LKG Seminar Companies Act 2014 Westbury Hotel 7 May 2015

THE TEAM AT LKG Neil Keenan Dorian Rees James Flynn Edon Byrnes

SERVICE EXCELLENCE

INFORMATION

Consolidates all existing company law Welcome consolidation and reform –but many additional duties and obligations 25 Parts, nearly 1500 sections and 17 schedules Is the largest piece of legislation ever on the statute book Built around the Ltd default model company Relevant to all companies no matter how small Introduction to Companies Act 2014

The new types of company and re-registrations Default model company the Ltd – existing private companies automatically convert to Ltd after 18 months (1 December 2016) New type of company the DAC –Regulated by Part 16 –Decision to convert by 1 September 2016 Law on DACS applies to existing private limited companies until they re-register or are deemed LTDs

Limited v DAC Limited –Name is Limited, Ltd or Irish equivalent –Single document constitution –No limit on its activities –Can have one Director (but separate secretary) –Can opt out of limit on its share capital –Can opt out of physical AGMs –Cannot list debt securities

Limited v DAC DAC –Name is DAC, “designated activity company” or Irish equivalent –Must have at least two directors –Will retain a Memorandum and Articles –Is limited in its activities –Can list debt securities –Must have physical AGMs (if multi member) –Must have a limit on its share capital

Conversion to DAC Conversion –Ordinary shareholders resolution –Directors if shareholders more than 25% of votes require it –Shareholders or debenture holders holding more than 15% can petition to court for conversion

Other types of companies The CLG (Part 18) –Will register a change of name Company limited by guarantee, clg, c.l.g. etc. Affects many apartment owner management companies –Law on DACs applies to those with a share capital –Will have a Memorandum and Articles of Association –Will be restricted in its activities

Unlimited companies Ucs (Part 19) –Will register a change of name as unlimited company, uc, u.c. or similar –Private unlimited (ULC) –Public unlimited with a share capital (PUC) –Public unlimited without a share capital (PULC) –Requirements to file financials will soon be widened

Other types of companies Include Public limited companies (Part 17) Investment companies (Part 24) External companies (Part 21) –Only branches now have to be registered

Company constitutions The Companies Act will contain various provisions deemed incorporated in a constitution (replaces Table A) There will be opt out or opt in for many of these –151 optional provisions on last count

Company constitutions There will be a deemed constitution for Ltd at the end of 18 months but Directors do have an obligation to deliver new constitution strictly to comply with Act (Section 19) Members can adopt new form constitution by special resolution to dis-apply or vary optional provisions – recommended approach

Re-registration Options for existing private limited companies –Pass shareholder special resolution to adopt a s.19 constitution and re-register as Ltd (Form N1) –Directors resolution to make minimum changes to adopt s.19 constitution (obligation) (Form N1) –Re-register as a DAC by ordinary resolution within 15 months (Form N2) –Do nothing – automatic conversion after 18 months Deemed constitution Essentially existing Memorandum and Articles without the objects clause

Offences and enforcement Now four categories of offences –Category 1 indictment 10 years in jail and/or €500k fine –Category 2 indictment 5 years and/or €50k fine –Category 3 summary 6 months and/or 5k fine (class A fine) –Category 4 summary class A fine Judgments against companies may be enforced against personal assets of directors - Section 53

Other key changes

Summary approval procedure Allows approval of various restricted matters –Loans to Directors and guarantees and security –Financial assistance for shares –Reduction of capital and variation on re- organisations* –Treatment of pre-acquisition profits as distributable* –Voluntary winding up* –Statutory mergers and divisions * requires independent persons report

Requires –Directors Declaration of Solvency –Shareholders approval –Independent accountants report for some transactions –Personal liability potentially for all debts if Declaration of Solvency not given on reasonable grounds! Summary approval procedure

Corporate Governance Ltd no longer requires AGM provided all members pass resolution with AGM business Majority written resolutions now available for companies and will take effect after the requisite notice periods –Follow procedures carefully

Corporate Governance Plcs and large private companies must have audit committee [b/s >25m and turnover >50m] –or explain publicly why not All procedures around board and shareholder meetings now statutory subject to opt outs Majority shareholders have a direct right to convene EGMs

Director’s compliance statement (Section 225) All Plcs and larger limited private companies –Balance sheet over €12.5m and turnover over €25m for large private companies Directors acknowledge responsibility to secure compliance with tax law and more serious company law obligations (categories 1 and 2) Directors report must confirm that the following has been done or explain why not –Compliance policy statement setting out relevant policies concerning compliance –Arrangements/structures put in place designed to secure material compliance or explain why not –Conducting a review of the arrangements and structures during the financial year.

Directors loans Loans, credit transactions, guarantees and security to directors and connected persons cannot be made if greater than 10% of net assets (old s.31) –All can now be done with SAP Loans from directors if not evidenced in writing presumed not to be a loan and fully subordinate and interest free Loans to directors if not evidenced in writing presumed to be repayable on demand and bear interest

Secretary Directors have duty to ensure that the secretary has skills and resources required to discharge their secretarial duties including maintenance of non- financial records – Training – Professional secretary?

Shares and offering shares Ltd cannot issue shares to public as before but offences increased –150 people or more (other than qualified) is offer to public –Separate to Prospectus Directive –Category 2 offence so now a serious matter Issued share capital can be reduced using SAP

Shares and offering shares (contd) Notification of officers’ interests in shares –1% minimum threshold –Now applies to grant and exercise of share options –Rights can’t be exercised if non compliance –Inadvertent breaches of existing legislation can be remedied within 18 months

Financial Assistance Financial assistance for purchase of shares reformed –Tighter definition –Company can pay costs and expenses of buyer

Mortages and charges Optional two stage process Priority of charges will now be based on filing dates –Risks for banks and other lenders

Statutory mergers and divisions Statutory mergers and divisions now possible Merger by acquisition, merger by absorption or merger by forming new company –the old entity or entities will be dissolved Can be done through SAP –Division requires court order

Audit Exemption Audit exemption can now apply to groups, dormant companies and CLGs Thresholds –Balance sheet <€4.4m, turnover <€8.8m average employees <50 Two tests only for DAC or Ltd 10% of shareholders can require an audit Audit still required where annual return late

Winding up/insolvency Liquidators must now have qualifications Examinership in Circuit Court –Since last December –Same thresholds as audit exemption Directors can be restricted for not co-operating with liquidator even if they have acted honestly and responsibly Director can voluntarily become restricted or disqualified to avoid court application by liquidator

Key steps Key steps on commencement –Decide type of company to convert into Register new name if required –Preparation of new constitution Bank/investor approval may be required –Evidence Directors’ loans in writing –Is Audit committee or Directors compliance statement required Start preparing –Review procedures on audit information –Check compliance with share disclosure requirements –Consider and minute skills and resources of secretary

Questions