Ivana Bacik (Independent) | Oireachtas source

I welcome the Minister of State. As the largest substantive Bill in the history of the State, this is welcome legislation. Even carrying it to the Chamber took a little more work than the Bills we usually deal with. I also thank the Minister of State's officials for the helpful briefing they provided on 14 May and to which a number of Senators referred. I thank, in particular, Ms Elaine Cassidy and Dr. Tom Courtney who helpfully provided an overview of the Bill. The additional materials we received are also welcome.
This is seminal, codifying legislation. Reading through the text brought me back to the days before I specialised in criminal law when I used to lecture accounting technicians in the basics of company and business law. I did so as part of an exercise aimed at making highly complex legal provisions accessible to people who did not have a legal background. Studying to become accountant technicians, they needed to know how to work the provisions of the law. I recalled that we used always to start the series of company law lectures with the case of Salomon v. Solomon, a shoemaker case on the veil of incorporation and the separate corporate personality. For some reason, this case and the principle behind it resonates with people as it is a simple idea to grasp. It remains the core of company law with this legislation. Built around this Bill, however, are a web and network of different regulations, both domestic and European, that have become very hard for anyone to penetrate, including company directors, lawyers and accountants. It has become very difficult for company directors to find their way around company law.
Previous speakers referred to the many Acts dating back to the major codifying law of 1963 and including the 1990 Act, which was an attempt to bring together the newer provisions around criminal liability and so forth. That these and many more Acts have been brought together in only two volumes is a matter of great importance.
I am struck that one of the key changes in the architecture of company law following the implementation of the Bill before us will be the shift of focus to the private limited company or company limited by shares. As the Minister of State and others noted, such companies account for 90% of firms in this country. The law, however, has tended to focus on public limited companies, which account for only a small minority of companies here. To refer again to my experience in criminal law, it is a little like the teaching of criminal law where the focus is always on murder cases, despite the fact that they make up only a tiny proportion of criminal offences.
One of the issues that arises in respect of separate corporate personality and the veil of incorporation and one which has become current in recent weeks has been what is described as the phoenix syndrome, whereby companies in the restaurant trade, the Paris Bakery in Dublin, for example, shut down without carrying out orderly windings up. In some cases, they re-open under a new brand, leaving creditors and, in the case of the Paris Bakery, employees high and dry. While we all welcome the resolution of the Paris Bakery case through the intervention of the Revenue Commissioners, it is necessary to ensure in legislation that this type of abuse of the principle of limited liability is prevented. This legislation appears to be the appropriate Bill in which to do so.
I will now address the core Parts of the Bill. As previous speakers noted, the legislation has been more than 14 years in genesis. The process commenced in 1999 and in 2000 the company law review group took up the proposal from the then Department of Enterprise, Trade and Employment to start work on drafting a codifying Bill. The group produced a number of reports and in 2011 a soft copy draft of Parts 1 to 15 of the Bill was published and a consultation process commenced. A good deal of amendment has been made to the Bill and further amendment will be made on Committee Stage. We are seeing a finessing of reforms around the idea of ensuring there is a simple, accessible structure for companies and an architecture for their regulation.
Parts 1 to 15, inclusive, contain a number of welcome provisions to simplify law on private limited companies. Under the new model, these are known as private companies limited by shares, a description which does not exactly roll off the tongue. The new company will, as is currently the case, have the same legal capacity as a natural person. The abolition of the ultra viresrule is welcome, as is the removal of the need for an objects clause in the memorandum of association. This requirement has become a largely artificial exercise in any case as objects clauses have developed, for the most part, into a catch-all set of provisions and no longer have a real purpose. The old cases we used to consider have become somewhat redundant and the formal removal of this rule is welcome in the new model companies.
The provision that a second director will no longer be required is also welcome. This requirement was in many cases artificial as it resulted in a second person, whether a partner, spouse or relative, being found who was willing to add his or her name to the company. The move towards a one director company is welcome. Companies will also have a single document constitution and will no longer be required to go through the formality of holding a physical annual general meeting, AGM. Instead, provision is made for a written AGM, which will simplify matters for small businesses. Previous speakers, notably Senator Quinn, have spoken of the need to ensure simplification of procedures for small and medium enterprises. This is a very important measure as the obligation to hold a physical AGM was an artificial requirement for small family companies.
The Bill also contains a simplified and codified set of obligations - fiduciary duties - for directors and deals with the streamlining of offences under company law through the four categories. These are important measures. It features a large number of other innovations, including the possibility of merging two private companies and the simplification of the application procedures that must currently be made to courts. The new summary approval procedure is very welcome.
I propose to refer specifically to the transition provisions, whereby private limited companies may choose to opt in or out for a transition period of 18 months. Clearly, a good deal of briefing of company directors is under way on how they can operate the transitional 18 month period, which can, I believe, be extended by a further 12 months from commencement. During this 18 month period, the directors and members of the existing private companies can elect either to register as a designated activity company or DAC - this process may enter common parlance as "dacking" - or a company limited by shares. Some of the briefings from solicitors' firms and so forth indicate that private limited companies will be treated as DACs for the transition period of 18 months given that they will, during that period, still have their objects clauses in place. The position in this regard is not clear from a reading of the Bill. At the end of the 18 month period, companies which have not opted in and become DACs will be deemed to register as a new form company limited by shares. While they may choose to register, will there be a difference in this regard? Can such companies avail of the same benefits as a new model private limited company if they are simply deemed to be registered? The Companies Registration Office will still have the existing memorandum and articles of association. While I understand that the company will be deemed to have fulfilled the new provisions, they may still have to file a one page constitution. Interestingly, there is some divergence of instruction for companies in the guides being provided by private firms as to how to operate the transition period. It is important, therefore, that the matter is clarified.
The Seanad earlier debated a much different Bill tabled by Senator Katherine Zappone on sexual offences, which proposes to end discrimination against persons with disabilities. The Senator produced a highly accessible guide to her Bill, which Senators found to be a model of good practice in that it allowed people without a legal background to see at a glance the issues addressed in her legislation.

Likewise, several very helpful guides to the content of this Bill have been produced. The transitional arrangements it sets out are of particular practical significance for company owners and directors, especially in the SME sector, who may not have access to their own legal or accounting advice and are relying on what is available on the Internet. It is important that these issues be clarified. The other Parts of the Bill, which deal with other types of companies, will be much less relevant to the vast majority of directors and shareholders. However, it is very important that we have this simplified architecture, which means that different company types will have their own dedicated provisions. For example, designated activity companies are dealt with in Part 16, public limited companies in Part 17, and so on. This will make the structure of company regulation far more accessible for everybody.

The legislation has received strong cross-party support. It is an important codifying Bill which can well be described as a one-stop shop for the regulation and governance of companies. It will provide a much more simplified structure for those who wish to start up their own businesses. There is unnecessary red tape at present and it is welcome to see a way of cutting through that. We must be careful, however, that the size of the Bill does not scare off people who might not believe us when we say that it provides for a simpler and more accessible procedure. How we disseminate the information about this Bill is critical in achieving the type of compliance we want to see. I presume we are aiming for a situation, at the end of the transitional period, where 90% or more of companies will opt for the new model of private limited companies set out in Parts 1 to 15, inclusive. It is vital that people understand how they can now benefit from these new procedures. That is the practical challenge in terms of ensuring the legislation beds down quickly in practice.