Pre-commencement Checklist: Preparing for a smooth transition to the new regimeTuesday, 24 March 2015
The Companies Act, 2014 (the “Act”) was signed into law on 23 December 2014 and is expected to enter into force with effect from 1 June 2015. It will consolidate, streamline and modernise Irish company law and will introduce a significant number of changes to the current law. Some of these changes will apply from the commencement date; some will require action by companies within an agreed transition period; while in respect of other changes, it will be optional as to whether a company avails of a new entitlement or not.
As such, the Act will directly impact all Irish companies with effect from its commencement and all such companies (but particularly private companies in respect of which the changes are more extensive) need to be aware of the key implications of the Act for that company and to prepare for commencement.
We note below some of the key changes and practical steps which it would be advisable for all Irish companies (but particularly private limited companies) to consider in the period prior to commencement to ensure a smooth, efficient and cost-effective transition to the new company law regime.
Pre-Commencement Checklist for Companies:
- Review group structure and identify dormant or superfluous companies with a view to potentially winding-up superfluous dormant companies pre-commencement to avoid the cost and administrative burden of re-registration.
- For private companies limited by shares, assess and decide whether such companies are to be re-registered as LTD or DAC, i.e. as the new simplified model form of private company limited by shares ("LTD") or alternatively as a designated activity company with restricted objects ("DAC") during the 18-month post-commencement transition period. Identify where prior bank or third party consent to changes to corporate structure or constitution is required.
- Review Memorandum and Articles of Association of each relevant company to assess if fit-for- purpose under Act, if any provisions conflict with new mandatory provisions under Act or if any of the optional provisions under the Act may be appropriate/ useful to incorporate.
- Assess if the company is eligible for the new Audit Exemption Thresholds.
- Ensure that directors are aware of statutory duties under the Act and consider if the company falls within the threshold for application of the new Directors’ Compliance Statement regime.
- Be comfortable that a person with requisite knowledge and experience is acting as Company Secretary as directors now have a statutory duty to ensure that this is the case.
- Consider how the Act will affect current practices and template documents for holding board and members' meetings and resolutions and take necessary action to update.
- Consider where a simplified corporate governance approach can be usefully adopted by LTDs - such as single director boards, dispensing with physical AGMs etc.
- Where corporate re-organisations or transactions are anticipated, consider how these may be facilitated / simplified by reforms introduced by the Act if deferred until commencement – for example, use of Summary Approval Procedure for various corporate transactions such as capital reductions, introduction of domestic mergers and divisions, exceptions to share premium rules, changes to the rules on distributions and various other innovations.
- Identify unlimited companies or companies limited by guarantee which need to either apply for a change of name or for Ministerial exemption from the new naming rules under the Act.
- Identify knock-on changes to company websites, letterheads, signage, company seals, business cards, intellectual property, product packaging, third party notifications etc on company re-registration or change of name.
For further information on the issues and considerations flagged above, please refer to:
- Companies Act, 2014 - Frequently Asked Questions
- Companies Bill, 2012 - Landmark Reform of Irish Company Law
In addition, we will be publishing a series of e-bulletins during the lead-in period to commencement of the Act, as well as post-commencement, which will assist companies navigating the new company law regime and assessing its practical impact. If you would like to receive these e-bulletins, please register here. Alternative, please monitor our website or Follow us on Linkedin for general news and updates on the Companies Act.
If you wish to obtain advice in relation to any aspect of the Act, please contact Gillian O'Shaughnessy, Partner, Corporate Department on +353 (0)1 691 5286, Eileen O'Connor, Head of Corporate Secretarial on +353 (0)1 691 5300 or your usual ByrneWallace contact.