Few people would disagree that the proper functioning of a modern economy requires there to be an effective system of company law and a fair framework of corporate governance. Historically, company law has concentrated on regulating the dynamic relationships between directors, employees, shareholders and creditors. But, in response to the recent cascade of high-profile financial scandals, the focus of company law has shifted. Law-makers are now addressing the challenge of establishing new mechanisms to enhance the effect and the effectiveness of corporate governance.
It is clear that, to be effective in this task, the key values needed are: ethical awareness, accountability and transparency. The challenge for any legislature in reforming company law is to draft measures which not only support a competitive ethos and enable companies to prosper but also safeguard the rights of shareholders, creditors and the wider public.
The Companies Act 2014, which has replaced former legislation, is designed to meet these criteria. It is a major reforming development, which not only thoroughly modernises Irish company law but also succeeds in striking a judicious balance between the competing interests of companies, shareholders, creditors and other stakeholders. Codifying the existing company statutes into a single consolidating instrument, the Act also introduces innovatory provisions designed to simplify company law practice and strengthen the entire corporate governance framework. Three notable areas in which reforms have been effected are: corporate form, corporate governance – including directors’ duties – and streamlining of procedures.
Among new types of companies created by the act is the LTD – a new kind of model private company, limited by shares. Departing from its antecedents, the LTD is unique. It requires only one director, enjoys unlimited legal capacity, has a one-document constitution and is exempted from the normal requirement of holding an AGM. Because of its simplicity, it is likely that the LTD will be perceived as an exemplary vehicle: not only by indigenous entrants venturing into new business markets but also by foreign investors seeking to establish a corporate presence in Ireland. Another type of private company is the DAC, which is largely similar to its predecessor, the private limited company. Public company versions created under the legislation are the public limited company, the company limited by guarantee and the unlimited company.
The Act also codifies directors’ common law fiduciary dutiesand, in combination with the pre-existing statutory duties – repeated in the new law – it augments the obligations of directors to ensure compliance with the company law regime. Directors of PLCs and certain private companies that meet specified thresholds have their duties further expanded by a supplementary obligation requiring them to attach an Annual Compliance Statement to the annual accounts. Moreover, changes to the conditions for loans made to directors are introduced. These effectively preclude -except in limited circumstances – loans or quasi-loansbeing advanced to them. The internal “house-keeping” rules of companies – formerly set out in the model articles in the Schedules to the earlier Acts -are now codified in the 2014 Act and therefore acquire the force of law. Some of the new requirements are optional but, to the extent that they are not excluded by companies, they will apply by default.
Significant reforms in this area also include: measures to enable private companies to merge and divide without court approval; a procedure to formalise the voluntary strike-off of companies; the introduction of a Summary Approval Procedure to facilitate the implementation of certain corporate reorganisations and of share capital procedures without prior court approval; and the extension of the audit exemption to dormant companies.
Plainly, the Companies Act 2014 will revolutionise Irish company law practice, transforming the legal and regulatory landscape and – in tandem with Ireland’s innovative tax regime-it will further enhance Ireland’s attractiveness as a location for foreign investors.
About the Author
Luigi Wewege is the founder and the Managing Director of Vivier Mortgages (a Dublin, Ireland based home loan company), as well as CEO of its Auckland based financial services arm,Vivier & Co, a boutique Financial Service Provider in New Zealand, offering no-cost, above-average returns for investors.
Vivier Mortgages is a Dublin, Ireland based home loan company that has specialised in secured property lending, principally for domestic mortgages and building projects, for nearly twenty years. The company, having recently become part of Vivier Group, is currently looking for new opportunities in Ireland, in the areas of property acquisition, redevelopment and regeneration.
Vivier Group is the global umbrella organisation of the Auckland based Vivier & Co and Vivier Investments, the London based Vivier Developments & Vivier Home Loans, and the Dublin based Vivier Mortgages.
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