Landmark reform of company law to slash the cost of starting a company and help make Ireland the best small country in which to do business – Minister Bruton
Minister publishes Companies Bill, largest substantive piece of legislation in the history of the State
21st December 2012
12,500 start-ups in Ireland every year will save a total of more than ¤6million in professional fees associated with establishing a company, as a result of one of a range of reforms to be introduced as part of the landmark Companies Bill 2012, published today (Friday) by the Minister for Jobs, Enterprise and Innovation Richard Bruton TD.
The Bill will provide significant benefits to companies by reducing red tape and making company law obligations easier to understand. This landmark legislative project, which is the largest substantive Bill in the history of the State, will bring significant benefits to companies of all types throughout the country, and is part of the Government’s drive to make Ireland the best small country in the world in which to do business.
Changes included in the Bill will mean that many of the 12,500 private companies limited by shares which are established every year will be able to incorporate more easily, resulting in average savings of ¤1,200 in professional fees in each case, resulting in substantial improvements to the ease of doing business in Ireland by comparison to our competitors.
The Bill consolidates 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. 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 most common company type in Ireland, the private company limited by shares, will now, for the first time in Irish company law, be placed at the centre of the legislation. All of the law which applies to this company type – which represents approximately 90% of all companies registered at the Companies Registration Office – will now be contained together, in Parts 1 to 15 of the Bill, and this law will be set out logically to follow the life-cycle of a company, starting 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.
Each other company type, such as PLCs, guarantee companies, unlimited companies, will then have its own dedicated Part within the Bill, thereby making it far easier for anyone involved with any of the possible company types to find the law that applies to their company more easily.
For the private company limited by shares, the Bill contains a number of significant reforms:
- 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 merely to comply with a requirement of the law
- The company will not be required to hold a “physical” AGM – instead, the business which is required to be carried out at the AGM can be completed by written procedure
- The company will be permitted to have a one-document constitution. The requirement under the current law for every company to draft detailed Articles of Association will no longer apply – instead the Bill will contain provisions which will apply by default, unless a company wishes to vary any of these provisions
- A 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. This will mean that the old legal doctrine of ultra vires (related to a company’s powers) will no longer apply to private companies limited by shares. This will aid commercial transactions, and companies’ interactions with banks and lending institutions (the bank will no longer need to require a company to establish – usually at the company’s own cost – that the company has the legal power to borrow money for the purpose of the activity which it wishes to carry out)
- 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)
- Private companies will be able, for the first time, to engage in mergers and divisions (under the current law, there is no facility for two Irish private companies to merge).
- The availability of the audit exemption will be extended to group companies, and to dormant companies
- Directors’ duties will be codified in the Bill, thereby making the law in this area more transparent and accessible. Currently many of the legal and equitable duties of directors are set out over more than 150 years of case-law
- All offences under company law will now be streamlined and categorised into four categories, with category 1 being the most serious, and carrying a maximum fine of ¤500,000 or a maximum term of imprisonment of 10 years
- SMEs will be able to apply to the Circuit Court for examinership.
For other company types, innovations include:
- For the first time, each company type (for example, PLCs, guarantee companies, unlimited companies) will have its own dedicated Part within the Bill, thereby improving the accessibility and visibility of the law for all users
- Any company will be enabled to convert from its existing company type to any other company type which can be formed under the Bill. This will provide flexibility and greater options to companies which find a change in their circumstances.
The Bill published today is based on the General Scheme which was drafted by the Company Law Review Group (CLRG), the statutory expert body which is charged with advising Minister Bruton on matters relating to company law. The CLRG has the benefit of drawing on the wide range of expertise in company law provided by appropriate stakeholders from across the private and public sectors. Chaired by Dr. Tom Courtney, one of the leading company law experts in Ireland, the CLRG membership includes representatives of business (both large and small) and of trade unions, practitioners in the legal and accountancy professions, representatives of relevant Government bodies, and regulators.
Minister Bruton said:
“This Government is determined to make Ireland the best small country in the world in which to do business, so that more businesses can start-up, grow and create the jobs we need, and a key part of our plan is implementing a series of changes to reduce the red tape and administrative burdens imposed by Government on business.
“The Companies Bill which we are publishing today is a groundbreaking piece of legislation. It will consolidate the 16 Companies Acts as well as the many statutory instruments and court judgements so as to make it easier for companies to know and understand their legal obligations. It will also implement a series of major reforms to reduce red tape and make it easier and cheaper to run a company in Ireland, and will make a real difference to our international competitiveness. It will save businesses across Ireland many millions of euro in reduced professional fees, compliance costs and red tape, and will ultimately make it easier to create jobs.
“In publishing this Bill, I am conscious of the enormously valuable input and assistance which has been contributed by the Company Law Review Group, the expert body which advises me on company law. This Bill started life as the General Scheme which was prepared, over the course of a number of years’ work, by the CLRG, and during the drafting of the Bill the CLRG has remained available to my Department to provide the technical expertise necessary to progress a Bill of this complexity. I would like to acknowledge the contribution of all the CLRG members who have contributed to this project, led by their Chairman, Dr. Tom Courtney.”
See link below to Companies Bill 2012:
For further information please contact:
Press Office, Department of Jobs, Enterprise and Innovation, 01-6312200. Press.email@example.com
Last modified: 21/12/2012