The Companies Act 2014

Corporate and Commercial Law

20 February 2015 by Paul Foley, Partner, and Andrew Clarke, Solicitor


The Companies Act 2014 (the Act) will commence 1st of June 2015. The Act is generally pro business, is deregulatory (although does not go as far as the UK Companies Act 2006) will cut compliance costs in the long term, but there will be costs to companies to adopt their documentation to the new regime in the short term.

In the case of private companies, the Act principally provides for a private company limited by shares (a CLS) and a designated activity company (DAC) ( such as a charity ). Directors of an existing private company, are under a duty prior to the expiry of the 18 month transition period to prepare a constitution for a CLS and deliver it to the members and to the Registrar for registration. If it does not do so, it automatically becomes a CLS.

An existing private company may re register as a DAC by passing an ordinary resolution not later than 3 months before the expiry of the transition period resolving that the company be so registered as a DAC. An existing private company may be required to re-register as a DAC by members holding 25% or more of the voting rights. Where an existing private company does not, before the expiry of the transition period, re-register as a DAC (whether it is obliged under that section to do so or not), 15% or more of the members (by voting rights) or creditors holding 15% or more of the company’s debentures may apply to the court for an order directing that it shall re-register as such a company.

Key Features

1. The Act provides a thorough framework for the incorporation, re-registration and supervisory framework under Irish company law for the following vehicles:

A private limited company having a share capital (CLS). This is the form of vehicle used or that will be used by the vast majority of companies in Ireland.

A designated activity company (DAC) is defined as a company to which Part 16 of the Act applies. This is a private company limited by shares or a company limited by guarantee, the primary defining feature of which is the continued existence of a restricted objects clause, in the constitution of the company (e.g. a special purpose vehicle or a restricted activity joint venture company or a charity).

A company limited by guarantee (CLG) and not having a share capital.

A public limited company (PLC). The typical vehicle used to raise money from the public.

An Investment Company which is a form of PLC and typically a non UCITS company.

Unregistered Companies and Joint Stock Companies as well as various forms of unlimited companies.

There is a transitional period which the CRO has stated will be 18 months for private limited companies to consider whether to convert to CLS or DAC status.

2. CLS. A CLS will have a single document constitution, may have a single member and up to 149 members, may have a minimum of 1 director and may dispense with holding a physical AGM.

3. DAC. A DAC will be the nearest to the current private limited company (whether limited by shares or guarantee), with the requirement for a two document constitution (including an objects clause), two directors and a company secretary. Companies that may have to, or wish to convert to DAC status are typically Charities, Joint Venture Companies, Special Purpose Vehicles.

4. CLG. These are typically Charities, or Sports Club. A CLG cannot have a share capital. The constitution of a CLG shall be in the form of memorandum of association and articles of association which are together referred to as the constitution. The constitution of a CLG shall be in accordance with the form set out in the Act or as near thereto as circumstances permit. The Act also specifies how it will affect the memorandum and articles of an existing company limited by guarantee.

It must be named as a company limited by guarantee or CLG (upper or lower case) or the Irish equivalent. The Act allows, subject to compliance with certain conditions, for the words ‘‘company limited by guarantee’’ to be dispensed with in the case of charities or other companies where all the profits of the company are applied to the promotion of that company’s objects (for example, the promotion of science, commerce, art, education or religion).

The Act requires a CLG to have two directors. It also regulates the rotation of Directors unless the constitution provides otherwise.

5. Share capital. The Act allows a company to allot shares (a) of different nominal values (b) of different currencies ( c ) with different amounts payable of them or (d) with a combination of 2 or more of the foregoing characteristics. Shares may be issued with such preferred, deferred, or other special rights or restrictions, whether in regard to dividend, voting return of capital or otherwise as the company may decide by ordinary resolution.

6. Reductions in capital. Reductions in capital (as defined) may be effected through compliance with a new Summary Approval Procedure.

7. Share Premiums. The Act provides that when a CLS issues shares at a premium, the premium received forms part of the undenominated share capital. This is, in general terms, the amount of the company capital from time to time in excess of the nominal value of its issued shares. The premium received shall be transferred to the share premium account. There are some exceptions to this. In the context of a certain type of merger within s72, there is no obligation to set up a share premium account. There are also less onerous requirements in the case of a group reconstruction within s73 and a group reorganisation within s75.

8. Electronic Records, Meetings, Communications

Records. In the case of any register, index or minute book required to be kept by a company, the Act allows for them to be kept otherwise than making entries in bound books. This includes power to keep the register or other record otherwise than in a legible form but subject to compliance with certain conditions.

Electronic filing agent. A company may authorise a person (an electronic filing agent) to (a) electronically sign documents required or authorised to be delivered by the company to the Registrar and (b) deliver to the Registrar by electronic means those of documents to be signed.

Delivery of documents in electronic form to the CRO, may be made mandatory, if the Minister, after consultation with the Registrar, requires that this be done and it is justified.

Director meetings. A meeting of the directors may be held by conference call, video or other electronic communication.

AGMs and EGMs may be held inside or outside the State: in the latter case where all members agree. Where they do so, there is a duty on the company to incur the cost of participation (by technological means) for the members without having to leave the State.

Merger and Divisions. Where companies wish to merge, there is a new arrangements that allows for the provision by email to the shareholders (where they have so consented) of the copies of the merger documents. In the case of general meetings of companies involved in a division, the Act allows for the use of electronic means to make the division documents available to the shareholders.

9. Majority Written resolution. Following on from the UK, a very welcome majority written resolution procedure has been introduced. Certain conditions have to be satisfied. The procedure will be available for CLSs and DACs but not for PLCs or CLGs. The procedure is not available in respect of a resolution to remove a director or an auditor. The written resolution(s) must be delivered to the company otherwise they do not have effect until this is done. There is a 7 delay period in the case of special resolutions and 21 day delay period in the case of ordinary resolutions before they have effect, unless certain conditions are satisfied.

10. Financial Assistance. Unlike the UK, where the financial assistance rules have been done away with for private limited companies (subject to some exceptions), a prohibition on the giving by a company of financial assistance for the purchase of its shares is contained in significantly revised format in s82 of the Act. The Act provides for two general circumstances where the giving of financial assistance is not prohibited, firstly where the purpose in giving the assistance is not for the purpose of an acquisition (as defined) or secondly, where the giving of such assistance is merely incidental to some larger purpose of the CLS. Such assistance must be given in good faith and in the interests of the CLS. The section reproduces other exemptions from existing law. However it also introduces a new exemption which provides that financial assistance given in accordance with the new Summary Approval Procedure is permitted.

11. The Board of the Company. The Board of Directors and any registered person will be deemed under the constitution to have authority to exercise any power of the company and to authorize others to do so. Where the Board authorises any person to bind the company (subject to some exceptions) the company may notify the CRO in the prescribed form of the authorisation and the Registrar shall register the authorisation.

12. Power to Attorney. In a new provision, the Act allows a company to empower any person either generally or in respect of any specified matters as its attorney to execute any deed or do any matter on its behalf in any place whether inside or outside the state.

13.Directors’ Duties. As with the UK 2006 Act, director’s duties at common law and equity have been codified.

14. Shadow and De Facto Directors. In addition to a definition of a shadow director, there is now a statutory definition of a de facto director.

15. Directors’ Compliance Statement. A Director’s Compliance Statement will be required to be given for private companies over a certain size (as below) under s225 of the Act and will be required to be given by all PLCs. In general terms, if in respect of the financial year of the private company to which the report relates (a) its balance sheet total for the year exceeds €12,500,000; and (b) the amount of its turnover for the year exceeds €25,000,000, then subject to some exceptions and provisions for exemptions, it will be required to provide a directors compliance statement.

16. Dealings by the Company with Directors. Dealings with directors as set out in CA 1990 have been made much clearer in s239 et sequi and the Act incorporates new law.

Generally companies are prohibited from giving direct or indirect loans or loan-type finance to directors or a person connected with a director, subject to certain exceptions. S242 is new and provides that section 239 does not prohibit a company from making a loan or quasi-loan, entering a credit transaction or entering into a guarantee or providing any security of the kind described in section 239(i) if the Summary Approval Procedure is followed.

17. Loans made by Directors to the company are now the subject of some regulation and should be properly drafted, set out in writing and executed by the parties.

18. Giving security by the company. With regard to the giving of security by a company, the 21 day rule has been maintained ( ie the charge or debenture must be received in the CRO within 21 days), but a two stage registration procedure for charges and debentures has been introduced (similar to that existing in some common law countries, which involves filing a notice of intention and then the charge within 21 days of the Registrar’s receipt of the notice of intention).

19. Financial Statements, Annual Return and Audit. The requirements are contained in Part 6 of the Act. Chapter 1 gives the power to the Minister to specify that US Accounting Standards may be used in certain limited cases for a transitional period. Chapter 3 introduces a new term and defines it ‘‘financial year’’ and requires that a company’s first financial year be within 18 months of its date of incorporation and thereafter should generally be for a period of 12 months or 52 weeks. This Chapter also incorporates the obligation to prepare entity and group financial statements in the form of Companies Act financial statements or under International Financial Reporting Standards (IFRS).

20. Audit Exemption. Chapter 15 of Part 6 of the Act deals with companies that qualify for an audit exemption identifies the companies that can avail of an audit exemption and those that cannot. In order to avail of the exemption, the company must be a small company and must not be a parent, subsidiary, credit insurance undertaking or an entity listed in Schedule 5 to the Act and must have filed its latest annual return in time. Chapter 16 provides for a special audit exemption for dormant companies subject to certain conditions.

21. Revision of Defective Statutory Financial Statements. Chapter 17 of Part 6 of the Act deals with the voluntary revision of defective statutory financial statements and is similar to requirements found in the UK Companies Act 2006. Prior to this, there was no mechanism in Irish company law whereby the directors, if they became aware of a deficiency in their latest statutory financial statements or directors’ report, could revise the reports filed with the Registrar. The Chapter sets out the procedures available to the directors to remedy deficiencies and where the company has a statutory auditor appointed, the statutory auditor is required to report on the revised financial statements and revised report. The Chapter also contains procedures for the revision of abridged financial statements filed by small and medium companies.

22. Reorganisations, Mergers and Divisions Part 9 and Part 17 (for PLCs) of the Act provides the framework for the reorganisation, acquisition, mergers and divisions of companies, parts of which are entirely new. In the case of Mergers for private companies, they can be effected either in accordance with the Summary Approval Procedure or, in the absence of the Summary Approval Procedure being employed, the relevant provisions of Part 9 of the Act. Accordingly, in the case of private companies under certain circumstances, a Merger may be effected without the need for a High Court order. It is also possible to proceed under Chapter 1 of Part 9 (Scheme of Arrangement) of the Act as an alternative. In the case of Divisions (Chapter 4), this is new law. The Divisions covered are division by acquisition and division by formation of new companies. Divisions can be effected also under Chapter 1 (Schemes of Arrangement) as an alternative where possible.

23. Part 23 of the Act provides a clear framework in the case of PLCs for the application of Irish requirements on Public Offers, Market Abuse, Corporate Governance Statements and Transparency. Part 23 of the Act also provides a framework for local offers which are defined as offers of securities to the public in the State for less than 5 million Euro. This is a separate category to those exempted or excluded from the Prospectus Directive.

24. Part 24 of the Act makes provision for investment companies with variable capital which are typically non UCITS investment companies. S1387 of the Act provides that the provisions of Parts 1 to 14 of the Act apply to an investment company save to the extent that they are (a) disapplied to public limited companies by section 1002; (b) disapplied by s1387(3) or modified by another provision of this Part.

20th February 2015
The Companies Act 2014: Key Features
Copyright McKeever Rowan 2015 – All Rights Reserved

By Paul Foley
McKeever Rowan
5 Harbourmaster Place
International Financial Services Centre
Dublin 1

Contacts in connection with the Article

Non Contentious
Paul Foley

Andrew Clarke

Gerard Walsh

Liz MacGinley

Key Contacts

Gerard H. Walsh

IFSC, Dublin
Gerry has advised extensively on all aspects of Financial Services (including Insurance), Corporate and Private Client Litigation for over 30 years.

T: +353 (0)1 670 2990

F: +353 (0)1 670 2988


Paul Foley

IFSC, Dublin
Paul practises both English and Irish law and specialises in cross border financial services law, online trade and internet law.

T: +353 (0) 1 670 2990

F: +353 (0) 1 670 2988


Andrew Clarke

IFSC, Dublin
Andrew also advises on corporate structures, mergers and acquisitions, particularly in the Charity sector, company law compliance and corporate governance.

T: +353 (0) 1 670 2990

F: +353 (0) 1 670 2988