2. Aims of the New Act
The product of over a decades work by the Company Law Review
Group (CLRG) and the largest piece of legislation in the history of
the State, the Companies Act, 2014 aims to consolidate, simplify and
reform Irish company law and provide us with a legislative framework
which is fit for purpose in the 21st century business environment.
Focusonthe
PrivateLtd
Company
The private company has been the “work-
horse” of commercial life in Ireland
since this form of company was first
permitted under the Companies Act of
1907 and today almost 90% of registered
companies are private companies.
Ironically, the current Companies
Acts view the public company as the
model company type with the private
company as a peculiar variation of it
a situation which the Chairman of the
CLRG described as “being akin to the tail
wagging the dog”.
Parts 1 to 15 of the New Act introduce
a new type of private company and
contains all of the legislation which will
apply to the new private company limited
by shares. This new private company
limited by shares will offer a number of
attractive practical benefits which will
make it easier to start, to use, and to run
a company.
Reform
Consolidate
Simplify
3. The New Private Company
May have a single director, removing
the need for nominees and increasing
accountability and governance in private
companies.
Single
Director
One Summary Approval Procedure will be
introduced, which will allow companies
to undertake certain transactions which
previously were either prohibited or required
Court approval (e.g. loans to directors,
provision of financial assistance and share
capital reductions).
Summary
Approval
Procedure
Will have the same contractual capacity as a
natural person, private companies will not have
an objects clause and so will not be subject to
the doctrine of ultra vires, making it easier to
transact with confidence with private companies.
No
Objects
Clause
The memorandum and articles of association
will be replaced by one document and the
need for complicated articles of association
will be removed as all of the relevant
legislation is included in the Act.
One
Document
Constitution
TheNew
Private
Company
The need to physically hold Annual General
Meetings will be removed.
Written
AGM’s
4. Companies
Directors
Advisors
• New Company Structures
• New Legislation
• Greater Contractual Capacity
• Simplified Management and Administration
• New Categories of Offences
• Increased Penalties for Non Compliance
• Common Law Duties Codified
• Duty to Appoint a Qualified Company Secretary
• Focus on Accountability and Governance - Ignorance of Law is No Longer an Excuse
• Audit Exemption for Guarantee Companies and Small Groups
• Summary Approval Procedures
• Directors Compliance Statements for All Public and Large Private Companies
• Revision of Defective Accounts
• Mergers of Private Companies Permitted
Designated
Activity
Companies
Unlimited
Companies
Guarantee
Companies
Public
Companies
• Private Limited Company with Specific Purpose
• Must Have Two Directors
• Must Have an Objects Clause
• Two Document Constitution
• Must Have Two Directors
• Must Have an Objects Clause
• Two Document Constitution
• Reduction in minimum number of members
• May avail of Audit Exemption
• Must Have an Objects Clause
• Two Document Constitution
• Reduction in minimum number of members
• Must prepare Directors Compliance Statement
• Must Have Objects Clause
• Two Document Constitution
Other Company Types
The law relating to other types of companies are set out in separate parts of the Act. In those
parts, appropriate deviations from the law applicable to the new private company will be
applied to each company type, as will distinct provisions relevant only to that type of company.
Who Will Be Affected?
5. Directors Fiduciary Duties
The Act codifies directors’ fiduciary duties into the following main duties:
• to act in good faith in what the director considers to be in the company’s interests;
• to act honestly and responsibly;
• to act in accordance with the company’s constitution and to exercise powers only for
lawful purposes;
• not to use company property for own or others’ use unless approved by the members
or the constitution;
• not to fetter discretion unless permitted by the constitution or entered into in the
company’s interests;
• to avoid conflicts of interest unless released by members or by the company’s
constitution;
• to exercise care, skill and diligence; and to have regard to the interests of the
members as well as employees.
Categorisation of Offences
The Act provides for a four-fold categorisation of offences. Throughout the Act, offences
are, as created, categorised as attracting a particular category of penalty.
Categories 1 and 2 cover indictable offences while categories 3 and 4 cover technical or
filing offences.
Category 1
Category 2
Category 3
Category 4
On summary conviction, to a class A fine or imprisonment for a
term not exceeding 12 months or both; or
On conviction on indictment, to a fine not exceeding €500,000
or imprisonment for a term not exceeding 5 years or both
On summary conviction, to a class A fine or imprisonment
for a term not exceeding 12 months or both; or
On conviction on indictment, to a fine not exceeding €50,000 or
imprisonment for a term not exceeding 5 years or both
Class A fine or imprisonment for a term not
exceeding 6 months or both
Class A fine (within the meaning of the Fines Act 2010 -
curently a fine not exceeding €5,000)
OFFENCE
LIABILITY
6. Following commencement on 1 June
2015, all private companies in the country
must re-register with the Companies
Registration Office under one of two new
corporate structures, the new simplified
Private Limited Company (“LTD”) or the
new Designated Activity Company (“DAC”).
The primary differences between these
two types of private limited company are
set out in the table opposite.
This conversion process is mandatory,
companies which do not convert within
the first 15 months of the transition
period will be automatically converted to
the simplified Private Limited Company
once the transition period expires but
leave themselves open to action by
the company or its shareholders if this
results in shareholders’ interests being
harmed or breaches of fiduciary duties.
The transition period will last for 18
months after the commencement date but
may be extended by a further 12 months
if difficulty arises in implementing certain
areas of the legislation.
Timeline
CompaniesActBill
Printed
Signed
IntoLaw
2012/13 2014 December2014
2014
Dáil Seanad
Dec
2014
15-18
months
1-15
months
1June
2015
Enactment Commencement Action Required Transition Period Ends
7. Mazars Corporate Secretarial Services
Please feel free to contact us if you would like to know more about the new Companies Act
and how it will affect your company.
This new Act will impact every company
now in existence in Ireland and will raise
immediate concerns for directors of
private limited companies in particular.
The Act imposes significant new legal
duties and obligations on directors of Irish
companies along with new categories of
offences as well as increased penalties for
non-compliance.
Mazars Team of Chartered Company
Secretaries have extensive knowledge
of the new legislation and are very
much prepared for its introduction, thus
ensuring our clients will remain aware
of and compliant with their relevant
obligations during the transition period.
Primary Differences between the two new types of Private Limited Company
Is a private company limited by shares.
The Company name must end in “Limited”
or “ltd” or “Teoranta” or “teo”.
May be either limited by shares, or limited
by guarantee, with a share capital. The
Company name must end with “Designated
Activity Company” or “DAC” or “Cuideachta
Ghníomhaíochta Ainmnithe” or ”CGA”.
Will have a single document constitution
which replaces the need for a
Memorandum and Articles of Association.
Will continue to have a two part constitution.
It will not have an objects clause
therefore granting unrestricted capacity
to carry on any legal business.
Must have a Memorandum and Articles of
Association with an objects clause.
May have a single director. Must have a minimum of two directors.
Must have a company secretary which
may be one of the directors where there
is more than one director.
Must have a company secretary which may be
one of the directors.
No requirement to have an authorised
share capital.
Must have an authorised share capital.
May dispense with the holding of a
physical AGM.
Must hold a physical AGM unless it is a single
member company.
May not list, or have admitted to trading
any securities (either shares or debts).
May list debt securities.
Company Limited by Shares Designated Activity Company
8. Mazars is present in 5 continents.
CONTACTS
Mazars
Lorcan Colclough
Partner
Tel: +353 (0)1 449 4420
Email: lcolclough@mazars.ie
Harcourt Centre
Block 3
Harcourt Road
Dublin 2
Ireland
Tel: +353 (0)1 449 4400
Fax: +353 (0)1 475 0037
Mazars Place
Salthill
Galway
Ireland
Tel: +353 (0)91 570 100
Fax: +353 (0)91 583 242
Detailed information available on
www.mazars.ie
