limited capacity, they can decide to incorporate as a Designated Activity Company (DAC). These are companies who wish to limit the corporate capacity of the company as laid out in the companies Memorandum and Articles of association. This may be done for a variety of reasons, namely shareholders or creditors will possess details of the types of contracts the company may or may not enter and encourage the provision of finance, safe in the knowledge as to how that money is to be spent.
Ltd to CLS
Following the introduction of the Bill, existing companies will have a period of 18 months, known as the transition period, within which they must adapt their companies to comply with the Bill. Existing private companies can “opt out” of the new regime and re-register as DACs before the end of transition period by passing an ordinary resolution, not later than 3 months before the expiry of the transition period. Directors of existing private companies must adopt a new one-document constitution in lieu of their existing memorandum and articles of association. At the end of the 18 month transition period, an existing private company shall be deemed to have a constitution in the form provided in the Bill.
Check back for Further Updates
The above is only a brief summary of some of the changes the Bill will bring about. Remember to check back for further updates on these and other reforms contained within the Bill and its progress through the legislative process.
Contact Us
If you would like to discuss the Bill and its potential impact upon your company or any other area of Corporate Governance and Compliance. please contact our office for a consultation or quote on 091 564011 or e-mail info@mgryan.com.
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