Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

This reduces the burden and expense for companies that previously may have had to secure court approval for certain transactions. Additionally, it simplifies and streamlines the current methods of effecting such transactions. To ensure balance, it incorporates safeguards in respect of directors' liability if the procedure is used inappropriately. Greater detail on the summary approval procedure is provided in the Deputies' handouts.

Part 5 codifies for the first time in Irish law all the duties of directors and other officers of the company. Up to now, these duties were to be found in the common law and in various statutory provisions. They are set out now in their entirety for the sake of clarity and it is expected that this innovation in company law will promote compliance with such duties by directors and company officers. Also dealt with in this part is the directors' compliance statement, which is now being introduced into law as recommended by the CLRG and approved by the Government in November 2005. The requirement in these provisions applies to all public limited companies, except investment companies, and large limited companies. It places on obligation on directors to make an annual statement in their directors' report, acknowledging that they are responsible for securing the company's compliance with its "relevant obligations" and confirming that certain things have been done or, if they have not been done, explaining why they have not been done. Failure to prepare a director's compliance statement will constitute an offence under the Bill.

Part 6 contains provisions regarding the accounting records to be kept by companies, the financial statements to be prepared by them, the periodic returns to be made by companies to the Registrar of Companies and the auditing of financial statements of the companies. It also covers other matters related to auditors, particularly rules governing the appointment of statutory auditors and their removal from office. To a large extent, the requirements are unchanged from existing law; however, the relevant provisions have been redrafted to make them easier to understand, in order to improve compliance. One of the significant changes in this part is that the audit exemption has been extended to a group situation, so that in order to avail of the audit exemption, the company must be a small company or must be a group of companies that, taken together, fall below the threshold requirements for a small company. In a case in which the exemption applies, at least 10% of the members of the company may still request that an audit take place.

Part 7 contains provisions regarding debentures and charges and introduces a number of changes to the current law. The thrust of the changes is to simplify the registration and deregistration of charges while clarifying the rules for the priority of charges. A new two-stage procedure for the registration of charges is proposed. It provides that an initial notice can be sent to the registrar stating the intention of the company to create a charge, followed up by a more detailed notification within 21 days of the creation of the charge stating that fact. In this way, it is envisaged that lenders may be more willing to advance funds if they can achieve an enhanced security priority over a company's assets. The rules governing the priority of charges have also been significantly changed in that, where the priority of charges is not governed by other regulation, such priority will be determined by reference to the date of receipt by the Registrar of Companies of the prescribed particulars. This is in contrast to the current position whereby priority is deemed to be governed by the date of creation of the charge. The CLRG was of the view that this practice is unfair and it was recommended that priority be given to the creditor who files first in order to minimise the potential for fraudulent abuse and thereby protect providers of finance.

Part 8 deals with receivers. It substantially re-enacts the current law on receivership as contained in the Companies Act 1963, as amended. There are, however, some new provisions that set out the powers and duties of receivers. Receivers are now given certain specific powers in this part in addition to those conferred on them by court order or the instrument under which they were appointed. Conferring statutory powers on receivers is intended to alleviate many of the problems arising from poorly drafted debentures.

Part 9 contains provisions relating to the reorganisation, acquisition, merger and division of companies. The main innovation in this part is the provision for the first time in Irish law of a statutory mechanism whereby two private Irish companies can merge so that the assets, liabilities and corporate identity of one are transferred by operation of law to the other before the former is dissolved. A further innovation is that a merger can be effected without the necessity for a High Court order. Where a merger meets the requirements of the legislation, it is proposed that the summary approval procedure can be utilised to effect the merger, which can be expected to result in a significant saving of time and money. The provisions dealing with divisions are also entirely new and have been drafted to mirror the corresponding provisions in this part on mergers.

Part 10 contains the provision relating to examinerships. It largely reproduces the provision on examinerships as contained in the 1990 Act. A recent recommendation from the CLRG to me as Minister advised that changes be made to the law in order to facilitate access by small private companies to the examinership process. The proposed amendment would allow such companies to apply directly to the Circuit Court to have an examiner appointed, so that they would not be required to apply to the High Court first, as is currently the case. Small private companies will still have the option to apply to the High Court directly for examinership if they so wish under the Bill. It is hoped that the immediate impact of this change will be lower costs and greater accessibility for small private companies to the examinership process due to the fact that it eliminates the requirement for any High Court involvement and all the associated costs.

Part 11 consolidates and modernises the law relating to the winding up of companies. In the first instance, the law relating to winding up has been reordered in a more logically coherent way and greater consistency has been introduced between the three different methods of winding up - members' voluntary, creditors' voluntary and court-ordered. This is most evident in the changes to the court-initiated mode of winding up, which will reduce the court's supervisory role in favour of greater involvement for creditors. Further changes are the introduction of new professional indemnity insurance requirements for liquidators and the requirement for a person to be qualified before acting as liquidator of a company.

Part 12 combines into one part the many diverse provisions of the current law regarding the striking off and restoration of companies. The new provisions set out in one place all of the reasons a company may be struck from the register and, in another, the procedures for restoration to the register. The Director of Corporate Enforcement will be empowered to require the directors of a company that is being struck off to produce a statement of affairs. These directors can be required to appear before a court and answer on oath any question relating to the statement.

Part 13 substantially re-enacts, without any significant amendments, the law regarding the appointment of inspectors to companies and seeks to codify all law relating to the investigation of companies. In keeping with the stricter approach to the enforcement of company law, Part 14 brings together the various compliance and enforcement provisions, a change which will provide greater transparency. A director may apply for relief from a restriction order at any stage during the restriction period but the Director of Corporate Enforcement must now also be included as a notice party in any application for relief. A new provision is inserted whereby a company is prohibited from utilising the summary approval procedure where that company has a restricted director. A new four-tier categorisation of offences is introduced. It is proposed that, subject to a small number of exceptions in the case of the most serious offences - for example, prospectus and market abuse offences - all offences under the Companies Acts should be categorised according to this four-tier scheme. The Deputies will find details of the scheme in their information packs. A further new provision has been introduced which provides that, following a person's conviction for an offence under this Bill, the court may order that the person remedy any breach of the Bill in respect of which he or she was convicted.

Part 15 contains provisions relating to the Registrar of Companies, the Irish Auditing and Accounting Supervisory Authority, IAASA, the Director of Corporate Enforcement and the CLRG. For the first time, the powers and duties of both the Minister and these bodies are brought together in one coherent group of legislative provisions.

Part 16 makes provision for a type of private company to be known as a designated company, DAC. The law in volume 1 applies to DACs as it does to the new LTD, subject to the exceptions set out in the table of disapplications and any other made in this part. There will be two types of DAC under the Bill - a private company limited by shares and a private company limited by guarantee, having a share capital. The primary and defining feature of a DAC will be the continued existence of an objects clause in the constitution of the company.

This is in contrast to the "new LTD company", dealt with in Volume 1 of the Bill, the constitution of which will no longer contain an objects clause.

The DAC limited by shares will be the closest type of company to the existing private company limited by shares under the current law. During the transition period, existing private companies may elect whether to opt into the new regime for private companies or alternatively, to retain their objects clause by converting to a DAC. Alternatively, an existing private company that does not wish to opt in to the new regime can do so easily by following the procedure laid down in the Bill. It is envisaged that entities which would welcome the DAC include special purpose companies, for example, those incorporated for joint ventures or for use in a financial transaction. However, the Bill does not restrict the availability of DACs to persons engaged in such activities.

Part 17 of the Bill is concerned with public limited companies, PLCs. The law in Volume 1 applies to PLCs as it does to the new model private company limited by shares, subject to the exceptions set out in its table of disapplications and any other adaptations made in this Part. The key difference between public limited companies and private companies is that only PLCs will be permitted to list their shares an a stock exchange and offer them to the public. It is provided that the authorised minimum issued share capital of a PLC must be at least €25,000 or such greater amount as the Minister may specify by order. A PLC is now permitted to have as few as one member and there is no maximum number on the membership of such a company. A PLC must have at least two directors. A PLC is obliged to establish an audit committee and corporate governance provisions for certain PLCs are set out.

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