The Companies Bill: Consolidation and Change. Prof. Irene Lynch Fannon, Law School.

“ A Single Comprehensible Code” 1998: McDowell Report from the Group on Company Law, Compliance and Enforcement called for a number of initiatives including the creation of “one single comprehensible code” for Irish company law. [Report: Para ] A Long Time Coming……

LTDs; DACs; and other companies. Parts 1-15 Parts LTD : Parts 1-14 DACs: Parts 1-14 and 16 PLCs: Parts 1-14 and 17 CLGs: Parts 1-14 and 18 Schedule 1 Schedule 7 “think small first”- private companies limited by shares. Parts 1-6

Structure of the Act described in s.9. “Subject to subsection (3) and(4) all of the law in this Act in relation to private companies limited by shares is to be found in Parts 1-14 (or instruments under them) and Schedules 1 to 6… and the law “ in relation to other types of company is to be found amongst the provisions of – Parts 16 to 25 ….and Schedules 7 to 17 and Parts 1 to 14 …and Schedules 1 to 6 as applied or adapted by Parts 16 to 25.”

Consolidation or Reform?- Innovations. 1. The introduction of the Summary Approval Procedure in Part 4, Chapter 7. (In relation for example to financial assistance and reduction of capital ss. 202 and 203). 2. Codification of Directors Duties in Part 5, Chapter 2-s. 228 in particular. 3. Categorisation of Offences. 4. Capacity and Authority of Agents. 5. Governance. Articles as statute; meetings and resolutions. 6. Finally there are a set of Transitional Obligations regarding initial obligations under the legislation once it is enacted.

Part 16 -DACs s (1) “The provisions of Parts 1 to 14 apply to a DAC except to the extent that they are disapplied or modified by— (a) this section; or (b) any other provision of this Part.”) DACs and LTDs

When is a DAC required? S. 56 Where the company, or the members of a company wish to agree specific activities and limit the company to those activities. Where a company wants to list debt securities on a stock exchange. Where a company is operating as a credit institution or insurance undertaking. DAC may be a private company limited by shares or a private company limited by guarantee.

Capacity- no more ultra vires. S. 38 for LTDs. -private company limited by shares has full and unlimited capacity S. 975 for DACs. “A DAC shall have the capacity to do any act or thing stated in the objects set out in its memorandum. “ S for PLCs. “A PLC shall have the capacity to do any act or thing stated in the objects set out in its memorandum. “ The Reno Weekly Gazette And Stockman, May 1893: "We know some men who are always looking for a sledge hammer to crack a peanut."

Objects clause is now a rule of internal discipline. S (1) of the Bill provides that: “The validity of an act done by a DAC shall not be called into question on the ground of lack of capacity by reason of anything contained in the DAC’s objects.” “(2) A member of a DAC may bring proceedings to restrain the doing of an act which, but for subsection (1), would be beyond the DAC’s capacity but no such proceedings shall lie in respect of any act to be done in fulfilment of a legal obligation arising from a previous act of the DAC.” S. 976 (4) addresses question of liability of directors and absolution from such liability.

Authority- ‘still a bit tricky’ Section 40 provides that the “board of directors of the company; and b) any registered persons” shall be deemed to have authority to exercise any power of the company and to authorise others to do so. Any person who is authorised by the Board to bind the company must be registered. Section 40(9) – ‘no reference to the constitution’ and 40(11) ‘ in addition to and not in substitution for Rule in Turquand’s case’

Governance Meetings of Board Part 4: Chapter 4 Meetings of Shareholders/Members Part 4: Chapter 6.

Governance- Part 4 : Chapter 4. S “Each subsequent provision of this Chapter (other than sections 166 and 167) applies save to the extent that the company’s constitution provides otherwise.” S. 166 refers to minutes of proceedings of directors and s. 167 concerns audit committees. Articles of Association now statutory provisions for example s. 158 (Article 80) s. 159 (Managing Director-Article 101).

Governance Part 4-Chapter 6 For private companies limited by shares AGMs can be dispensed with under the terms of s. 175(3) as long as the unanimous written resolution procedure is followed under s S. 176 allows for meetings to be held outside the state but imposes duty to provide ‘technological’ means of participation. S. 194 provides a structure for majority written resolutions as provided for in previous legislation- ’nothwithstanding anything to the contrary’

Help !- The Transition Period-Options Register as a LTD- private company limited by shares using adapted existing Memo and Arts. – s. 60(2). Register as a LTD-private company limited by shares by adopting a new constitution under s. 59 (1). Re-register as a DAC- designated activity company where a resolution has been passed under s. 56(1). Re-register as a DAC- a designated activity company where required to do so under s. 56 (2). Re-register as a DAC where required to do so under s. 56 (3) or s. 57. In the three cases where an existing company re-registers as a DAC this can only be as a DAC limited by shares. [s. 54(2) and s.967(3)(a)].

Transition Period-Saving provisions. Section 5. S. 5(1) states that the repeal of any previous enactments by the Bill once passed will not affect the incorporation of any company registered under any such act. S. 5(3) states that any document which refers to any former companies enactment ‘shall be read as referring to the corresponding enactment of this Act.’ S. 5(6) states that any funds and accounts constituted under the Bill (‘this Act’) ‘shall be deemed to be a continuation of the corresponding funds and accounts constituted under the former enactments relating to companies.’

Future Seminars???