By Daisy Downes
Some 13 years after its inception, Ireland’s new Companies Act is expected to be enacted before the end of 2014. Daisy Downes spoke Dr Tom Courtney, Chairman of the Company Law Review Group about the new legislation.
Why has it taken the Companies Bill so long from inception to enactment?
Assuming the Bill is enacted this year, it will have been 13 years since the CLRG unveiled the blueprint I mentioned. CLRG published heads of Bill in 2007 and it took a further five years to draft the Companies Bill which was published in December 2012. The necessary resources for drafting such a mammoth piece of legislation – which at 1,448 sections is the largest enactment in the history of the State – are scarce at the best of times in a jurisdiction the size of Ireland. It is also significant that the Bill was drafted at a time when there were never greater demands made on the Office of the Attorney General in terms of providing legislative solutions to Ireland’s economic crisis.
To what extent will the new legislation revolutionise company law in Ireland?
I think that many aspects of the Companies Act appear revolutionary to practitioners e.g. a one-document constitution, the absence of an objects clause for LTDs, the abandonment of Table A and the advent of statutory default governance provisions. I am not sure I would use the same term to describe the experience for businesses and other users of company law. I would like to think that the Act will confirm that Ireland is a good place to do business through the medium of the registered company, simplify company law as much as is possible and set out the law more clearly. If these outcomes, achieved by the repeal and reformed restatement of 32 enactments, are considered to be revolutionary, then the Companies Act will revolutionise Irish company law.
What are the most significant changes?
The changes can be broken down into structural and substantive. After the architecture of the Act – whereby the law applicable to each type of company is, for the first time, clearly delineated – the next most significant structural change is the abandonment of Table A in favour of the creation of a series of statutory defaults which will automatically apply unless a company’s constitution provides otherwise. The advent of a one-document constitution for the new model private company or “LTD” is also a significant structural change. As to substantive changes, the abolition of objects clauses for LTDs, and merge companies using the summary approval procedure, the codified statement of directors’ duties, the procedure for revising defective statutory financial statements, changes to registration of charges – the list goes on – are all important changes introduced by the new legislation.
Are Irish company directors ready for the change?
Company directors are only as ready for the change as are their accounting, legal and company secretarial advisers. For most directors and shareholders of private companies, the key action required will be deciding whether to convert the company to a designated activity company (DAC) or become a new model private company (LTD). And while there are new obligations (for a small number of companies, the directors’ compliance statement will be a new obligation) much of the Act is actually old wine in a new bottle. Advisers will play a key role in stewarding their corporate clients through the transition stage of the Act which is likely to commence on 1 June 2015.
What impact will the Companies Act have on foreign direct investment and in particular on Ireland’s competitiveness?
It is important that Ireland’s corporate framework supports competitiveness. FDI does not choose to come to Ireland because of our company law regime; however, FDI might choose not to come here and go elsewhere if it is not supportive. The Companies Act will give Ireland a state-of-the art code which is supportive of a decision to locate in Ireland. It simplifies the law, clarifies obligations of companies and their directors, it removes unnecessary bureaucracy and seeks to allow companies to engage in transactions provided the interests of creditors and shareholders are protected.
Do you anticipate further reform once this legislation is enacted?
Company law must always be kept under review and changes introduced at regular intervals, whether to match or exceed the support provided by competing jurisdictions or to address new mischiefs which come to light. The CLRG will continue and its current work programme, in addition to looking at whether company law compliance and enforcement is fit for purpose, will involve a review of issues which were not included in the Bill because they needed further development.
Dr Thomas B Courtney is a partner and head of the Company Compliance & Governance group in Arthur Cox. Tom has been the Chairperson of the CLRG since its inception and is the author of The Law of Companies (3rd edn, 2012) and editor of the forthcoming Bloomsbury Professional’s Guide to the Companies Act. Daisy Downes edits Accountancy Ireland. A fuller version of this article appears in the December 2014 edition of Accountancy Ireland which is available for in-App purchase through the Accountancy Ireland Magazine App.