The Companies Act 2014: An Overview

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The Companies Act 2014:
16 June 2015
An Overview

Welcome from Gerard O’ Reilly, Crowe Horwath
Crowe Horwath, in association with The South Dublin Chamber Tallaght Business Centre
welcomes you to today’s event
This seminar will provide members with an overview on the Companies Act 2014, as it
pertains to Irish registered limited companies, and will ensure that members have information
and practical knowledge to ensure that their organisations comply with the Act.
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The Companies Act 2014

Contents
Background to The Companies Act 2014
New Company Types and the Conversion Process
Directors Duties and Role of the Company Secretary
Financial Statements
Summary Approval
Other Initiatives to be introduced
Questions and Answers

Background to the Companies Act 2014
The Companies Bill was published on 21 December 2012 by the Minister for Jobs, Enterprise
and Innovation.
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 its aim is to ease accessibility of the law for each different company
type
Consolidates the 16 Companies Acts as well as the many statutory instruments and court
judgements
 The aim is 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
The Companies Act 2014 was signed into law on 23 December 2014 and commenced on 1
June 2015.
The Companies Act 2014 is available for download at http://www.oireachtas.ie

New Company Types
presented by
Gráinne Howard

New Company Types
The vast majority of companies currently registered in Ireland are private companies limited
by shares (EPCs- Existing Private Limited Companies).
The Act proposes two new forms of private company to replace all existing private companies
limited by shares.
LTD-Private Company Limited by Shares DAC-Designated Activity Company
A new form of simplified
company limited by
shares with unlimited
legal capacity with a
single constitutional
document.
Similar to existing form
of private limited
company. Will continue
to have a M&A, with
an objects clause
limiting its legal
capacity.

New Company Types
LTD Private Limited by Shares DAC- Designated Activity Company
It may have just one director but it must have a separate secretary if
it has only one director.
It must have at least 2 directors
It can have between 1 and 149 members It can have between 1 and 49 members
Both single and multi member companies can dispense with the
need to hold an AGM
Multi member companies are required to hold AGMs
It has a one-document constitution that replaces the need for a
memorandum and articles of association.
It has a constitution document which includes a memorandum and
articles of association.
It will not have an objects clause because it has full unlimited
capacity to carry on any legal business, subject to any restrictions in
other legislation.
It has stated objects for which the company was incorporated.
It has limited liability and has a share capital. It is a Private company It is a Private company and has limited liability. It has a share capital
or is a private company limited by guarantee with a share capital.
It can pass majority written resolutions (special and ordinary). It can pass majority written resolutions
Name must end in “Limited” or “Teoranta” Name must end in “Designated Activity Company” or “Cuideachta
Ghníomhaíochta Ainmnithe” unless qualified for an exemption

New Company Types
Other Company Types
PLC – Public Limited Company
PUC – Public Unlimited Company
PULC – Public Unlimited Company with no share capital
ULC – Private Unlimited Company
CLG – Company Limited by Guarantee (these are public guarantee companies)
The changes for these companies will be minimal under the Companies Act 2014

New Company Types
PLC- Public Limited
Companies
Guarantee Companies Unlimited Companies
Will retain objects clause Will retain objects clause Will retain objects clause
No name change required Name change may be
required (if no exemption is in
place)
Name change may be
required (if no exemption is in
place)
Can have a single member Can now have a single
member
Can now have a single
member
Minimum of two directors Minimum of two directors Minimum of two directors
Can offer shares to the public Can now avail of audit
exemption if the criteria is met

New Company Types
Question: I have a Limited Company, what action needs to be taken?
For most Irish companies limited by shares, the question will be whether to convert into a
LTD or DAC.
Existing private companies (limited by shares) - EPCs - did not automatically become LTD
companies on commencement date 1st June 2015.
They operate under DAC legislation for the duration of the Transition Period.
EPCs do not have to change their name during the Transition Period.
EPC cannot avail of the features of the LTD company without having been converted first.

New Company Types
To register as a LTD or DAC?
This will depend on what is best suited for your company and the purpose for which it is
incorporated.
Companies such as banks, insurers and companies with debt securities listed on an
exchange, that wish to continue as private limited companies must convert to a DAC.
It is anticipated that most companies will become LTDs. As these are types of companies that
enjoy the benefit of most of the innovations intended to simplify their administration e.g. the
ability to have a single director.

Timeframe for Conversion
Commencement date
(1st June 2015)
New Act commenced.
Newly incorporated companies will be registered as one of the relevant new company
types.
All EPCs as DACs until the end of the Transition Period only.
15 months later
31st August 2016
Final date for companies who wish to convert by re-registration to DAC to initiate
procedure.
Thereafter may only re-register following procedure under Part 20 or following a section
57 Companies Act 2014 court order.
18 months later
30th November 2016
Transition Period ends.
EPCs which have not availed of the opportunity to convert will automatically be converted
to LTD.

Conversion Process
LTD
Special Resolution of
the Members
Directors must prepare
constitution and
deliver to members
and CRO before the
end of the transition
period
Default to a LTD at the
end of the transition
period
DAC
Ordinary resolution of
the members within 15
months
Special Resolution of the
members after 15
months
Directors must resolve to
re-register as DAC if
members holding more
than 25% serve written
notice within 15 months.
Company has
debentures admitted to
trading on listed on a
debt market
Court Order

Memorandum and Articles of Association
In accordance with 1176 (6) the memorandum and articles of association will continue in
force save to the extent that they are inconsistent with a mandatory provision.
Review of the companies memorandum and articles of association highly recommended to
ensure that they comply with all mandatory provisions of the Act. M&As that are in
contravention of the Act will lead to confusion as their terms will be misleading.
Doing nothing is not recommended as the conversion process offers a company the
opportunity to discuss with its advisers, directors and members the steps to be taken to
ensure that the company has the required regulations incorporated into its new constitution.
Taking no action means the company will not have had an opportunity to review its current
articles of association to see if any of those provisions are contrary to mandatory provisions.

Course of
Action for
ARTICLES OF
ASSOCIATION
Full review of the articles,
modifying where
necessary and adopting
any new favourable
provisions arising out of the
Companies Act 2014
Maintain existing Articles
as constitution modifying
only where necessary
Maintain existing Articles
as the Constitution.
Mandatory provisions will
prevail and company will
not necessarily have
availed of any favourable
provisions

Directors and Officers of the Company
Directors and Officers of a
Company
presented by
Gerard O’ Reilly

History of Directors’ Duties
Developed by the UK and Irish Courts over the past 150 years
Origins developed by the older concepts of equity and trusts.
Fiduciary duties being owed by the Director to act solely in Company’s interests.
Previous sources of Directors Duties for example can be found in:
Memorandum & Articles of Association
Common Law
Companies Act 1963-2013
These common law fiduciary duties have now been codified in the new Companies Act.

History of Directors’ Duties
The codification of these duties will now set out clear rules of the principal fiduciary
duties to which a Director will have to consider when acting as an officer of the Company.
This will act as a more accessible checklist of the rules and regulations for any person
who is, or is considering becoming a Director of a Company.
Ultimately, this will result in a greater awareness of the rules and regulations that a
Director must consider and lead to better governance practices within Companies.
“Easier to comply, harder to deny.”
With this increased responsibility placed on Directors, it is extremely important that they
understand the obligations that are placed on them.

Directors’ Fiduciary Duties
8 Fiduciary
Directors
Duties
Codified under
Section 228
To act honestly
and
responsibly
Act in
accordance
with
Company’s
Constitution
A Director will not use
the Company's
property, information
or opportunities for
their own interest
To exercise
care, skill and
diligence
Avoid Conflicts
of Interest
Have regard to
the interests of
Members
To act in good
faith for the
best interests
of the
Company
Not to restrict
the power of
Director’s
independent
judgement

It is the duty of each director of a company to ensure that the Companies Act 2014 is
complied with (section 223(1)).
Directors will also be obliged to acknowledge their duties and obligations when consenting to
act (section 223(3)).
“I acknowledge that, as a director, I have legal duties and obligations imposed by the
Companies Act, other statutes and at common law.”
Directors to have regard to interests of employees (section 224).
Duty of director to disclose his or her interest in contracts made by the company (section
231).
Other Important Duties to Consider

Breaches of Duties and Directors Penalties
 Breaches of certain duties: liability to account and indemnify
 The Companies Act has now increased the penalties for non compliance with the Companies Act 2014. These are as
follows (S. 871):
Category
Offence
Summary Conviction Conviction On
Indictment
Example
1 Class A Fine or
imprisonment for a term not
exceeding 12 months or
both.
Fine not exceeding
€500,000 or imprisonment
for a term not exceeding
10 years or both.
If any person is knowingly a party to the carrying on of the
business of a company with intent to defraud creditors of the
company or creditors of any other person or for any fraudulent
purpose, the person shall be guilty of a category 1 offence.
2 Class A Fine or
exceeding 12 months or
both.
Fine not exceeding
€50,000 or imprisonment
for a term not exceeding
5 years or both.
Obligation to keep adequate accounting records
3 Class A Fine or
exceeding 6 months or both.
N/A Failure to provide the directors' report to the Companies
Registration Office or Members in a manner prescribed by
section 332 of the Companies Act 2014.
4 Class A Fine.
A “Class A fine” is a fine
within the meaning of the
Fines Act 2010 (i.e. a fine
not exceeding €5,000).
N/A Failure to provide a copy of the constitution to its members.

The Role of Company Secretary
All Companies required to have a Company Secretary (section 129(1))
Duty placed on the Director to appoint a Company Secretary who has the:
“skills or resources necessary to discharge his or her statutory and other duties.”
(section 129(4))
To comply with new requirement Directors may seek to:
 appoint a Company Secretary who has the necessary skills.
 obtain Company Secretarial Services.
Single Director Companies will require that the Company Secretary be a different
person (section 129(6)).

Role of Company Secretary (Cont.)
Some other key duties:
Duties delegated by the Board of Directors without deviating from the secretary’s
statutory and other legal duties (section 226(4)).
the skills necessary so as to enable him or her to maintain (or procure the
maintenance of) the records (other than accounting records) (section 226(2)).
Secretaries will also be obliged to acknowledge their duties and obligations :
“I/We acknowledge that, as a Secretary, I/we have legal duties and obligations
imposed by the Companies Act, other statutes and at common law.” (section
226(5)).

presented by
Gerard O’ Reilly
Audit and Financial
Statements

Audit Exemption
The provisions contained in Volume 1 Part 6 Financial Statements, Annual Return and Audit.
The directors of a company are required to arrange for audit unless the company is entitled to
and chooses to avail itself of the audit exemption. (Sec 333)
Members may requisition an audit
For dormant company audit exemption, the Act does state the directors must be of the
opinion that the company will satisfy the conditions and hold the board meeting in the
financial year.
One significant change to the old legislation is if the company files the first annual
return late it cannot avail of audit exemption for the first financial year.

Audit Exemption
Companies that can avail
Company Limited by Shares (LTD) that is a small company
Designated Activity Company
Company Limited By Guarantee
Small Groups
Dormant companies that have no significant accounting transactions or permitted assets &
liabilities
Non-designated Private Unlimited Company (ULC)

Audit Exemption
Companies that cannot avail
PLC’s
Certain Unlimited companies
A company, holding or subsidiary company that falls within Schedule 5 or is a credit
institution, insurance undertaking, relevant securitisation or body with securities admitted to
trading
Late filing the current or preceding annual return with financial statements annexed
Late filing the first annual return
All companies in the group must have filed their returns on time
A notice is received 1 month before the end of the financial year by one or more members
holding 10% or more of the voting rights or for Companies Limited By Guarantee 1 member
may object.

Financial Statements- Size Criteria Companies Act 1963-
2013
Small Medium Large Group
Balance sheet total not exceeding
€4.4m
€7.62m
Balance sheet total exceeding
€7.62m
the balance sheet total of the group
exceeds €7.62m
Turnover not exceeding
€8.8m
€15.24m
Turnover exceeding
€15.24m
the amount of the turnover of the group
exceeds
€15.24m
Employees not exceeding
50
250
Employees exceeding
250
the average number of persons
employed the group exceeds 250

Financial Statements- Size Criteria Companies Act 2014
Small Medium Large Group
€4.4m
€10m
Balance sheet total exceeding
€10m
the balance sheet total of the group
exceeds €10m
€8.8m
€20m
Turnover exceeding
€20m
the amount of the turnover of the group
exceeds
€20m
50
250
Employees exceeding
250
the average number of persons
employed the group exceeds 250

The consolidation of the law in this area is an improvement in accessibility and transparency,
and is set out in Part 6.
Part 6 refers to “financial statements” and “accounting records”, where legislation previously
referred respectively to “accounts” and “books of account”. This reduces the risk of confusion
arising from the use in practice of “accounts” to refer both to “financial statements” and
“accounting records”.
CLG can for the first time claim audit exemption should they meet the required criteria.
However, be careful of the Charities Act 2009 requirements!
Ability to fix defective Financial Statements with the new B1 X Form.
Auditors’ reporting of offences- no longer ambiguous
They will now be Category 1 and 2 offences only.
Directors’ report to confirm (so far as directors are aware) auditors have relevant information
 increases directors’ accountability for audit.
Introduction of Directors Compliance Statement: “Comply or Explain”
Changes in respect of Financial Statements

Directors Compliance Statement- “Comply or Explain”
New Provision in the Act
Compliance with Statement for “Large Companies” i.e. balance sheet €12.5 million and an
annual turnover of €25 million.
 Compliance Statement must have:
that the directors have drawn up a compliance policy statement;
That the directors have put in place appropriate arrangements or structures that are, in directors’
opinion, designed to secure material compliance with the company’s obligations under company law
and tax law; and
that the directors have conducted a review during the relevant financial year of the arrangements and
structures and have taken such steps to ensure the company’s compliance with the Companies Act
2014 and Tax law, or explain why this has not been done.
However, explanation must be given for non compliance with these obligations.
Non Compliance with this Act or tax law, a failure to comply can be considered to be an
offence (Section 225) This will be a category 1 or a category 2 offence if not complied with or
a serious Market abuse offence or a serious prospectus offence.

Changing Financial Year
•288. (1) A company's first financial year must be no 18 months after incorporation
• (a) Each subsequent financial year must not be in excess of 12 months, or
•(b) such other period, not being more than 7 days shorter or longer than 12 months, as the
directors may determine to its next financial year end date,
s.288
•Changes to a company’s year end must be notified to CRO on a designated form B83 and will
not be accepted if:-
•if it result in a financial year in excess of 18 months
•the previous financial year has expired.
•if the alteration would result in a gap in the periods covered by the company's financial
Statements
•if it results in a company not filing an annual return in a given year
•if the new B83 notice is made less than 5 years after a previous B83 notice.
Form B83
•there is an exemption to the 5 year rule under section 288(10):-
•To bring the financial year end in line with a parent or subsidiary
•The company is being wound up.
•Direction from Director of Corporate Enforcement.
Exemption
to the five
year rule,
S. 288 (10)

FORM B83

Summary Approval Procedure
The Summary Approval Procedure is covered in Chapter 7 of Part 4 of the Companies Act
2014.
It is a new procedure and it covers several different areas of the Act and the procedure
permits certain restricted activities that would otherwise be prohibited.
It is a means by which companies can engage in restricted activities by ensuring that the
persons those restrictions are designed to protect, consent to the action.
The summary approval procedure requires that the members pass a special resolution (and
in the case of mergers, a unanimous resolution) approving the transaction and a director’s
declaration in relation to the post-completion solvency of the company.
 New summary approval procedure will provide a general validation process for overcoming
the following restricted types of transaction:

Summary Approval Procedure
The restricted activities are
the financial assistance for the acquisition of shares (section 82),
reduction in company capital (section 84),
variation of company capital on re-organisations (section 91),
prohibition on pre-acquisition profits or losses being treated in holding company’s financial
statements as profits available for distribution (section 118),
prohibition of loans to directors and connected persons (section 239),
domestic merger (section 464),
members voluntary winding up (section 579).

Summary of other initiatives
included in the Act
presented by
Gráinne Howard

Companies Act 2014- Summary
Charges
New two tier process introduced for registering a charge where notice of a lender’s intent to
create a charge may be provided to the CRO. This would allow the lender the opportunity to
secure priority (up to 21 days in advance) before the charge is created.

Company Capital
A company’s capital will now be made up of the following elements:
 The aggregate value of the consideration received by the company in respect of shares allotted by the
company
 Un-denominated capital which includes the share premium account, the capital conversion reserve fund
and the capital redemption reserve fund.
 A company will be entitled to vary its capital in advance of reorganisations where it is disposing of one or
more assets, an undertaking/part of an undertaking, or a combination of assets and liabilities to a body
corporate where the consideration meets certain criteria.
 Such reorganisation must have been approved using the Summary Approval Procedure.
 Where the criteria has been met, the company may, by ordinary resolution, vary the structure of its
capital by reducing the reserves and company capital by an amount equal to the book value of the
transferred assets and undertakings.
 It is expected that this will make reorganisations much simpler and will facilitate the completion of
reorganisations by companies that would have been prohibited from doing so in the past by virtue of
having negative or low reserves.

Share Capital
Previous
Share Capital
CCRF
CRRF
Share Premium
Companies Act 2014
Share Capital
Un-denominated Capital
Provided that the Company Capital remains intact, share
capital par value and un-denominated capital are
interchangeable.

Directors Loans
Must now be properly documented and approved in writing.
Mergers of Private Companies
In the past, private companies could only merge with companies in other EU jurisdictions
under the EU Cross Border Merger Regulations. This has been amended by the new Act and
private companies may choose to merge with another company using either the Summary
Approvals Procedure or through the Courts.
Persons binding the company
There is an option to register the names of individuals who are authorised to bind the
company with the CRO.

Recording of Residential address
In cases where the personal safety or security of a director or secretary is in question, an
exemption to recording the usual residential address of that officer in the register of directors
and secretaries may be allowed.
Redeemable Shares
It will no longer be necessary to maintain a non-redeemable portion of the issued share
capital (there was a 10% threshold previously).
Share notifications
Any disclosure of interest in shares and share options below 1% of the nominal issued share
capital is no longer required.

Winding-up
It will be possible to approve a members’ winding-up using the new Summary Approval
Procedure. In general the Act has made the legislation in relation to the different methods that
may be employed to wind up a company more intelligible and logical

Companies Act 2014
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