Company Law: The New Companies Bill 2011

It’s here now, 99.9% ready to go for approval and drafting with the Office of the Parliamentary Draughtsman. The draft heads of this gigantic new Companies Bill 2011 have been published. The exact enactment and commencement into law depends on its inevitable passage through the Oireachtas. However, the CLRG will hand over a practically complete Companies Bill, thus hastening its reading in the Oireachtas.

At the end of the day, much of the work here will fall on the members of the select committee who will read the Bill in its entirety line by line and move it through the Houses of the Oireachtas

It’s been a huge overhaul of our company law. The Company Law Review Group was devised as the engine for delivering a world-class companies code in Ireland. On foot of a Government decision, Mary Harney TD, the then Tánaiste and Minister for Enterprise, Trade and Employment, set up the Review Group in February 2000. The Group operated on an administrative basis until it was accorded a statutory advisory status in the Company Law Enforcement Act 2001.

The 2001 Act sets out the role and the advisory responsibilities of the Review Group and the basis on which its members are appointed. The membership brings together the expertise of company law practitioners, Government departments and agencies, recognised professional bodies, regulatory bodies and the social partners. It is chaired by Thomas B Courtney, solicitor. Pat Nolan, Principal Officer, Department of Enterprise, Trade and Employment is secretary to the Group.

The members of the CLRG generously give of their time and expertise on a voluntary basis. The commitment and enthusiasm of this group is astonishing. Their project to reform and modernise company law is perhaps the biggest single regulatory reform project ongoing in Ireland today. The completion of their work will make an enormous difference to the thousands of company directors and other users of company law in Ireland. However, corporate life is not going to get any easier for them, there is an ever-increasing burden of corporate governance to be adhered to, but all the rules and regulations and procedures will be condensed in one single volume of law.

Thomas Courtney delivered the First Report of the Company Law Review Group to the Tánaiste in 2002. The focus of the report was on simplification. The general objectives of the report are that the reformed and streamlined companies code should be effective, intelligible to company law directors and shareholders, and that the law should reflect how business is actually transacted. The report reflects throughout its 195 individual recommendations the Review Group’s concern to maintain creditor and shareholder protection. The big idea at the heart of the report is to replace the public company (plc), by the most common type of company, the private company limited by shares as the standard type of company. This will accord with the actual reality that 90% of all companies are private companies limited by shares. This will bring the advantage, particularly to small and medium sized businesses, of clarity and relative simplicity in the regulatory and compliance regime.

The Company Law Review Group, CLRG, actively encourage all users of company law, company officers, shareholders, creditors and other stakeholders to make any submission whatsoever to the group if they feel there is any issue in any area of company law which needs to be reviewed or if they feel an existing provision of company law needs to be amended or repealed.

Accordingly, now is the time to communicate with the CLRG. Full details of the work programme and how to make a submission can be found at the very useful website of the group, www.clrg.org

The Minister gave approval for an enhanced consultation process, whereby the constituent parts of the General Scheme of the proposed New Consolidation Bill , be made available, on completion by the Drafting Committee of the CLRG to the public through their website.

Set out below are excerpts of the most relevant summary draft heads of the new Bill. the remaining parts of the General Scheme of the Bill will be made available as soon as they are completed.

PART A2 – INCORPORATION AND REGISTRATION

Chapter 1 Interpretation

Head 1 Defined terms

(1) In this Part, unless the context otherwise requires –

“activity” means any activity that a company may be lawfully formed to carry on and includes the holding, acquisition or disposal of property of whatsoever kind;

“existing private company” means a private company limited by shares that was incorporated under the Companies Acts 1963 to 2005 or previous enactments and which is in existence at the status date;

“registered person” means a person notified pursuant to Part A2, Head 17

“relevant classification system” means NACE Rev. 1, that is to say, the common basis for statistical classifications of economic activities within the European Community set out in the Annex to Council Regulation (EEC)[O.J No L 293/1 24 October 1990]

“status date” means the date six months after the commencement of this section;

“transition period” means the period expiring twelve months after the status date.

(2) If, in any respect, any difficulties arise in the operation of the provisions of the [Bill] which necessitate the giving of more time for affected or interested parties to undertake any necessary actions or procedures in the periods provided for in the definitions of “status date” or the ending of the “transition period” in subsection (1), the Minister may, by regulation, extend the period specified in each or either instance by periods not exceeding six months or eighteen months respectively.

Explanatory note

This section is a new section, which contains provisions for the interpretation of certain terms used in this part of the Bill. The section takes account of the recommendations of the First Report of the Company Law Review Group which provided that greater use should be made of defined terms in order to make the legislation more succinct.

The definitions of both “activity” and “relevant classification system” are taken from subsection 42(7) of the Companies (Amendment)(No 2) Act 1999.

The Head defines two new dates, the status date and the end of the transition period. Between those two dates an existing private company limited by shares (governed by memorandum and articles of association) can convert to the status of new model private company limited by shares (governed by a single document constitution). At the end of the transition period if an existing private company has not so converted, or has not converted to a DAC (designated activity company) it is deemed to have the default constitution set out in the schedule (to be appended). The Head also defines what is considered to be an existing private company for these purposes.

The purpose of subsection (2) is to give the Minister a limited degree of flexibility to extend the period in question by the limits proposed.

It is considered to be in the interests of all concerned that the change over to the new regime being provided for the existing private companies limited by shares in Pillar A should be undertaken and completed as quickly as possible. Accordingly, it is proposed that in the 12 month period between the “status date” (which is six months after the commencement of the relevant provisions) and the end of the “transition period”, all existing private limited companies will have decided to register as anew as a CLS (with a “tailored” constitution), or register as a DAC.

At the end of the period, if they have done neither of the foregoing, they will automatically become a CLS with the default constitution.

However, this will be a significant change for all concerned, and no matter how well in advance people are advised of the coming changes (eg through CLRG report, publication of the Bill, CRO, IAASA and ODCE publicity etc.), there is no certainty that company personnel or their advisers (legal, accounting or secretarial) will be able to deal with as of the issues arising for all of the companies affected.

Further definitions may be identified and set out in this section.

Chapter 2 Incorporation and Consequential Matters

Head 2 Way of forming a company limited by shares

(1) A company may be formed for any lawful purpose by any person or persons subscribing to a constitution and complying with the registration requirements in this Act.

(2) The liability of a member at any time shall be limited to the amount, if any, unpaid on the shares.registered in the member’s name at that time.

(3) Subsection (2) is without prejudice to any other liability to which a member may be subject as provided by this Act.

(4) The number of members of a company is limited to:

(a) 99 persons; and

(b) current and/or former employees of the company.

(5) A company shall not be formed or registered unless it appears to the Registrar that the company, when registered, will carry on an activity in the State.

Explanatory note

This section sets out the manner in which a private company limited by shares may be formed, and further delimits the liability of any member of such a company. The text of the section is drawn from section 5 of the Companies Act, 1963; it is amended to allow a private company limited by shares to be formed by one person as is currently permitted under Regulation 4 of the EC (Single Member Private Limited Companies) Regulation 1994.

The section reflects the recommendation of the First Report of the Company Law Review Group that any one or more persons may, by subscribing their names to an application for incorporation in a form prescribed for that purpose, form a private company limited by shares.

The references to the memorandum and articles of association are replaced by the term ‘constitution’. This is in accordance with the recommendation of the First Report of the Review Group, which provided that the current two-document constitution of the private company limited by shares should be replaced by a single-document constitution.

Subsection (4) limits the number of members of a private company limited by shares to 99. This increases the limit on membership from 50 as currently prescribed in subsection 33(1) of the Companies Act, 1963. In its first report the review Group recommended that the maximum number of members be increased to 150. This figure had to be subsequently revised in the light of the requirement in Directive 2003/71/EC of the European Parliament and of the Council (i.e. the prospectus directive) which requires a company to issue a prospectus where shares are offered to 100 or more persons.

Subsection (5) is an amended re-enactment of subsection 42(1) Companies (Amendment) (No 2) Act 1999.

Head 3 The form of the constitution

(1) The constitution of the company shall state

(a) its name

(b) that it is a private company limited by shares, registered under this Part.

(2) The constitution shall—

(a) be in a form in accordance with the form set out in [schedule 000] or as near thereto as circumstances permit,

(b) be divided into paragraphs numbered consecutively;

Explanatory note

This section is a new section. It gives effect to the idea that the constitution is the single document of incorporation of the private company limited by shares. As such, sections 8-16 of the Companies Act 1963 are no longer of any relevance to the private company limited by shares – they will be of relevance to other corporate entities dealt with in Group of Parts B of the Bill.

The new form of the constitution corresponds with the structure envisaged by the First Report of the Company Law Review Group, which provides a simplified form of application for incorporation of the CLS.

Subsection (1) retains a requirement similar to that at section 6 of the Companies Act 1963, that the constitution of the CLS must state the name of the company. The constitution is also required to state that the company is a private company limited by shares, i.e. a CLS.

Subsection (1)(c) requires the constitution of the CLS to state the supplemental regulations, if any, which may be adopted by the CLS in addition to the Regulations, set out in Schedule 000.

Subsection (2)(a) sets out the form that the constitution must take and this essentially replicates what is said in section 16 of the Companies Act 1963 (in relation to the memorandum and articles of association) to the effect that it must correspond to the form as set out in (Schedule 000) or as near thereto as circumstances permit.

Subsections (2)(b) and (2)(c) further add to the form that the constitution must take. The requirements of numbered paragraphs and an attested signature of each member reflect the existing section 14 of the Companies Act 1963 in relation to the articles of association.

Chapter 3 Corporate Capacity and Authority

Head 16 Capacity of a private company limited by shares

(1) Subject to subsection (2), notwithstanding anything contained in its constitution a company shall have whether acting inside or outside of the State –

(a) full and unlimited capacity to carry on and undertake any business or activity, do any act or enter into any transaction and,

(b) for the purposes of paragraph (a) of this subsection, full rights powers and privileges.

(2) Nothing in subsection (1) shall relieve a company from any duty or obligation under any enactment or the general law.

(3) A person who contravenes this section shall be guilty of an offence.

Explanatory note

This is a new section which gives effect to the recommendation in the First Report of the Company Law Review Group that private companies limited by shares should be granted the legal capacity of a natural person with the consequent effect that the doctrine of ultra vires is disapplied from the CLS. The section is modeled on subsection 16(1) of the New Zealand Companies Act, 1993

The Review Group recognised that nearly 90% of registered companies are private companies limited by shares and the majority of these were closely-held companies. Accordingly the Review Group believes that such companies should not be required to set out any objects or powers; such companies should be empowered with the capacity of a natural person. Thus, it recommended that, except where otherwise specifically required by a company’s promoters, private companies limited by shares should have the legal capacity of a natural person.

Subsection (1) provides that the CLS shall have the capacity to carry on and undertake any business activity, do any act or enter any transaction and for these purposes it is given full rights, powers and privileges.

Subsection (2) is a safety provision stating that the CLS is not relieved from its duties or obligations under any enactment or the general law as a result of subsection (1).

Head 17 Registered delegate

(1) Where a company appoints any delegate as a person entitled to bind the company it shall notify the Registrar in the prescribed form.

Explanatory note

New section. The concept is drawn from Regulation 6(3) of the EC (Companies) Regulations, 1973 (although it is not a direct re-enactment)

Head 18 Persons or bodies of persons authorised to bind a company

(1) For the purposes of any question whether a transaction fails to bind a company because of lack of authority on the part of the person exercising (or purporting to exercise) the company’s powers, the board of directors of a company and any registered person shall be deemed to have authority to:

(a) exercise any power of the company; and

(b) authorise others to do so;

and this applies regardless of any limitations in the company’s constitution on the board’s authority or a registered person’s authority, but subject to subsections (4) and (6).

(2) Subsection (1) shall not be taken to prevent the exercise of a company’s powers otherwise than by the board, a registered person or a person authorised by the board or by a registered person, where authority for that exercise exists.

(3) Subsection (1) does not affect a director’s duties (including his duty to observe any limitations in the company’s constitution on the board’s authority), or his or any other person’s liability (including the liability of a registered person) in respect of any breach of those duties.

(4) Where a company is purportedly a party to a transaction –

(a) in connection with which the board of directors exceeded limitations in the company’s constitution on their authority, and

(b) to which a person falling within subsection (5) is also a party,

subsection (1) does not apply in favour of the party falling within subsection (5).

(5) A person falls within this subsection if he is –

(a) a director or shadow director of the company or of its holding company; or

(b) a person connected with such a director; or

(d) a person connected with a registered person

and in this subsection, references to a person’s being “connected” with another person are to be read in accordance with Part A5, Head 2 [equivalent of section 26 of the Companies Act 1990, as amended by section 76 of the Company Law Enforcement Act 2001]

(6) Subsection (1) does not apply in relation to a power of the company which this Act requires to be exercised otherwise than by the board.

(7) Without prejudice to subsection (2), in determining any question whether a person had ostensible authority to exercise any of a company’s powers in a given case, no reference may be made to the company’s constitution.

(8) In this section, references to limitations in the company’s constitution include references to limitations deriving from –

(a) a resolution of the company or of any class of members; or

(b) any agreement between the members of the company or of any class of members;

and “transaction” includes any act [or omission].

Explanatory note

This is a new section. The section sets out those persons who are authorized to bind a company and draws on the provision in the UK White Paper.

Subsection (1) is a new provision aimed at enhancing clarity and certainty in relation to the issue of the authority of the Board of Directors to bind the company. It is similar to the current Model Article 80 of Part I of Table A of the First Schedule to the Companies Act 1963. Subsections (2), (3), (4), (5), (6), (7) and (8) are all new provisions which further elaborate on authority to bind the company. Subsection (9) deleted – Subsection (9) describes who is to be considered a “registered person” for the purposes of this section. This concept is drawn from Regulation 6(3) of the EC (Companies) Regulations, 1973.

Head 31 Enforcement of Orders and Judgments Against Companies and their Officers

(1) Any judgment or order against a company wilfully disobeyed may, by leave of the court, be enforced by sequestration against the corporate property, or by attachment against the directors or other officers thereof, or by order of sequestration of their property.

(2) In order for an application to be made for the attachment of directors or other officers or for the sequestration of their property, a “penal notice” must be included in the court order.

(3) The meaning of “attachment against the directors” and “sequestration” shall be as provided for, from time to time, and at any time, in the Rules of the Superior Courts.

Explanatory note

This is a new section, which is aimed at enhancing the enforcement of orders and judgments against companies and their officers.

Subsection (1) is drawn from Order 42, Rule 32 of the Rules of the Superior Courts, 1986. This provision was considered to be such a fundamental exception to the principle of separate legal personality of a corporate entity that it needed to be stated in primary legislation and not merely in the Rules of the Superior Courts.

Subsection (2) is new and is designed to put the officers of the company on notice that if the company fails to comply with the order or judgment, then they may be attached and their assets sequestered.

Subsection (3) is a new provision referring to the Rules of the Superior Courts. This is necessary in light of the origins of subsection (1).

Chapter 6 Conversion of an Existing Company to a Company Limited by Shares

Head 32 Conversion of existing companies or re-registration as Designated Activity Companies

(1) Every existing private company shall at the end of the transition period become a “company limited by shares” to which Group A applies.

(2) Subsection (1) does not apply to existing private companies that re-register as designated activity company before the status date.

(3) In order to re-register as a designated activity company, an existing private company must pass an ordinary resolution resolving that the company be so registered and must comply with the provisions contained in Group B, [Part 000, s_000].

Explanatory note

This is a new section. The section provides a transitional regime whereby an existing private company limited by shares is to be converted to a CLS at the end of the transition period unless it has re-registered as a designated activity company before the status date.

Both the “transition period” and “status date” are defined in section 1 of this Part for these purposes. A definition of an “existing private company” is also contained in that provision.

Head 33 Relief where there is a failure to re-register as a designated activity company

(1) Where an existing private company does not re-register as a designated activity company, any qualifying member or creditor may apply to the court for an order that it should be re-registered as a designated activity company and the Court shall, unless cause is shown to the contrary, make the order sought or make such other order as seems just.

(2) A qualifying member or creditor means (a) the holder or not less in the aggregate than 15% in nominal value of the company’s issued share capital or any class thereof or (b) the holder of not less than 15% of the Company’s debentures entitling the holder to object to any alteration in the company’s objects clause.

Explanatory note

This is a new section. The section provides a safeguard for both creditors and members of a company that fails to elect to become a DAC, thus becoming a CLS with no objects clause. The section is based on section 10 of the Companies Act, 1963. Subsection (1) permits a qualifying member or creditor to apply to the court for an order that the company should be re-registered as a DAC. The Court is given discretion in deciding whether to grant such relief.

Subsection (2) sets out who is a qualifying member or creditor for the purpose of subsection (1).

Head 34 Applicable Laws During Transition

(1) Pending the end of the transition period, the provisions contained in Group B, [Part 000] shall apply to an existing private company, unless and until it delivers a constitution to the Registrar.

(2) The provisions contained in Group A, Part 2 shall apply to an existing private company either –

(a) upon the expiry of the transition period; or

(b) upon the delivery by such a company of a constitution to the Registrar in accordance with Part A2, Head 4 [s. 17 of the Companies Act 1963].

Explanatory note

This is a new section. The section sets out the applicable laws during the transition period. It was considered by the Company Law Review Group to be fundamentally important that every existing private company limited by shares knows precisely what the law applicable to them is at any time.

Subsection (1) provides that the provisions in Group B shall apply to an existing private limited company pending the end of the transition period unless it delivers a constitution to the Registrar. During this period the law applicable to existing private companies limited by shares is that which will apply to DACs in the future. The law applicable to DACs will be kept as similar as possible to the current law applicable to private companies limited by shares to ensure a smooth transition. It is the view of the Review Group that major reform of the DAC, at this stage, should be sacrificed in the interests of certainty for existing private companies during this transition stage.

Subsection (2) provides that the provisions of Group A relating to a CLS are not applicable until the expiration of the transition period unless the existing private company limited by shares delivers a constitution to the Registrar. This will provide further certainty for existing private companies during the transition period.

Head 35 Adoption of New Constitution by Members

An existing private company may, on or after the status date, by special resolution passed in accordance with its existing memorandum and articles of association and subject to compliance with this Act as to the variation of rights and obligations of members, adopt a new constitution in the form specified at Part A2, Head 5 [s.3 Companies Act 1982].

Explanatory note

This is a new section. This section sets out the manner in which an existing private company limited by shares may adopt a new constitution, which may subsequently be delivered to the Registrar for the purpose of converting to a CLS.

Head 36 Certification of new constitution by directors

(1) The directors of an existing private company shall, unless it has already adopted a constitution in accordance with Part A2, Head 35,

(a) prepare a constitution in the form specified at Part A2, Head 3 [s.6-16 of the Companies Act1963]

(b) deliver a copy of such constitution to each member

before the end of the transition period.

(2) The directors shall in compliance with subs (1) ensure that such constitution does not alter the rights and obligations of the members of the existing company and without prejudice to the generality of the foregoing does not alter the rights and obligations of members of the existing company as set out in its memorandum and articles of association in relation to: -

(a) rights and duties on the transfer or transmission of shares;

(b) voting at meetings of members

(d) preferential or fixed entitlements to distributions

(e) liability to pay calls on shares, or

(f) the distribution of surplus assets of the company,

and accordingly the constitution shall contain such supplemental regulations as are necessary to give effect to the foregoing.

(3) The constitution need not contain any supplemental regulations, to the extent that the provisions of Group A of this Act regulate the matters which would be governed by those regulations.

Explanatory note

This is a new section. The section facilitates the conversion of existing private companies limited by shares into a CLS. The board of directors is permitted to take such a decision under this provision; such a decision would normally be taken by the members in general meeting in accordance with the normal principles of corporate governance. The reason for giving this power to the directors is that such an expedient measure is believed to be in the best interests directors to convert the existing private company limited by shares.

Subsection (1) sets out what is required of the directors.

Subsection (2) contains a safeguard whereby a duty is imposed on the directors to ensure that the rights of all the members are safeguarded when they exercise this discretion.

Subsection (3) is aimed at keeping the constitution of the CLS as simple as possible.

Head 37 Deemed Constitution

A company which has not delivered a constitution for registration within the transition period shall be deemed from the expiry of that period to have a constitution in accordance with the Schedule to this Part in place of its existing memorandum and articles of association and the Registrar shall register same in the name of the company and shall send to the company its registered constitution.

Explanatory note

This is a new section. The section applies a pro forma, de minimis constitution which is to be set out in a Schedule to this Part. Such a constitution will apply in place of the old memorandum and articles of association, where either the members or the directors fail to deliver a constitution for registration before the end of the transition period.

This was considered by the Review Group to be, on balance, a proportionate and reasonable measure given that the CLS will be a preferable alternative for a large majority of existing private companies. Furthermore, there are two built in safeguards in this Part for aggrieved members and creditors: Head No.33 affords relief to both members ad creditors where there is a failure to re-register as a DAC and Head No.38 affords relief to both members and creditors where a constitution prejudices their interests.

Head 38 Relief for Members and Creditors

(1) Provide that any member of a company who considers that his rights or obligations have been prejudiced may apply to the court for an order under Part 000, Head 000 [the equivalent of section 205 of the Companies Act 1963] and in any such application it shall be presumed until the contrary is proven that the directors have exercised their powers in a manner oppressive to such member or in disregard of his interests as a member where the directors have failed to comply with Part A2, Head 36 (1) & (2) unless the members of the company adopt a new constitution in accordance with Part A2, Head 35.

(2) Provide that a qualifying creditor can apply to court for relief where a constitution (howsoever coming into being – whether adopted by members, certified by directors or deemed by law) prejudices their interests, provided that they have a legal or equitable right to that interest.

In this section “qualifying creditor” has the same meaning as in Part A2, Head 33(2).

Explanatory note

This is a new section. The section provides a mechanism by which both members and creditors may be entitled to relief. The provision is seen as a justification for the provision of a “deemed constitution” in section 59 where an existing private company fails to deliver a constitution for registration before the end of the transition period. Subsection (1) expressly permits a member to apply to the court for relief, where his rights or interests have been prejudiced, under section 205 Companies Act 1963. In such circumstances there is a presumption that the directors have exercised their powers in an oppressive manner or in disregard of their interests as a member.

Subsection (2) states that a creditor may apply to the court for relief where a constitution prejudices their interests, regardless of the manner in which the constitution came into being.

PART A4 – CORPORATE COVERNANCE

Chapter 1 Interpretation

Head 1 Interpretation

In this Part, “director” includes any person occupying the position of director by whatever name called.

Explanatory note

This section is a new section. It has been introduced in accordance with the view of the Company Law Review Group for clarification purposes. This interpretation makes it clear that the term “director” applies to all persons appointed to the position of director, including where the director’s position is named differently.

Chapter 2 Directors and Secretaries

Head 2 Directors

Every company shall have at least one director.

Explanatory note

This section is an amended re-enactment of section 174 of the Companies Act, 1963. The section was amended to allow a CLS to have only one director in accordance with the recommendations of the First Report of the Company Law Review Group.

Head 3 Secretary

(1) Every company shall have a secretary, who may be one of the directors.

(2) Anything required or authorised to be done by or to the secretary may, if the office is vacant or there is for any other reason no secretary capable of acting, be done by or to any assistant or deputy secretary or, if there is no assistant or deputy secretary capable of acting, by or to any officer of the company authorised a generally or specially in that behalf by the directors.

(3) The secretary shall be appointed by the directors for such term, at such remuneration and upon such conditions as they may think fit; and any secretary so appointed may be removed by them.

(4) The directors shall have a duty to ensure that the person appointed as secretary has the skills necessary to discharge his or her statutory duties and such other duties as may be delegated to the secretary by the directors.

(5) Where a company has only one director, that person may not also hold the office of secretary of that company.

Explanatory note

This section is a new section. The section is substantially taken from section 175 of the Companies Act, 1963 and Model Regulation 113 of Part I of Table A of the First Schedule to the Companies Act, 1963. Further provisions have been added in accordance with the views of the Company Law Review Group.

Subsections (1) and (2) are re-enactments of subsections 175(1) and 175(2) of the Companies Act, 1963.

Subsection (3) imports Model Regulation 113 of Part I of Table A of the First Schedule to the Companies Act 1963.

Subsection (4) is new. This subsection is similar, in substance, to section 236 of the Companies Act, 1990 which places a similar duty on the directors of a PLC.

Subsection (5) is new. This accords with the recommendations of the First Report of the Company Law Review Group that a sole director should not also be the company secretary.

Head 4 Prohibition on corporation being a director

(1) A company shall not have as director of the company a body corporate.

(2) All acts or things purporting to be made or done by a body corporate as director of any company shall be null and void.

Explanatory note

This section is an amended re-enactment of section 176 of the Companies Act, 1963. All references to the “operative date” have been deleted as obsolete. Furthermore the provision that a body corporate which is a director at the operative date must vacate office has been deleted for the same reason.

Head 5 Prohibition on minor being a Director or Secretary

(1) No person shall be appointed a director or, in the case of an individual, secretary unless he has attained the age of 18 years.

(2) Where:

(a) a person appointed a director of a company before subsection (1) comes into force has not attained the age of 18 when [that section] comes into force; or

(b) the office of director of a company is held otherwise by virtue of another office, and the person appointed to that other office has not attained the age of 18 years when subsection (1)]comes into force

that person ceases to be a director on subsection (1) coming into force and the company must make the necessary consequential alteration in its register of directors and must notify the Registrar of the change.

Explanatory note

This section is a new section. The section gives effect to the recommendations of the First Report of the Company Law Review Group that any purported appointment is ineffective and void as between the company and the individual.

The text of subsection (2) is substantially based on section 143 of the UK Company Law Reform Bill.

Head 17 Vacation of Office

(1) The office of director shall be vacated if-

(a) the director is adjudged bankrupt or being a bankrupt has not obtained a certificate of discharge in the relevant jurisdiction, or

(b) becomes or is deemed to be subject to a disqualification order.

(2) Unless the constitution provides otherwise, the office of director shall be vacated if the director:

(a) resigns his office by notice in writing to the company; or

(b) becomes of unsound mind; or

(c) where, following and during the currency of a restriction order, the directors resolve that his office be vacated; or

(d) is sentenced to a term of imprisonment (actual or suspended) following conviction of an indictable offence; or

(e) is for more than 6 months, absent without the permission of the directors, from meetings of the directors held during that period.

Explanatory note

This section is a new section. The section substantially reproduces Model Regulation 91 of Part I of Table A of the First Schedule to the Companies Act, 1963. Other subsections which are referred to in this section include section 183 of the Companies Act 1963, section 150 of the Companies Act 1990 and section 160 of the Companies Act 1990. It must be noted that these provisions are themselves re-enacted in other provisions and reference to them is made here for the purpose of completeness.

Subsection 1(a) is taken, in substance, from section 183 of the Companies Act, 1963, as re-enacted.

Subsection 1(b) is taken, in substance, from section 160 of the Companies Act, 1990, as re-enacted.

Subsection 2(a) and (b) are taken from Model Regulation 91(d) and (e) of Part I of Table A of the First Schedule to the Companies Act, 1963.

Subsection 2(c) is taken, in substance, from section 150 of the Companies Act 1990.

Subsection 2(d) is taken, in substance, from Model Regulation 91(f) of Part I of Table A of the First Schedule to the Companies Act, 1963. A new requirement that the conviction must give rise to a sentence to a term of imprisonment (actual or suspended) has been inserted.

Subsection 2(e) is taken, in substance, from Model Regulation 91(g) of Part I of Table A of the First Schedule to the Companies Act, 1963.

Model Regulations 91(a) and 91(g) of Part I of Table A of the First Schedule to the Companies Act, 1963 have been migrated elsewhere. Model Regulation 91(a) deals with the share qualification of directors and this is dealt with in section 9 of this Part. Model Regulation 91(g) deals with the absence of directors for more than 6 months from meetings of the company without permission. It was not believed to be necessary to provide for such a default position in the context of the private company limited by shares.

Chapter 3 Service Contracts and Remuneration

Head 20 Inspection of director’s service contracts

(1) Subject to the provisions of this section every company shall keep at an appropriate place—

(a) in the case of each director whose contract of service with the company is in writing, a copy of that contract;

(b) in the case of each director whose contract of service with the company is not in writing, a written memorandum setting out the terms of that contract;

(c) in the case of each director who is employed under a contract of service with a subsidiary of the company, a copy of that contract or, if it is not in writing, a written memorandum setting out the terms of that contract;

(d) a copy or written memorandum, as the case may be, of any variation of any contract of service referred to in paragraphs (a), (b) or (c);

and all copies and memoranda kept by a company in pursuance of this subsection shall be kept at the same place.

(2) Where a contract of service is only partially in writing, paragraphs (a), (b), (c) and (d), as

appropriate, of subsection (1), and subsections (4) and (5), shall also apply to such a contract.

(3) The following shall, as regards a company, be appropriate places for the purposes of subsection (1), namely—

(a) its registered office;

(b) the place where its register of members is kept if other than its registered office;

(4) Every company shall send notice in the prescribed form to the Registrar of the place where copies and memoranda required by subsection (1) to be kept by it are kept and of any change in that place, save in a case in which they have at all times been kept at its registered office.

(5) Subsection (1) shall not apply in relation to a director’s contract of service with the company or with a subsidiary of the company if that contract required him to work wholly or mainly outside the State, but the company shall keep a memorandum—

(a) in the case of a contract of service with the company, setting out the name of the director and the provisions of the contract relating to its duration;

(b) in the case of a contract of service with a subsidiary of the company setting out the name of the director, the name and place of incorporation of the subsidiary and the provisions of the contract relating to its duration, at the same place as copies and the memoranda are kept by the company in pursuance of subsection (1).

(6) Every copy and memorandum required to be kept by subsections (1) and (5) shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, so that not less than two hours in each day be allowed for inspection), be open to the inspection of any member of the company without charge.

(7) If default is made in complying with subsection (1) or (5) or if an inspection required under subsection (6) is refused, the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.

(8) In the case of a refusal of an inspection required under subsection (6) of a copy or memorandum the court may by order compel an immediate inspection thereof.

(9) This section shall not require to be kept a copy of, or memorandum setting out the terms of, a contract or a copy of, or memorandum setting out the terms of a variation of, a contract at a time at which the unexpired portion of the term for which the contract is to be in force is less than three years or at a time at which the contract can, within the next ensuing three years, be terminated by the company without payment of compensation.

Explanatory note

This section is an amended re-enactment of section 50 of the Companies Act, 1990. The reference to being liable to a fine has been changed to being guilty of an offence and liable to a fine, the amount of which will be prescribed later in the Bill.

Chapter 4 Proceedings of Directors

Head 24 General Power of Management and Delegation

Unless the constitution otherwise provides:

(a) The business of the company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the company and may exercise all such powers of the company as are not, by the Act or by the constitution, required to be exercised by the company in general meeting, subject, nevertheless, to any regulations contained in the constitution, to the provisions of this Act and to such regulations, not being inconsistent with the aforesaid regulations or provisions, as may be given by the company in general meeting; but no regulation given by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that direction had not been given.

(b) Without prejudice to Part II, Head 14 [Persons or bodies of persons authorised to bind a company - new provision], the directors may delegate any of their powers to committees consisting of such member or members of the board as they think fit; any committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may be imposed on it by the directors.

(c) All acts done by any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.

Explanatory note

This section is new. The section imports various regulations previously contained in Part I of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (a) imports Model Regulation 80 of Part I of Table A of the First Schedule to the Companies Act, 1963. The references to the Model Regulations contained in that Part have been replaced by references to “the regulations of the constitution” and “the constitution” of the company.

The reference to “…such directions…as may be given by the company in general meeting” has been replaced by “…such regulations…as may be given by the company in general meeting”. This was done in accordance with recommendation of the Company Law Review Group to restore the pre-Companies Act 1963 position. The insertion of “such directions” in the Companies Act 1963 had been the cause of much uncertainty in case law. The central issue was whether this allowed the members to control the directors through amending the articles of the company by special resolution (as was the case when “regulations” was used) or to more radically direct the directors to a particular course of action, other than by special resolution amending the articles. Upon review of the case law, the general consensus on the use of the word “directions” appears to be that the members may direct the directors to do or refrain from doing certain acts only where to do so is not inconsistent with the articles of the company. Thus, by reverting back to the use of the word “regulations” as opposed to “directions”, the traditional position has been restored. Members may thus control the directors only through amending the articles of the company by special resolution.

Paragraph (b)imports Model Regulation 105 of Part I of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (c) imports Model Regulation 108 of Part I of Table A of the First Schedule to the Companies Act, 1963.

Head 25 Managing Director

Unless the constitution otherwise provides:

(a) The directors may from time to time appoint one or more of themselves to the office of managing director (by whatever name called) for such period and on such terms as to remuneration and otherwise as they see fit, and, subject to the terms of any agreement entered into in any particular case, may revoke such appointment. Without prejudice to any claim he may have for damages for breach of any contract of service between him and the company), his appointment shall be automatically determined if he ceases from any cause to be a director.

(b) A managing director shall receive such remuneration whether by way of salary, commission or participation in the profits, or partly in one way and partly in another, as the directors may determine.

(c) Without prejudice to Part II, Head 14 [Persons or bodies of persons authorised to bind a company - new provision], the directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit, and either collaterally with or to the exclusion of their own powers, and may from time to time revoke, withdraw, alter or vary all or any of such powers.

Explanatory note

This section is a new section. The section imports various provisions of the Model Regulations of Part 1 of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (a) imports, in an amended manner, Model Regulation 110 of Part I of Table A of the First Schedule to the Companies Act, 1963. The second phrase of Model Regulation 110, concerning the rotation of directors, has been deleted in accordance with the recommendations of the First Report of the Company Law Review Group. The words “…(by whatever name called)…” has been newly inserted in recognition that a managing director may be called a different name e.g. CEO.

Paragraph (b) imports Model Regulation 111 of Part I of Table A of the First Schedule to the Companies Act, 1963.

Head 26 Meetings of Directors and Committees of Directors

Unless the constitution otherwise provides:

(a) The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit.

(b) Questions arising at any meeting shall be decided by a majority of votes and where there is an equality of votes, the chairman shall have a second or casting vote.

(c) A director may, and the secretary on the requisition of a director shall, at any time summon a meeting of the directors.

(d) All directors shall be entitled to reasonable notice of any meeting of the directors, provided that, if the directors so resolve, it shall not be necessary to give notice of a meeting of directors to any director who, being resident in the State, is for the time being absent from the State, provided always that no person other than a director can object to the notice given for any meeting of the directors.

(e) The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two but where the company has a single director, the quorum shall be one.

(f) The continuing directors may act notwithstanding any vacancy in their number but, if and so long as their number is reduced below the number fixed by or pursuant to [this Act] as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company but for no other purpose.

(g) The directors may elect a chairman of their meetings and determine the period for which he is to hold office, but if no such chairman is elected, or, if at any meeting the chairman is not present within 15 minutes after the time appointed for holding the same, the directors present may choose one of their number to be chairman of the meeting.

(h) A committee may elect a chairman of its meetings; if no such chairman is elected, or if at any meeting the chairman is not present within 15 minutes after the time appointed for holding the same, the members present may choose one of their number to be chairman of the meeting.

(i) A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and where there is an equality of votes, the chairman shall have a second or casting vote.

(j) A resolution in writing signed by all the directors for the time being entitled to receive notice of a meeting of the directors or a committee of the directors shall be as valid as if it had been passed at a meeting of the directors duly convened and held.

(k) Where a minority of the directors are pursuant to statute, the company’s constitution or a rule of law, are unable to vote on a resolution of the directors that minority may nonetheless sign such a resolution in writing referred to in paragraph (j) and ‘minority’ for the purposes of this paragraph shall include one half of the board of directors where a director who is not so unable to vote has a casting vote.

(l) The resolution in writing referred to in subsection (j) may consist of several documents in like form each signed by one or more directors and for all purposes shall take effect from the time that it is signed by the last director.

(m) Meetings of Directors shall be capable of being held by telephone or other suitable electronic means whereby all the directors can hear and be heard.

(n) A director may vote in respect of any contract, appointment or arrangement in which he is interested, and he shall be counted in the quorum present at the meeting.

(o) A director may vote in respect of any contract appointment or arrangement in which he is interested and he shall be counted in the quorum present at the meeting.

(p) The directors may exercise the voting powers conferred by the shares of any other company held or owned by the company in such manner in all respects as they think fit and in particular they may exercise the voting powers in favour of any resolution appointing the directors or any of them as directors or officers of such other company or providing for the payment of remuneration or pensions to the directors or officers of such other company. Any director of the company may vote in favour of the exercise of such voting rights notwithstanding that he may be or may be about to become a director or officer of such other company and as such or in any other manner is or may be interested in the exercise of such voting rights in manner aforesaid.

Explanatory note

This section is a new section. The section imports various provisions of the Model Regulations of Part 1 of Table A of the First Schedule to the Companies Act, 1963. It also gives effect to certain recommendations of the First Report of the Company Law Review Group.

Paragraphs (a)-(d) import, in an amended manner, Model Regulation 101 of Part I of Table A of the First Schedule to the Companies Act, 1963.

The requirement of “reasonable notice” of any meeting of the directors has been included inparagraph (d). The reason for this is that the courts, in Holland v McGill (16th March 1990, Unreported HC decision) have held that such a requirement already exists; thus, the common law requirement is now being included for the purpose of completeness.

It is also stated in paragraph (d) that no person other than a director may object to the notice given for directors’ meetings. This safety measure has been included to prevent third parties/outsiders challenging a resolution of the directors on the basis that insufficient notice for the meeting at which it was passed was given.

Paragraph (e)imports, in an amended manner, Model Regulation 102 of Part I of Table A of the First Schedule to the Companies Act, 1963. The amendments were necessitated in order to recognise the possibility of a single-director private company limited by shares.

Paragraph (f)imports, in an amended manner, Model Regulation 103 of Part I of Table A of the First Schedule to the Companies Act, 1963. The reference to the fixing of the quorum by “the regulations” has been replaced by a reference to the quorum instead being fixed by “this Act”.

Paragraph (g)imports Model Regulation 104 of Part I of Table A of the First Schedule to the Companies Act,

1963.

Paragraph (h)imports Model Regulation 106 of Part I of Table A of the First Schedule to the Companies Act,

1963.

Paragraph (i)imports Model Regulation 107 of Part I of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (j)imports, in an amended manner, Model Regulation 109 of Part I of Table A of the First Schedule to the Companies Act, 1963. Meetings of a committee of directors have also been included in this subsection.

Paragraph (k) is new.

Paragraph(l) is new. The paragraph gives effect to the recommendation of the Review Group in its First Report that the possibility of the directors signing a written resolution on separate pieces of paper be recognised.

Paragraph (m)is new. The section may be said to be a logical step forward from the E-Commerce Act, 2000.

Paragraph (n)imports Model Regulation 86 of Part I of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (o)imports Model Regulation 7 of Part II of Table A of the First Schedule to the Companies Act, 1963.

Paragraph (p)imports Model Regulation 8 of Part II of Table A of the First Schedule to the Companies Act, 1963.

Explanatory note

This section imports, in an amended manner, Model Regulation 9 of Part II of Table A of the First Schedule to the Companies Act, 1963. The Model Regulation has been sub-divided into paragraphs and the references to the “secretary” in paragraphs (c) and (e) have been replaced by “company”

Head 28 Minutes of proceedings of meetings of directors

(1) Every company shall as soon as may be cause minutes of all proceedings at meetings of its directors or committees of directors and all resolutions to be entered in books kept for that purpose.

(2) Any such minute if purporting to be signed by the chairman of the meeting at which the proceedings were had, or by the chairman of the next succeeding meeting, shall be evidence of the proceedings.

(3) Where minutes have been made in accordance with this section of the proceedings at any meeting of directors or committee of directors, then, until the contrary is proved, the meeting shall be deemed to have been duly held and convened, and all proceedings had thereat to have been duly had, and all appointments of directors shall be deemed to be valid.

(4) A company shall if required by the Director of Corporate Enforcement produce for inspection the book or books kept in accordance with subsection 1 and shall give the Director of Corporate Enforcement such facilities for inspecting and taking copies of the contents of the book or books as the Director of Corporate Enforcement may require.

Explanatory note

This section is a slightly amended re-enactment of section 145 of the Companies Act, 1963, as amended by section 19 of the Company Law Enforcement Act, 2001.The section has been split into two new sections, one for directors’ meetings and one for members’ meetings.

Head 29 Audit Committees

(1) In this section—

‘affiliate’ in relation to an auditor, means a firm, body corporate or partnership considered under Part A6, Head 000 [equivalent of section 182(2) of Companies Act 1990] to be an affiliate of the auditor at the relevant time;

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in Part A6, Head 000 [equivalent of section 8 of Companies (Amendment) Act 1986];

‘internal audit’ means an examination of the internal control system of a large private company that is conducted within the company at the request of its audit committee, directors or other officers;

‘internal auditor’ means a person who conducts an internal audit;

‘large private company’ means either of the following:

(a) a private company limited by shares that, in both the most recent financial year of the company and the immediately preceding financial year, meets the following criteria:

(i) the balance sheet total of that company exceeds for the year—

(A) €25,000,000, or

(B) if an amount is prescribed under [equivalent of section 48(1)(l) of Companies (Auditing and Accounting) Act 2003] for the purpose of this provision, the prescribed amount;

(ii) the amount of turnover of that company exceeds for the year—

(A) €50,000,000, or

(B) if an amount is prescribed under [equivalent of section 48(1)(l) of the Companies (Auditing and Accounting) Act 2003] for the purpose of this provision, the prescribed amount;

(b) a private company limited by shares if the company and all its subsidiary undertakings together, in both the most recent financial year of that company and the immediately preceding financial year, meet the criteria in paragraph (a);

‘parent undertaking’ and ‘subsidiary undertaking’ have the same meaning as in the Part I, Head 000 [equivalent of S.I. No.201 of 1992, EC (Companies: Group Accounts) Regulations, 1992];

(2) The responsibilities of a committee of directors, to be known as the audit committee, may include, but are not limited to, the following:

(a) reviewing, before they are presented to the board of directors for approval—

(i) the company’s annual accounts, and

(ii) if the company is a parent company,, the group accounts of the group of undertakings of which the company is the parent company;

(b) determining whether the annual accounts so reviewed comply with Part A6, Head 000 [equivalent of section 205A(2) of Companies Act 1990] and whether, in the committee’s opinion, they give at the end of the financial year a true and fair view of—

(i) the state of affairs of the company, and

(ii) the profit or loss of the company, even if, by virtue of Part A6, Head 000 [equivalent of section 3(2) of Companies (Amendment) Act 1986], Part A6, Head 000 [equivalent of section 3(1) of Companies (Amendment) Act 1986] does not apply to the company’s profit and loss account;

(c) determining whether the group accounts so reviewed comply with Part A6, Head 000 [equivalent of section 205A(2) of Companies Act 1990] and whether, in the committee’s opinion, they give at the end of the financial year a true and fair view of—

(i) the state of affairs of the group of undertakings of which the company is the parent company, and

(ii) the profit or loss of that group;

(d) recommending to the board of directors whether or not to approve the annual accounts and group accounts so reviewed;

(e) determining, at least annually, whether in the committee’s opinion, the company has kept proper books of account in accordance with Part A6, Head 000 [equivalent of section 202 of Companies Act 1990];

(f) reviewing, before its approval by the board of directors, the statement required to be made under Part A6, Head 000 [equivalent of section 205E(5) and (6) of Companies Act 1990];

(g) determining whether, in the committee’s opinion, the statement so reviewed—

(i) complies with Part A6, Head 000 [equivalent of section 205E(5) and 5(6) of Companies Act 1990], and

(ii) is fair and reasonable and is based on due and careful enquiry;

(h) recommending to the board of directors whether or not to approve a statement reviewed under paragraph (f);

(i) advising the board of directors as to the recommendation to be made by the board to the shareholders concerning the appointment of the company’s auditor;

(j) monitoring the performance and quality of the auditor’s work and the auditor’s independence from the company;

(k) obtaining from the auditor up to date information to enable the committee to monitor the company’s relationship with the auditor, including, but not limited to, information relating to the auditor’s affiliates;

(l) recommending whether or not to award contracts to the auditor or an affiliate of the auditor for non-audit work;

(m) satisfying itself that the arrangements made and the resources available for internal audits are in the committee’s opinion suitable;

(n) reporting, as part of the report under Part A6, Head 000 [equivalent of section 158 of Companies Act 1963], on the committee’s activities for the year, including, but not limited to, the discharge of its responsibilities under paragraph (j);

(o) performing any additional functions prescribed by regulation under Part A6, Head 000 [equivalent of section 48(1)(m) of the Companies (Auditing and Accounting) Act 2003];

(p) performing any other functions relating to the company’s audit and financial management that are delegated to it by the board of directors.

(3) The board of directors of each large private company shall either—

(a) establish an audit committee that—

(i) has all or some of the responsibilities specified in subsection (2), and

(ii) subject to subsection (8), otherwise meets the requirements of this section, or

(b) decide not to establish an audit committee.

(4) The board of directors of each large private company to which subsection (3) applies shall state in their report under Part A6, Head 000 [equivalent of section 158 of Companies Act 1963]—

(a) whether the company has established an audit committee or decided not to do so,

(b) if the company has established an audit committee, whether it has only some of the responsibilities specified in subsection (2), and

(5) The audit committee is to consist of such directors as the board of directors concerned thinks fit, provided, subject to subsection (8), both of the following requirements are met:

(a) the committee consists of not fewer than 2 members;

(b) all those appointed to the committee qualify under subsection (6).

(6) A director qualifies for appointment to the audit committee unless he or she—

(a) is, or was at any time during the 3 years preceding appointment to the committee—

(i) an employee of the company concerned, or

(ii) an employee of any subsidiary of the company concerned, or

(b) is the chairperson of the board of directors.

(7) The requirements specified in paragraphs (a) and (b) of subsection (6) do not apply if—

(a) only one director on the board of directors of the company concerned qualifies under subsection (6),

(b) that director—

(i) is appointed as the sole member of the audit committee, or

(ii) is appointed as the chairperson of an audit committee consisting of not more than 2 members (including the chairperson) and has, in the case of an equal division of votes, a second or casting vote,

(c) any conditions prescribed under section [equivalent of 48(1)(m) of the Companies (Auditing and Accounting) Act 2003] are met, and

(d) the directors of the company concerned state in their report under [Equivalent of section 158 of the Companies Act 1963] the reasons for the company’s exemption from those requirements.

(8) Written terms of reference concerning the audit committee’s role in the audit and financial management of the company concerned shall—

(a) be prepared and approved by the board of directors,

(b) be submitted for the information of the shareholders of the company concerned at its annual general meeting, and

(9) Without limiting the matters that may be included under subsection (9), the terms of reference must—

(a) specify how the audit committee will discharge its responsibilities, and

(b) provide for a programme of separate and joint meetings with the management, auditor and internal auditor of the company or undertaking concerned.

(10) Subsection (9) applies also in relation to any amendments of the audit committee’s terms of reference.

(11) Where a director of a large private company to which subsection (3) applies fails to take all reasonable steps to comply with the requirements of subsection (4), the director is guilty of an offence.

Explanatory notes

This section is an amended re-enactment of section 205B of the Companies Act 1990, as inserted by section 42 of the Companies (Auditing and Accounting) Act 2003. All cross-references have been updated in accordance with the structure of the new Bill. References to “parent undertaking” have been replaced with references to “parent company” and references to “relevant undertaking” have been deleted where appropriate, given that the CLS is the only concern in this Part.

Subsection (1) is an amended re-enactment of subsection 205B(1) of the Companies Act 1990. This subsection contains the interpretive provisions for the purpose of this section. The definition of “internal audit” has been amended insofar as the references to the PLC and the relevant undertaking have been removed for the purpose of this Part. Similarly the definition of “relevant undertaking” has not been included but will need to be re-inserted in

Group B.

Subsection (2) is an amended re-enactment of subsection 205B(2) of the Companies Act 1990. Previously, this subsection imposed the duty to establish an audit committee on the board of directors of a public limited company. As a result of subsection 205B(5) of the Companies Act 1990, the reference to the public limited company in subsection 205B(2) was also to be construed as a reference to a large private company. The new provision simply highlights the main responsibilities of the Audit Committee of the CLS and is not intended to be exhaustive.

As a result of the amendments to subsection (2), subsection 205B(5) has been rendered superfluous.

Subsection (3) is an amended re-enactment of subsection 205B(3) of the Companies Act 1990. The phrase “Subject to subsection (16)…” has been removed since that provision has been deleted.

Subsection (4) is a slightly amended re-enactment of subsection 205B(4) of the Companies Act 1990. All references to “relevant undertaking” and “undertaking” have been removed.

Subsections (5)-(10) are slightly amended re-enactments of subsections 205B(6)-(11) of the Companies Act 1990.

Subsection (11) is a re-enactment of subsection 205B(13) of the Companies Act 1990.

Subsections 205B(12), (14), (15) and (16) have been removed but will be re-inserted for the purposes of Group B.

Chapter 5 Members

Head 30 Definition of member

(1) The subscribers of the constitution of a company shall be deemed to have agreed to become members of the company, and, on its registration, shall be entered as members in its register of members.

(2) Every other person who agrees to become a member of a company, and whose name is entered in its register of members, shall be a member of the company.

Explanatory note

This section is a slightly amended re-enactment of section 31 of the Companies Act 1963. The amendments were necessitated by the fact that a private company limited by shares has a constitution in place of a memorandum and articles of association.

Head 31 Register of members

(1) Subject to subsection (4), every company shall keep a register of its members and enter therein the following particulars:—

(a) the names, addresses of the members and a statement of the shares held by each member, distinguishing each share by its number so long as the share has a number, and of the amount paid or agreed to be considered as paid on the shares of each member;

(b) the date at which each person was entered in the register as a member;

(2) The entries required under paragraphs (a) and (b) of subsection (1) shall be made within 28 days after the conclusion of the agreement with the company to become a member or, in the case of a subscriber of constitution, within 28 days after the registration of the company.

(3) The entry required under paragraph (c) of subsection (1) shall be made within 28 days after the date when the person concerned ceased to be a member, or, if he ceased to be a member otherwise than as a result of action by, the company, within 28 days of production to the company of evidence satisfactory to the company of the occurrence of the event whereby he ceased to be a member.

(4) Where the company has converted any of its shares into stock and given notice of the conversion to the Registrar, the register shall show the amount of stock held by each member instead of the amount of shares and the particulars relating to shares specified in paragraph (a) of subsection (1).

(5) Subject to subsection (6), the register of members shall, except when it is closed under the provisions of this Act, be kept at the registered office of the company, so, however, that—

(a) if the work of making it up is done at another office of the company, it may be kept at that other office; and

(b) if the company arranges with some other person for the making up of the register to be undertaken on behalf of the company by that other person, it may be kept at the office of that other person at which the work is done.

(6) The register of members shall not be kept at a place outside the State.

(7) Subject to subsection (8), every company shall send notice to the Registrar of the place where its register of members is kept and of any change in that place.

(8) A company shall not be bound to send notice under subsection (7) where the register has, at all times since it came into existence or, in the case of a register in existence on the operative date, at all times since then, been kept at the registered office of the company.

(9) Where a company makes default in complying with any of the requirements of subsections (1) to (6) or makes default for 14 days in complying with subsection (7), the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine.

Explanatory note

This section is a slightly amended re-enactment of section 116 of the Companies Act, 1963, as amended by section 20 of the Companies (Amendment) Act, 1982. References to the memorandum and articles of association have been replaced by references to the constitution of the company. References to the registrar of companies have also been replaced by references to the “Registrar”.

Subsection (1)(a) has been amended insofar as the phrase “in the case of a company having a share capital” has been deleted as it was unnecessary as this Part applies only to a private company limited by shares.

Head 32 Inspection of register

(1) Except when the register of members is closed under the provisions of this Act, it shall during business hours (subject to such reasonable restrictions as the company in general meeting may impose, so that not less than 2 hours in each day be allowed for inspection) be open to the inspection of any member without charge, and of any other person on payment of €10, or such less sum as the company may prescribe, for each inspection.

(2) If any member or other person may request a copy of the register, or of any part thereof the company shall cause any copy so required to be sent to that person within a period of 10 days of receiving the request and on payment of €10 or such less sum as the company may prescribe.

(3) If any inspection required under this section is refused or if any copy requested under this section is not sent within the proper period, the company and every officer of the company who is in default shall be liable in respect of each offence to a fine.

(4) Where under this Act any document or register is required to be made available for inspection to any person or class of person, such inspection shall be made available at the registered office of the company or another place in the State, provided that such other place has first been notified to the Registrar in the prescribed form.

Explanatory note

This section is an amended re-enactment of section 119 of the Companies Act, 1963. Subsection 119(4) of the Companies Act, 1963, which provided that the courts may compel an inspection of the register, has been repealed as there is a general power under section 371 of the Companies Act 1963 to compel company law defaulters to comply.

Subsection (1) is an amended re-enactment of subsection 119(1). The maximum inspection charge has been raised to €10.

Subsection (2) is an amended re-enactment of subsection 119(2). The method of calculating the charge has been replaced by a maximum charge of €10.

Subsection (3) is a re-enactment of subsection 119(3).

Subsection (4) is a new subsection. This subsection gives effect to the recommendation of the Review Group in its First Report that documents required to be made available for inspection should be made available for inspection either at the registered office of the company or another location within the State, subject to notification to the Registrar of that location.

Head 33 Trusts not to be entered on register

No notice of any trust, express, implied or constructive, shall be entered on the register or be receivable by the keeper of the register.

Explanatory note

This section is a slightly amended re-enactment of 123 of the Companies Act, 1963. The phrase “by the Registrar” has been replaced by the phrase “by the keeper of the register”. In doing so, it is not thought to effect any substantive change.

Chapter 6 General Meetings and Resolutions

Head 36 Annual General Meeting

(1) Subject to subsections (2) and (3), every company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year and shall specify the meeting as such in the notices calling it and not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next.

(2) So long as a company holds its first annual general meeting within 18 months of its incorporation, it need not hold it in the year of its incorporation or in the following year.

(3) A company need not hold an annual general meeting in any year where all the members entitled (at the date of the written resolution referred to in this section) to attend and vote at such general meeting sign, before the latest date for the holding of that meeting, a written resolution;

(a) acknowledging receipt of accounts;

(b) resolving all such matters as would have been resolved at the annual general meeting; and

(4) If default is made in holding a meeting of the company in accordance with subsection (1), the Director of Corporate Enforcement may, on the application of any member of the company, call or direct the calling of a general meeting of the company and give such ancillary or consequential directions as the Director of Corporate Enforcement thinks expedient, including directions modifying or supplementing in relation to the calling holding and conducting of the meeting, the operation of the company’s constitution, and it is hereby declared that the directions which may be given under this subsection include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.

(5) A general meeting held in pursuance of subsection (4) shall, subject to any directions of the Director of Corporate Enforcement, be deemed to be an annual general meeting of the company but, where a meeting so held is not held in the year in which the default in holding the company’s annual general meeting occurred, the meeting so held shall not be treated as the annual general meeting for the year in which it is held unless at that meeting the company resolves that it shall be so treated.

(6) Where a company resolves that a meeting shall be so treated, a copy of the resolution shall, within 21 days after the passing thereof, be delivered to the Registrar for registration.

(7) If default is made in holding a meeting of the company in accordance with subsection (1), or in complying with any direction of the Director of Corporate Enforcement under subsection (4), the company and every officer of the company who is in default shall be liable to a fine, and if default is made in complying with subsection (6), the company and every officer of the company who is in default shall be liable to a fine.

Explanatory note

This section is an amended re-enactment of section 131 of the Companies Act, 1963. References to the articles of the company have been replaced by references to the constitution of the company.

Subsection (3) is a new subsection. This subsection was inserted in accordance with the recommendations of the First Report of the Company LawReview Group to allow a CLS dispense with the requirement to hold an AGM.

Subsection (6) is an amended re-enactment of subsection 131(5). It has been amended insofar as the time period has been raised from 15 to 21 days. Such a time frame of 21 days is allowed by most provisions of the Companies Act 1963.

Head 37 The Location and Means for Holding General Meetings

(1) Where a company holds its annual general meeting or any extraordinary general meeting outside of the State then, unless all of the members entitled to attend and vote at such meeting consent to its being held outside of the State, the company must at its expense make all necessary arrangements to ensure that members can by technological means participate in any such meeting without leaving the State.

(2) A meeting may be held in two or more venues (whether inside or outside of the State) using any technology that provides members as a whole, with a reasonable opportunity to participate.

Explanatory note

This section is a new section. The section provides for the location and means for holding general meetings. It replaces section 140 of the Companies Act, 1963 which required that general meetings be held in the State unless all the members consented to it being held elsewhere or a resolution was passed at the preceding general meeting that it may be held elsewhere.

Under the new subsection (1), all the members must consent to the meeting being held outside of the State and there is a duty on the company to incur the cost of participation for the members, who are not required to leave the State.

Subsection (2) gives effect to the recommendations of the First Report of the Company Law Review Group that it should be possible to hold general meetings in more than one venue.

Head 38 Extraordinary general meetings

(1) All general meetings other than annual general meetings shall be called extraordinary general meetings.

(2) The directors may, whenever they think fit, convene an extraordinary general meeting.

(3) If at any time there are not sufficient directors capable of acting to form a quorum, any director or any member of the company may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the directors.

Explanatory note

This section is a new section. The section imports various provisions of the Model Regulations of Part 1 of Table A of the First Schedule to the Companies Act 1963. It also gives effect to certain recommendations of the First Report of the Review Group.

Subsection (1) imports Model Regulation 49 of Part 1 of Table A of the First Schedule to the Companies Act, 1963.

Subsections (2) and (3) import Model Regulation 50 of Part 1 of Table A of the First Schedule to the Companies Act, 1963. The reference to requisitioned meetings has been deleted.

Head 39 Convening of Extraordinary General Meeting by members

(1) Save where the constitution of a company provides otherwise, a member or members together holding at any time not less than 10% of the paid up share capital of the company as at that time carries the right of voting at general meetings of the company may convene an extraordinary general meeting of the company.

(2) The directors of a company shall, notwithstanding anything in its constitution, on the requisition of a member or members together holding at the date of the deposit of the requisition not less than 10% of the paid up share capital of the company as at the date of the deposit carries the right of voting at general meetings of the company, forthwith proceed duly to convene an extraordinary general meeting of the company.

(3) The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office of the company and may consist of several documents in like form each signed by one or more requisitionists.

(4) If the directors do not within 21 days from the date of the deposit of the requisition proceed duly to convene a meeting to be held within 2 months from the said date, the requisitionists, or any of them representing more than 50% of the total voting rights of all of them, may themselves convene a meeting, but any meeting so convened shall not be held after the expiration of 3 months from the said date.

(5) A meeting convened under this section shall be convened in the same manner as nearly as possible as that in which meetings are to be convened by directors.

(6) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors duly to convene a meeting shall be repaid to the requisitionists by the company and any sum so repaid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as were in default.

(7) For the purposes of this section, the directors shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by Part A4, Head 42 [equivalent of s.133 of Companies Act 1963].

Explanatory note

This section is a slightly amended re-enactment of section 132 and section 134(b) of the Companies Act, 1963. References to the articles of the company have been replaced by references to the constitution of the company. Furthermore, the reference in subsection (1) to companies not having a share capital has been deleted as this Part only applies to private companies limited by shares.

Head 47 The business of the Annual General Meeting

The business of the annual general meeting shall include:

(a) the consideration of the company’s accounts, balance sheets and the reports of the directors; and unless the company has exercised its right pursuant to Part 000, Head 000 [equivalent of s.32 of Companies (Amendment) Act 1999] to dispense with the obligation to appoint an auditor, the reports of the auditors; and

(b) the review by the members of the company’s affairs; and

(i) the declaration of a dividend of an amount not exceeding the amount recommended by the directors; and

(ii) the authorisation of the directors to approve the remuneration of the auditors; and

(d) where the constitution provides that the directors retire by rotation, the election and re-election of directors.

(e) the appointment or re-appointment of auditors; and

(f) the remuneration of the directors

Explanatory note

This section is a new section. It was necessary to elucidate the business of the AGM since the notions of special and ordinary business are to be repealed. Model Regulation 53 of Part I of Table A of the First Schedule to the Companies Act, 1963 sets out the business of the AGM and this has been substantially followed in the new section.

Head 61 Remedy in case of oppression

(1) Any member of a company who complains that the affairs of the company are being conducted or that the powers of the directors of the company are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section.

(2) In a case falling within subsection (1), the Director of Corporate Enforcement may apply for an order under this section.

(3) If, on any application under subsection (1) or subsection (2) the court is of opinion that the company’s affairs are being conducted or the directors’ powers are being exercised as aforesaid, the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether directing or prohibiting any act or cancelling or varying any transaction or for regulating the conduct of the company’s affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and in the case of a purchase by the company, for the reduction accordingly of the company’s capital, or for the payment of compensation or otherwise.

(4) Where an order under this section makes any alteration in or addition to any company’s constitution, then, notwithstanding anything in any other provision of this Act but subject to the provisions of the order, the company concerned shall not have power without the leave of the court to make any further alteration in or addition to the constitution inconsistent with the provisions of the order; but, subject to the foregoing provisions of this subsection, the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the company, and the provisions of this Act shall apply to the constitution as so altered or added to accordingly.

(5) An office copy of any order under this section altering or adding to or giving leave to alter or add to a company’s constitution shall, within 21 days after the making thereof, be delivered by the company to the Registrar for registration; and if a company fails to comply with this subsection, the company and every officer of the company who is in default shall be liable to a fine.

(6) The personal representative of a person who, at the date of his death was a member of a company, or any trustee of, or person beneficially interested in, the shares of a company by virtue of the will or intestacy of any such person, may apply to the court under subsection (1) for an order under this section and, accordingly, any reference in that subsection to a member of a company shall be construed as including a reference to any such personal representative, trustee or person beneficially interested as aforesaid or to all of them.

(7) If, in the opinion of the court, the hearing of proceedings under this section would involve the disclosure of information the publication of which would be seriously prejudicial to the legitimate interests of the company, the court may order that the hearing of the proceedings or any part thereof shall be in camera.

Explanatory note

This section is an amended re-enactment of section 205 of the Companies Act,1963. References to the memorandum and articles of association have been replaced by references to the constitution of the company.

Subsection (2) has been amended insofar as locus standii has been transferred from the Minister to the Director of Corporate Enforcement.

Subsection (3) has been amended by expressly permitting the courts to make an award of damages. Although section 205 stated that the courts were permitted to “make such order as it thinks fit”, it has been held by the SC in Irish Press PLC v Ingersoll Irish Publications Ltd. (1995) 2 IR 175 that section 205 does not empower the courts to make an award of damages. In reality the courts circumvented this by ordering the respondent to purchase the shares of the petitioner at an inflated price, thus in effect making an award of damages. As a result the subsection has been amended to permit the courts to make an award of damages directly.

Subsections (6) – (14) are all drawn, in substance, from sections 60 and 31.

PART 5A – DUTIES OF DIRECTORS AND OTHER OFFICERS

Head 3 Shadow directors

(1) Subject to subsection (2), a person in accordance with whose directions or instructions the directors of a company are accustomed to act (in this Act referred to as “a shadow director”) shall be treated for the purposes of this Part as a director of the company unless the directors are accustomed so to act by reason only that they do so on advice given by him in a professional capacity.

(2) A body corporate is not to be regarded as a shadow director of any of its subsidiary companies.

(3) A shadow director shall not be guilty of an offence under Part 000, Head000 [equivalent of section 44(8) of Companies Act 1990] by virtue only of subsection (1).

(4) Part A5, Head 11 [equivalent of section 194 of Companies Act 1963] shall apply in relation to a shadow director of a company as it applies in relation to a director of a company, except that the shadow director shall declare his interest, not at a meeting of the directors, but by a notice in writing to the directors which is either:

(a) a specific notice given before the date of the meeting at which, if he had been a director, the declaration would be required by subsection (2) of that section to be made; or

(b) a notice which under subsection (3) of that section falls to be treated as a sufficient declaration of that interest or would fall to be so treated apart from the proviso; and Part A4, Head 000 [equivalent of section 145 of Companies Act 1963] shall have effect as if the declaration had been made at the meeting in question and had accordingly formed part of the proceedings at that meeting.

Head 4 De Facto Directors

(1) Subject to subsection (2), a person who occupies the position of director but who has not been formally appointed as a director (in this act referred to as a “de facto director”) shall be treated for the purposes of this Part as a director of a company provided that a person shall not be a de facto director by reason only of the fact that he gives advice in a professional capacity.

(2) Part A5, Head 11 [equivalent of section 194 of Companies Act 1963] shall apply in relation to a de facto director of a company as it applies in relation to a director of a company.

A saving provision for those giving professional advice has also been inserted.

Chapter 7 General Duties of Directors and Secretaries

Head 5 Duty of each director

(1) It is the duty of each director of a company to ensure that [the Companies Acts] are complied with by the company.

(2) For the purpose of any provision of [the Companies Acts] which provides that an officer of a company who is in default shall be liable for a fine or penalty, an officer who is in default is any officer who authorises or who, in breach of his duty as such officer, permits, the default mentioned in the provision.

(3) An officer shall be presumed to have permitted a default by the company unless the officer can establish that he took all reasonable steps to prevent it, or that, by reason of circumstances beyond his control, was unable to do so.

(4) Upon notification of appointment as a director on the prescribed form the director’s signature should appear below a statement: “I acknowledge that, as a director, I have legal duties and obligations imposed by [the Companies Acts], other statutes and at common law.

Explanatory note

This section is an amended re-enactment of section 383 of the Companies Act 1963, as substituted by section 100 of the Company Law Enforcement Act 2001. As an introductory provision to the Chapter of this Part dealing with the general duties of directors and secretaries, it sets out the overall duty of compliance by directors with the Companies Acts. It must be noted that this section now applies to registered directors, shadow directors and

de facto directors equally.

Subsections (1), (2), and (3) are re-enactments of subsections 383(3), (1), and (2), and of the Companies Act 1963 respectively.

Subsection (4) is a new subsection. This subsection implements the recommendation of the First Report of the Company Law Review Group that such an acknowledgement of the existence of director’s duties by the directors upon registration is desirable. This is achieved through requiring them to sign a declaration to that effect.

Head 6 Director’s compliance statement and related statement.

(1) In this head—

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in [the equivalent of section 8 of Companies (Amendment) Act 1986]

‘relevant obligations’, in relation to a company, means the company’s obligations under—

(a) [the Companies Acts], where the failure to comply with any such obligation is an indictable offence under [the Companies Acts], and

(b) tax law,

‘tax law’ means—

(a) the Customs Acts,

(b) the statutes relating to the duties of excise and to the management of

those duties,

(d) the Capital Gains Tax Acts,

(e) the Value-Added Tax Act 1972 and the enactments amending or extending

that Act,

(f) the Capital Acquisitions Tax Act 1976 and the enactments amending or

extending that Act,

(g) the statutes relating to stamp duty and to the management of that duty, and

(h) any instruments made under an enactment referred to in any of paragraphs

(a) to (g) or made under any other enactment and relating to tax.

(2) The directors of a company to which this section applies shall also include in their report under Part A6, Head 000 [the equivalent of section 158 of the Companies Act 1963] a statement—

(a) acknowledging that they are responsible for securing the company’s compliance

with its relevant obligations, and

(b) confirming that the company has in place a compliance policy statement that is, in the opinion of the directors, appropriate for the company; and, if this is not the case, specifying the reasons, and

(c) confirming that the company has in place, appropriate arrangements or structures that are, in the opinion of the directors, designed to secure material compliance with its relevant obligations, which arrangements or structures may (at the discretion of the directors) include the company’s reliance upon internal and or external advisors who appear to the directors to have the requisite knowledge and experience to advise the company on compliance with its relevant obligations); and, if this is not the case, specifying the reasons, and

(d) confirming that the company’s arrangements or structures referred to in paragraph (c), have been reviewed during the financial year to which the report relates, and, if this is not the case, specifying the reasons.

(3) For the purposes of this section, a company’s arrangements or structures are considered to be designed to secure material compliance with its relevant obligations if they provide a reasonable assurance of compliance in all material respects with those obligations.

(4) Where the directors of a company to which this section applies fail to comply with subsection (3), each director to whom the failure is attributable is guilty of an offence.

(5) This section does not apply to a company in respect of any financial year of the company if, either—

(a) its balance sheet total for the year does not exceed—

(i) €12,500,000, or

(ii) if an amount is prescribed under [the equivalent of section 48(1)(l) of the Companies (Auditing and Accounting) Act 2003] for the purpose of this provision, the prescribed amount,

or, in the alternative to the provisions in (a),

(b) the amount of its turnover for the year does not exceed—

(i) €25,000,000, or

(ii) if an amount is prescribed under [the equivalent of section 48(1)(l) of the Companies (Auditing and Accounting) Act 2003] for the purpose of this provision, the prescribed amount.

(6) This section does not apply to any company that is a of a class exempted under Part 000, Head 000 [equivalent of section 48(1)(j) of the Companies (Auditing and Accounting) Act 2003].

Explanatory note

This Head is an amended re-enactment of section 45 of the Companies (Auditing and Accounting) Act 2003. The amendments have been made in accordance with the recommendations made by the Company Law Review Group in its 2005 Report on the Directors’ Compliance Statement and subsequently adopted by the Minister. The previous section 45 has not been enacted.

This Head does not apply to guarantee companies and unlimited companies under Part B4 and B5 respectively. It has full application to DACs under Part B3 (subject to the exemption provided for in subhead (5)) and to PLCs in Part B2

Head 7 Duties of secretary

(1) The duties and responsibilities of the secretary of the company shall, without derogating from the secretary’s statutory and other legal duties and responsibilities, be such duties and responsibilities as are delegated to the secretary by the board of directors.

(2) The directors shall in their appointment of a secretary, who may be one of their number, have a duty to ensure that the person appointed as secretary has the suitable skills to maintain (or to procure the maintenance of) the records (other than accounting records) required to be kept under [the Companies Acts].

(3) Upon notification of appointment as a secretary on the prescribed form the secretary’s signature should appear below a statement: “I/We acknowledge that, as a secretary, I/we have legal duties and obligations imposed by [the Companies Acts], other statutes and at common law.

Explanatory note

This section is a new section. The section sets out the duties and responsibilities of the secretary. The section also reflects that the secretary is appointed by and can be removed by the board of directors. The secretary is not responsible for company law compliance since the secretary does not have the authority to cause the company to comply, such being vested in the board of directors.

Subsection (1) sets out and recognises the role of the secretary as the person who, by order of the board of directors, convenes meetings, records their proceedings, is custodian of the registers required by the Companies Acts and the person to whom the directors are permitted and expected to delegate their responsibility to make filings under the Companies Acts. It also reflects that it is the directors who are primarily responsible for the management and direction of the company, and to that extent primarily responsible for compliance with the

Companies Acts.

Subsection (2) imposes a duty on the directors to ensure that the secretary has the suitable skills to maintain records required by the Companies Acts. Such a duty is new. However, it is worth noting that a similar duty is imposed upon the directors of a PLC under section 236 of the Companies Act 1990.

Subsection (3) implements the recommendation of the First Report of the Company Law Review Group that such an acknowledgement of the existence of a secretary’s duties by the secretary upon registration is desirable. This is achieved through requiring the secretary to sign a declaration to that effect. The wording of such a declaration recognises that the secretary may be a corporate body.

Head 8 Fiduciary duties of directors

(1) Without prejudice to the provisions of any enactment (including this Act) a director of a company shall owe the duties set out in subsections (2) to (9) to his company (and the company alone), which shall be enforced in the same way as any other fiduciary duty owed to a company by its directors.

(2)The duties set out in subsection (3) are based on certain common law rules and equitable principles as they apply in relation to the directors of companies and shall have effect in place of those rules and principles as regards the duties owed to a company by a director and the duties in subsection (3) shall be interpreted and applied in the same way as common law rules or equitable principles and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the duties set out in subsection (3)

(3) Every director of a company shall:

(a) act in good faith in what the director considers to be the interests of the company;

(b) act honestly and responsibly in relation to the conduct of the affairs of the company;

(d)not use the company’s property, information or opportunities for his own or anyone else’s benefit unless he is allowed to by the company’s constitution or the use has been approved by a resolution of the company in general meeting;

(e) not agree to restrict the director’s power to exercise an independent judgment unless this is expressly permitted by the company’s constitution and provided that. if a director considers in good faith that it is in the interests of the company for a transaction to be entered into and carried into effect, a director may restrict the director’s power to exercise an independent judgment in the future by agreeing to act in a particular way to achieve this;

(f) avoid any conflict between the director’s duties to the company and the director’s other, including personal, interests and may not retain any benefit derived from any engagement (other than a transaction or arrangement to which the director and the company are party) where there is such a conflict of interests unless the company’s members in general meeting release the director from his duty to the company;

(g) owe the company a duty to exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both;

(i) the knowledge and experience that may reasonably be expected of a person in the same position as the director, and

(ii) the knowledge and experience which the director has; and

have regard to the interests of the company’s employees in general and to those of its members.

(4) A director appointed or nominated for appointment by a member with an entitlement so to appoint or nominate under the constitution or a shareholders’ agreement may have regard to the interests of that member.

Explanatory note

This section is a new section. The section implements the recommendation of the First Report of the Company Law Review Group that the fiduciary duties owed by directors to the company be stated within the new Companies code.

The fiduciary duties of the directors have been enunciated, until now, by the Irish courts. The Company Law Review Group recommended that the inaccessibility and incomprehensibility of the common law concerning directors’ duties to the layperson should be addressed by their being stated within the body of the Companies code. Furthermore, the fiduciary duties are stated in general rather than specific terms and since they are derived from principles established by the courts, they are not intended to be exhaustive.

Head 42 Effect of Winding Up on antecedent and other Transactions; Unfair preference

(1) Subject to the provisions of this section, any conveyance, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company which is unable to pay its debts as they become due in favour of any creditor, or of any person on trust for any creditor, with a view to giving such creditor, or any surety or guarantor for the debt due to such creditor, a preference over the other creditors, shall, if a winding-up of the company commences within 6 months of the making or doing the same and the company is at the time of the commencement of the winding-up unable to pay its debts (taking into account the contingent and prospective liabilities), be deemed an unfair preference of its creditors and be invalid accordingly.

(2) Any conveyance or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

(3) A transaction to which subsection (1) applies in favour of a connected person which was made within two years before the commencement of the winding up of the company shall, unless the contrary is shown, be deemed in the event of the company being wound up:

(a) to have been made with a view to giving such person a preference over the other creditors, and

(b) to be an unfair preference, and be invalid accordingly.

(4) Subsections (1) and (3) shall not affect the rights of any person making title in good faith and for valuable consideration through or under a creditor of the company.

Explanatory note

Amended reenactment of section 286 Companies Act 1963 as substituted by section 135 Companies Act 1990

Subsection (5) has been moved to the definitions section for the Part.

The term “fraudulent” has been changed to “unfair” to reflect that the section may be triggered in the absence of fraud.

Head 43 Liabilities and rights of certain persons who have been unfairly preferred.

(1) Where:

(a) a company is being wound up; and

(b) anything made or done on or after the operative date is void under Part A11, Head 42 – [equivalent of section 286 Companies Act 1963] as an unfair preference of a person interested in property mortgaged or charged to secure the company’s debt;

then (without prejudice to any rights or liabilities arising apart from this section) the person preferred shall be subject to the same liabilities and shall have the same rights as if he had undertaken to be personally liable as surety for the debt to the extent of the charge on the property or the value of his interest, whichever is the less.

(2) The value of the said person’s interest shall be determined as at the date of the transaction constituting the unfair preference, and shall be determined as if the interest were free of all encumbrances other than those to which the charge for the company’s debt was then subject.

(3) On any application made to the court in relation to any payment on the ground that the payment was an unfair preference of a surety or guarantor, the court shall have jurisdiction to determine any questions relating to the payment arising between the person to whom the payment was made and the surety or guarantor, and to grant relief in respect thereof notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of an action for the recovery of the sum paid.

(4) Subsection (3) shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies to payments.

Explanatory note

Restatement of section 287 Companies Act 1963.

The term “fraudulent” has been changed to “unfair” to reflect that the section may be triggered in the absence of fraud.

Head 47 Personal liability of officers of company where proper books of account not kept

(1) Subject to subsection (2), if—

(a) a company that is being wound up and that is unable to pay all of its debts has contravened Part A6, Head 000 [Equivalent of section 202 Companies Act 1990], and

(b) the court considers that such contravention has contributed to the company’s inability to pay all of its debts or has resulted in substantial uncertainty as to the assets and liabilities of the company or has substantially impeded the orderly winding up thereof,

the court, on the application of the liquidator or any creditor or member of the company, may, if it thinks it proper to do so, declare that any one or more of the officers and former officers of the company who is or are in default shall be personally liable, without any limitation of liability, for all, or such part as may be specified by the court, of the debts and other liabilities of the company.

(2) On the hearing of an application under this subsection, the person bringing the application may himself give evidence or call witnesses.

(3)

(a) Where the court makes a declaration under subsection (1), it may give such directions as it thinks proper for the purpose of giving effect to the declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him or any company or other person on his behalf, or any person claiming as assignee from or through the person liable under the declaration or any company or person acting on his behalf, and may from time to time make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.

(b) In Paragraph (a) “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

(4) The court shall not make a declaration under subsection (1) in respect of a person if it considers that—

(a) he took all reasonable steps to secure compliance by the company with [Equivalent of section 202 Companies Act 1990], or

(b) he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of a director of the company who has been formally allocated such responsibility, was charged with the duty of ensuring that that section was complied with and was in a position to discharge that duty.

(5) This section shall have effect notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made.

(6) In this section “officer”, in relation to a company, includes a person who has been convicted of an offence under Part A11, Head 000 or Head 88 [Equivalent of section 194 or 242 Companies Act 1990] in relation to a statement concerning the keeping of proper books of account by the company.

Explanatory note

Amended reenactment of section 204 Companies Act 1990

The reference to contributory in subsection (1) has been changed to a reference to member.

The reference to section 197 in subsection (6) has been deleted as that section has not been reenacted in the consolidated Bill.

PART A12 – DISSOLUTION AND REINSTATEMENT

Chapter 1 Interpretation

Head 1 Interpretation of Part A12

In this Part, unless the context otherwise requires—

“appropriate response” has the meaning assigned to it by Part A12, Head 4(2) [new];

“deadline date”, in relation to a process of strike-off has the meaning assigned to it by Part A12, Head 4(2) [new];

“incomplete liquidation induced strike-off” means a process of strike-off commenced in the circumstances specified in sub-paragraph (d) of section 3(1);

“non-residency induced strike-off” means a process of strike-off commenced in the circumstances specified in Part A12, Head 3(1)(c) [equivalent of section 43(15) of Companies (Amendment) (No.2) Act 1999];

“no returns induced strike-off” means a process of strike-off commenced in the circumstances specified in Part A12, Head 3(1)(a) [equivalent of sectoin 12(1) of Companies (Amendment) Act 1982];

“Revenue induced strike-off” means a process of strike-off commenced in the circumstances specified in Part A12, Head 3(1)(b) [equivalent of section 12A(1) of Companies (Amendment) Act 1982, as inserted by section 46 of Companies (Amendment) (No.2) Act 1999];

“no directors induced strike-off” means a process of strike-off commenced in the circumstances specified in Part A12, Head 3(1)(e) [equivalent of section 48 of Companies (Amendment) (No.2) Act 1999];

“strike off” means the process provided for in Part A12, Head 3 [new], Part A12, Head 4 [new], Part A12, Head 5 [new] and Part A12, Head 6 [new] and cognate words or phrases shall be construed accordingly.

“voluntary strike-off” means a process of strike-off pursuant to Part A12, Head 13 [new].

Explanatory note

This section is a new section. The definitions are all new definitions which have been compiled in this section in order to create a comprehensive list of the defined terms for the purposes of the Part.

Head 2 Instances of dissolution generally

In addition to the instances of dissolution provided for in Part A11, Head 117 [equivalent of section 249 of Companies Act 1963], Part A11, Head 118 [equivalent of section 263 of Companies Act 1963] and Part A11, Head 119 [equivalent of section 273 of Companies Act 1963] a company may be dissolved following a process of strike-off initiated by the Registrar.

Explanatory note

This section is a new section. It is intended to put the process of strike-off in context and to act as a sign-post for dissolution provisions in the context of winding-up.

Chapter 2 Strike-off and Its Consequences

Head 3 Instances of strike-off

A process of strike-off may be commenced in relation to a company in circumstances where:-

(a) the company does not, in respect of one or more years, make an annual return required by Part A6 Head No.000 [equivalent of section 125 of Companies Act 1963]; or,

(b) the Revenue Commissioners give a notice under subsection (3) of section 882 (inserted by the Finance Act, 1999) of the Taxes Consolidation Act, 1997, to the Registrar stating that the company has failed to deliver a statement which it is required to deliver under that section; or,

(c) the Registrar has reasonable cause to believe that PartA6, Head 10(1) [equivalent of section 43(1) of Companies (Amendment) (No.2) Act 1999], is not being complied with in relation to the company; or

(d) the company is being wound up and the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company are fully wound-up and the returns required to be made by the liquidator have not been made for a period of 6 consecutive months; or

(e) there are no persons recorded in the office of the Registrar as being directors of the company; or

(f) an application for voluntary strike-off has been received by the Registrar which satisfies the requirements of Part A12, Head 13.

Explanatory note

This section is a new section. It is a consolidated interpretation of several different strike-off provisions included in the Companies Acts 1963-2003. Some provisions have been newly inserted in accordance with the recommendations of the Company Law Review Group.

The initial notification procedure whereby the Registrar is required to send notice of the commencement of the strike-off process to the company has not been restated for each of the circumstances of strike-off envisaged here. Instead it is provided for, generally, in the next provision.

All references to the registrar of companies have been replaced by references to the “Registrar” and cross-references have been updated in accordance with the structure of the Bill.

Paragraph (a) is taken, in substance, from subsection 12(1) of the Companies (Amendment) Act 1982.

Paragraph (b) is taken, in substance, from subsection 12A(1) of the Companies (Amendment) Act 1982, as inserted by section 46 of the Companies (Amendment) (No.2) Act 1999.

Paragraph (c) is taken, in substance, from subsection 43(15) of the Companies (Amendment) (No.2) Act 1999. The reference to subsection 43(2) has been removed since that subsection has not been re-enacted as it is obsolete.

Paragraph (d) is taken, in substance, from subsection 311(3) of the Companies Act 1963.

Paragraph (e) is taken, in substance, from subsection 48 of the Companies (Amendment) (No.2) Act 1999. The Review Group was of the opinion that it was not necessary to continue to restrict the scope of the provision to situation arising in consequence of subsections 195(11A) or 195(11B) of the Companies Act 1963, as is the case in section 48 of the Companies (Amendment) (No.2) Act 1999. Such a situation arises where the company fails to send notification to the Registrar of the fact that a person has ceased to be a director or secretary, for whatever reason, despite that person’s request to the company to send notification of his resignation to the Registrar. Section 48 artificially deemed such circumstances to be sufficient evidence that the company had ceased to trade and could therefore be struck off the register under section 311 of the Companies Act 1963. The new provision instead elevates such a situation to be an independent ground for strike off in itself.

Paragraph (f) is new. It has been inserted in accordance with the recommendation of the Review Group to give the current system of voluntary strike off a statutory basis.

Head 4 Initial notification of commencement of strike-off process

(1) On commencement of every process of strike-off in relation to a company (other than a voluntary strike-off), the Registrar shall send an initial warning letter by registered post:

(a) to the company at its registered office;

(b) to such persons, if any, as are recorded in the office of the Registrar as being directors of the company.

(2) An initial warning letter shall contain:-

(a) a statement by the Registrar that he or she has commenced a process of strike-off in relation to the company which has the potential to lead to its name being struck off the register and the company being thereby dissolved;

(b) a statement of the circumstance which has led to the commencement of the process of strike-off;

(c) a warning that if the name of the company is so struck off the register, each person who was a director of the company at the time the warning letter is sent shall be at risk of having a disqualification order made against him or her pursuant to Part 000, Head 000 [equivalent of section 160(2)(h) of Companies Act 1990] except in the case of an incomplete liquidation-based strike-off;

(d) a stipulation of a deadline-date (which shall be at least 1 month subsequent to the date of the warning letter) and a statement that the next phase of the strike-off process may be commenced on or after that date and will consist of the publication of a notice in the CRO Gazette with a view to striking the name of the company off the register; and

(e) an invitation to the company to avert the continuance of the strike-off process by means of an appropriate response being:-

(i) in the case of a no-returns induced strike-off, the delivery to the Registrar on or before the deadline-date of all annual returns which are outstanding in relation to the company as required by Part A6, Head 000 [equivalent of section 125 of Companies Act 1963];

(ii) in the case of a Revenue induced strike-off, the delivery to the Revenue Commissioners on or before the deadline-date of the statement which the company is required to deliver under subsection (3) of Section 882 (inserted by the Finance Act, 1999) of the Taxes Consolidation Act, 1997;

(iii) in the case of a non-residency induced strike-off, the furnishing to the Registrar on or before the deadline-date of evidence that Part A6, Head 10(1) [equivalent of section 43(1) of Companies (Amendment) (No.2) Act 1999] is being complied with in relation to the company;

(iv) in the case of an incomplete-liquidation induced strike-off, the furnishing to the Registrar on or before the deadline-date of details of the identity of the liquidator together with up-to-date liquidation accounts; and

(v) in the case of a no-directors induced strike off the notification to the Registrar pursuant to Part II, Head 000 [equivalent of section 195(6) of Companies Act 1963] of the appointment of a person as director of the company.

Explanatory note

This section is a new section. It provides the structure of the initial notification procedure, whereby the Registrar is required to send notice of the commencement of the strike-off process to the company. It has not been restated for each of the circumstances of strike-off envisaged in the preceding section. Instead a general procedure has been provided for here.

The section is taken, in substance, from the procedure for notification as provided for in section 311 of the Companies Act 1963, section 12 of the Companies (Amendment) Act 1982, section 12A of the Companies (Amendment) Act 1982, as inserted by section 46 of the Companies (Amendment) (No.2) Act 1999, and section 43(15) of the Companies (Amendment) (No.2) Act 1999. Some provisions have been inserted in accordance with the recommendations of the Company Law Review Group in its First Report.

All references to the registrar of companies have been replaced by references to the “Registrar” and cross-references have been updated in accordance with the structure of the Bill.

Subsection (1)(b) has been newly inserted in accordance with the recommendation of the Review Group that, at the commencement of the strike-off process, the Registrar should write to the directors of the company at their home address (as per CRO records) enclosing a copy of the strike-off notice which is being sent to the company at its registered office.

Subsection (2)(b) has been newly inserted in accordance with the recommendation of Review Group. This subsection requires the initial warning letter to highlight the circumstances which led to the commencement of the strike-off process.

Subsection (2)(e)(v) has also been newly inserted in accordance with the recommendation of the Review Group. This subsection provides that, in the situation of a no-directors induced strike-off provided for in the preceding section, the initial notification shall invite the company to avert the strike-off process by means of the appointment of a director.

Head 5 Continuation of the strike-off process and further notifications

On or after the deadline-date the Registrar may publish in the CRO Gazette a notice-

(a) indicating the circumstances which form the basis for a process of strike-off having been commenced in relation to the company; and

(b) stating that at the expiration of one month from the date of that notice, the name of the company will be struck off the register, and the company thereby dissolved, unless within the said period of one month—

(i) in the case of a no-returns induced strike-off, there are delivered to the Registrar by the company all annual returns which are outstanding in relation to it;

(ii) in the case of a Revenue induced strike-off, there is delivered to the Revenue Commissioners the statement which the company is required to deliver under subsection (3) of Section 882 (inserted by the Finance Act, 1999) of the Taxes Consolidation Act, 1997;

(iii) in the case of a non-residency induced strike-off, evidence is furnished to the Registrar that Part A4, Head 11(1)[equivalent of section 43(1) of Companies (Amendment) (No.2) Act, 1999] is being complied with in relation to the company;

(iv) in the case of an incomplete-liquidation induced strike-off, the liquidation has been completed;

(v) in the case of a no-directors induced strike-off the appointment of a person as director of the company is notified to the Registrar pursuant to Part A4, Head 18 [equivalent of section 195(6) of Companies Act 1963].

Explanatory note

This section is a new section. It is taken, in substance, from section 311 of the Companies Act 1963, sections 12 of the Companies (Amendment) Act 1982, section 12A of the Companies (Amendment) Act 1982, as inserted by section 46 of the Companies (Amendment) (No.2) Act 1999, and section 43(15) of the Companies (Amendment) (No.2) Act 1999.

All references to the registrar of companies have been replaced by references to the “Registrar” and cross-references have been updated in accordance with the structure of the Bill. Furthermore, publication will occur in the CRO Gazette as opposed to Iris Oifiguil.

It provides for the continuation of the strike-off process by means of the publication of the notice period by the Registrar in the CRO Gazette. Following the expiration of this period, the company is struck-off unless the specified course of action is taken in respect of each type of strike-off.

Paragraph (b)(v) is new. Strike-off under section 48 of the Companies (Amendment) (No.2) Act 1999, where there are no registered directors of the company, is artificially achieved through the procedure under section 311 of the Companies Act 1963 for striking-off companies which have ceased to trade. Accordingly, preventing strike-off following the one month notice by the Registrar would have been achieved by proving that this was not the case. This new provision instead provides for the prevention of strike-off of the company, where there are no registered directors of the company, by means of the appointment of a person as director of the company.

Head 6 The act-of strike-off and its consequences

(1) Subject to subsections (2) and (3), at the expiration of the time mentioned in the notice, the Registrar may, unless there has been an appropriate response by the company, strike its name off the register, and shall publish notice thereof in the CRO Gazette and on the publication in the CRO Gazette of this notice, the company shall be dissolved.

(2) The liability, if any, of every director, officer and member of the company shall continue and may be enforced as if the company had not been dissolved.

(3) Nothing in subsections (1) or (2) shall affect the power of the court to wind up a company the name of which has been struck off the register.

(4) Except in the case of an incomplete-liquidation induced strike-off, the Registrar shall, upon striking the name of a company off the register pursuant to subsection (1), forthwith inform the Director of Corporate Enforcement of the names of the persons who were recorded in the Registrar’s records as having been the directors of the company at the date of the warning letter sent pursuant to Part A12, Head 4(1) [equivalent of section 311(1) of Companies Act 1963, sections 12(1) and 12A(1) of the Companies (Amendment) Act 1982 and section 43(15)(a) of the Companies (Amendment) (No.2) Act 1999].

(5) The Director of Corporate Enforcement may require the directors of a company which has been dissolved pursuant to subsection (1) to produce by a specified date a statement as to the affairs of the company, in such form as may be prescribed, verified by affidavit, and showing the particulars of its assets, debts and liabilities, the names and residence of its creditors, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed or as the Director of Corporate Enforcement may reasonably require.

(6) The court may, on the application of the Director of Corporate Enforcement, require a director of a company who has made a statement under subsection (5) to appear before it and answer on oath any question pertaining to the content of the statement.

(7) A person who fails to comply with a requirement under subsection (5) shall be guilty of an offence.

Explanatory note

This section is a new section. It states when the company is struck-off and elaborates on the consequences thereof. The section is comprised of amended re-enactments of various provisions of the Companies Acts 1963-2003 and new provisions inserted in accordance with the recommendations of the Company Law Review Group in its First Report.

Subsection (1) is an amended re-enactment of subsection 311(5) of the Companies Act 1963.

Subsection (2) is a re-enactment of subsection 311(6) of the Companies Act 1963.

Subsection (3) is an amended re-enactment of subsection 311(7) of the Companies Act 1963.

Subsection (4) is a new provision inserted in accordance with the recommendation of the Review Group in its First Report. It was recommended that in circumstances of strike-off (excluding incomplete-liquidation strike-off), the Registrar should be required to notify the Director of Corporate Enforcement of the names of the persons who were recorded in the CRO as being the directors of the company as at the date of initiation of the strike-off process. The purpose of this is to facilitate the discretion of the Director of Corporate Enforcement to apply to the court for the restriction or disqualification of directors, or take an action against them for fraudulent or reckless trading, in relevant circumstances.

Subsections (5), (6) and (7) are newly inserted in accordance with the recommendations of the Review Group in its First Report. The Review Group gave consideration as to what extent and in what circumstances the principle of limited liability should be deemed to be superceded by the personal liability of directors in the event of strike-off. This would be achieved under the fraudulent and reckless trading provisions, where necessary.

The Review Group therefore recommended that it would be important to give the Director of Corporate Enforcement powers such that, in the event of a strike-off, he could require a director of a company to produce a statement of affairs as at a date preceding the commencement of the strike-off of the company. Upon examination of such statement the Director of Corporate Enforcement would then decide whether an investigation and subsequent application to court for disqualification or loss of limited liability was warranted.

The requirement to produce a statement of affairs of the company is analogous to the examination as to the solvency status of a company under section 183A of the Companies Act 1963, as inserted by section 40 of the Company Law Enforcement Act 2001, and the requirement to file a statement of the affairs of the company under section 224 of the Companies Act 1963 where the company is being wound up.

Head 7 Post-Dissolution Capacity

(1) Notwithstanding Part A12, Head 6(1) [equivalent of section 311(5) of Companies Act 1963] but subject to subsection (2), a company, the name of which has been struck-off the register, shall be deemed not to have been dissolved in the context of such actions, steps or processes which are required to be taken, and are stated to be being so taken, for the purpose of enabling or facilitating an intended application under Part A12, Head 8 [equivalent of section 311A of Companies Act 1963, as inserted by section 246 of Companies Act 1990] and Part A12, Head 9 [equivalent of section 311 of Companies Act 1963].

(2) Subsection (1) shall not be construed to authorise the dealing with, or exercise of control over, any property which has become the property of the State pursuant to Part III of the State Property Act 1954.

Explanatory note

This section is a new section which implements the recommendations of the Company Law Review Group in its First Report. The Review Group noted that where a company has been struck-off the register and purports to be re-instated, one of the difficulties facing the directors and auditors of the company is that, although an application may be successful and the company will be deemed to have never been struck-off, at the time of the purported re-instatement the company will not, in fact, exist.

The Review Group accepts that it is implicit that the company has a “shadow existence” for the purpose of achieving restoration. It recommended, however, that such an implicit position be made explicit in the restoration process. Accordingly, all actions necessary for the restoration process may be taken on the basis that, for this purpose only, as if the company has, in fact, an existence.

Chapter 3 Restoration of Companies to the Register

Head 8 Administrative Restoration

(1) Without prejudice to the provisions of Part A12, Head 10 [equivalent of section 311(8) of Companies Act 1963 and section 12B of Companies (Amendment) Act 1982, as inserted by section 46 of Companies (Amendment) (No.2) Act 1999], if a member or officer of a company feels aggrieved by having been struck off the register, the Registrar, on an application made in the prescribed form before the expiration of twelve months after the publication in the CRO Gazette of the notice striking the company name from the register, may restore the name of the company to the register where, within the said period of twelve months, the Registrar:-

(a) has received all annual returns outstanding, if any, from the company;

(b) has been furnished by the applicant with confirmation from the Revenue Commissioners that no statement which the company is required to deliver under subsection (3) of Section 882 (inserted by the Finance Act 1999) of the Taxes Consolidation Act 1997 remains undelivered;

(c) has received confirmation from the Minister for Finance that he has no objection to the name of the company being restored to the Register pursuant to this section;

(d) is satisfied that PartA4, Head 11(1) [section 43(1) of Companies (Amendment)(No.2) Act 1999] is being complied with in relation to the company; and

(e) is satisfied that no notification required by Part A2 Head 18 [equivalent of section 195(6) of Companies Act 1963] remains outstanding in relation to the company.

(2) Upon the registration of an application under subsection (1) and on payment of such fees as may be prescribed, the company shall be deemed to have continued in existence as if its name had not been struck off.

(3) Subject to any order made by the court in the matter, the restoration of the name of a company to the register under this section shall not affect the rights and liabilities of the company in respect of any debt or obligation incurred, or any contract entered into by, to, with or on behalf of, the company between the date of such restoration.

Explanatory note

This section is an amended re-enactment of section 311A of the Companies Act 1963, as inserted by section 246 of the Companies Act 1990 and amended by section 50 of the Companies (Amendment) (No.2) Act 1999.

Subsection (1) is an amended re-enactment of subsection 311A(1) of the Companies Act 1963. A lacuna exists under section 311A(1) of the Companies Act 1963 whereby administrative restoration is only possible following the delivery of outstanding annual returns to the Registrar, even where the strike-off occurred for reasons other than the failure to make annual returns to the Registrar i.e.one of those grounds now listed in section 3 of this Part.

For this reason the requirements are now stated cumulatively, including those which were not the basis of the original strike-off.

The application for restoration may no longer be made by “a company” that feels aggrieved by the strike-off, as is the case under subsection 311A(1) of the Companies Act 1963. It is now to be made by a member or officer of the company who feels aggrieved by the compa\ny having been struck-off the register.

Subsection (1)(c) has been newly inserted to deal with the anomaly whereby at present the Minister for Finance becomes unknowingly divested of property which was earlier vested in him by virtue of the State Property Act 1954. It has been drafted in terms such that the restoration will be effected unless there is some objection by the Minister for Finance. In the event of such objection by the Minister for Finance, the issue should be dealt with by the court under section 9 of this Part.

Subsections (2) and (3) are re-enactments subsection 311A(2) and (3) of the Companies Act 1963 respectively.

Head 9 Restoration by the court

(1) If any person who, but for the dissolution of the company, would have been a member, officer or creditor of the company is aggrieved by the company having been struck off the register of companies, the court, on an application made by the member, officer or creditor before the expiration of 20 years from the publication in the CRO Gazette of the notice referred to in Part A12, Head 6(1) [equivalent of section 311(5) of Companies Act 1963], may, if satisfied that it is just that the company be restored to the register, order that the name of the company be restored to the register, and, subject to subsection (3) of this section, upon an office copy of the order being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off or make such other order as seems just (and such other order is referred to in subsection (3) of this section as an “alternative order”).

(2)

(a) An application under subsection (1) shall be made on notice to the Registrar, the Revenue Commissioners and the Minister for Finance.

(b) In the case of an application by a creditor, the application shall additionally be made on notice:-

(i) to such officers of the company whose identities are known, or ought reasonably to be known, to the creditor; and,

(ii) to such other members or officers of the company as the Registrar, the Revenue Commissioners and/or the Minister for Finance, upon being notified of the application, may seek to have joined as notice parties.

(3) An alternative order may, if the court considers it appropriate that it should do so, include a provision that, as respects a debt or liability incurred by, or on behalf of, the company during the period when it stood struck off the register, the officers of the company or such one or more of them a is or are specified in the order shall be liable for the whole or a part (as the court thinks just) of the debt or liability.

(4) The court shall, unless cause is shown to the contrary, include in an order under subsection (1) of this section, being an order made on the application of a member or officer of the company, a provision that the order shall not have effect unless, within a specified period—

(a) all outstanding annual returns required by Part A6, Head 000 [equivalent of section 125 of Companies Act 1963] are delivered to the Registrar;

(b) all outstanding statements required by Section 882 of the Taxes Consolidation Act 1997 in relation to the company are delivered to the Revenue Commissioners;

(5) In making an order under subsection (1) of this section, being an order that is made on the application of a creditor of the company, the Court shall:-

(a) unless cause is shown to the contrary, direct that one or more specified members or officers of the company shall, within a specified period—

(i) deliver all outstanding annual returns required by Part A6, Head 000 [equivalent of section 125 of the Companies Act 1963] to the Registrar; and,

(ii) deliver all outstanding statements or returns required by Section 882 of the Taxes Consolidation Act 1997 in relation to the company to the Revenue Commissioners;

(iii) deliver to the Registrar any notifications required by PartA4, Head 18 [equivalent of section 195(6) of Companies Act 1963]

(b) award the applicant the costs of the application against the company, unless to do so would conflict with the constitutional rights of any person (in which case the court shall make such order as to costs as it would have made if this sub-paragraph had not been enacted).

(6) The court, on an application by the Registrar (on notice to each person who, to his knowledge, is an officer of the company) before the expiration of 20 years from the publication in the CRO Gazette of the notice referred to in Part A12, Head 6(1) [equivalent of section 12(3) of Companies (Amendment) Act 1982 and section 12A(3) of Companies (Amendment) Act 1982, as inserted by section 46 of Companies (Amendment)(No.2) Act 1999], may, if satisfied that it is just that the company be restored to the register, order that the name of the company which has been struck off the register under the said section 6(1) be restored to the register and, upon the making of the order by the court, the company shall be deemed to have continued in existence as if its name had not been struck off; and the court may by the order give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off or make such other order as seems just (and such other order may, if the court considers it appropriate that it should do so, include a provision of the kind referred to in subsection (3) of this section.

(7)

(a) Notwithstanding Part 000, Head 000 [equivalent of section 2(1) of Companies Act 1963], in the case of an application under this section that is made by a creditor of the company or by the Registrar, “the court”, for the purposes of this section, means either the High Court or the Circuit Court

(b) An application under this section to the Circuit Court by a creditor of the company concerned shall be made to the judge of the Circuit Court for the circuit in which the registered office of the company was, immediately before it was struck off the register, situated or, if no office was registered at that time, for the circuit in which the creditor resides or, in case the creditors reside outside the State, for the Dublin Circuit.

(c) An application under this section to the Circuit Court by the Registrar shall be made to the judge of the Circuit Court for the Dublin Circuit

Explanatory note

This section is a new section. It is comprised of various provisions of the Companies Acts 1963-2003. Some provisions have been newly inserted in accordance with the recommendations of the Company Law Review Group in its First Report.

Subsection (1) is taken in substance from subsection 311(8) of the Companies Act 1963 and subsection 12B(3) of the Companies (Amendment) Act 1982, as inserted by section 46 of the Companies (Amendment) (No.2) Act 1999. An application is now allowed to be brought by “any member, officer or creditor who is aggrieved by the company having been dissolved”. This accords with section 12B of the Companies (Amendment) Act 1982 as opposed to subsection 311A(8) of the Companies Act 1963 which provided that an application may be brought by “the company, or any member or creditor thereof, who feels aggrieved by the company having been struck off the register”.

Under section 311(8) of the Companies Act 1963 application for restoration was made on notice only to the Registrar and, in practice, to the Minister for Finance. Section 12B of the Companies (Amendment) Act 1982 also required that notice be given to the Revenue Commissioners. It is provided for all three to be statutory notice parties in all instances in a later subsection.

Restoration under subsection 311(8) of the Companies Act 1963 is contingent on proof that the company was actually trading at the time of strike-off or otherwise that it is just that the company be restored to the register. However section 12B of the Companies (Amendment) Act 1982 requires simply that it be just that the company be restored to the register. The option for the “just ground” simpliciter has been preferred here.

Subsection (2) is new. Subsection (2)(a) provides for the Registrar, the Minister for Finance and the Revenue Commissioners to be statutory notice to parties in all instances of court restoration. The requirement to give notice the Registrar was provided for in section 311(8) of the Companies Act 1963 and to notify the Revenue Commissioners was in section 12B of the Companies (Amendment) Act 1982. The process of notifying the Minister for Finance had no statutory basis previously – it had merely developed in practice.

Subsection (2)(b) is new and is designed to ensure that, in a creditor’s application, the parties who ought to be subject to the restoration order are notified of the application.

Subsection (3) is a re-enactment of subsection 311(8A) of the Companies Act 1963 and subsection 12B(4) of the Companies (Amendment) Act 1982. It is presumed that persons potentially entitled to benefit under such order (creditors) would be afforded an opportunity to be before the court and the Rules of Court (e.g. advertisement of a petition) would adequately deal with such a scenario.

Subsection (4) is an amended re-enactment of subsection 12B(5) of the Companies (Amendment) Act 1982. It is now provided that there must be compliance with all the circumstances that can justify strike-off and not merely the circumstances that led to the company being struck-off the register. Furthermore, the “one-month period” is replaced with a “specified period”.

Subsection (5)(a) is an amended re-enactment of subsection 12(b)(6) of the Companies (Amendment) Act 1982. It has been amended in light of the fact that that there must be compliance with all the circumstances that can justify strike-off and not merely the circumstances that led to the company being struck-off the register. Accordingly paragraph (iii) has been newly inserted.

Subsection (5)(b) has been newly inserted in accordance with the recommendations of the Review Group in its First Report concerning the award of costs to the applicant against the company.

Subsection (6) is a slightly amended re-enactment of subsection 12B(7) of the Companies (Amendment) Act 1982.

Subsection (7) is an amended re-enactment of subsection 12B(9) of the Companies (Amendment) Act 1982. It has been amended to clarify the uncertainty which arose following the Supreme Court decision in Re Deauville Communication Worldwide Ltd. (15th March 2002, unreported). It was held by the Supreme Court in that case that although the language used in section 12B(9) of the Companies (Amendment) Act 1982 was capable of being construed so as to make it obligatory that an application for restoration be brought in the Circuit Court as opposed to the High Court, a creditor was still permitted to bring an application for restoration was in the High Court.

Head 10 Registration of Restoration Orders

On the making of an order by the court providing for the name of a company to be restored to the register, or the declaring of a dissolution to have been void, the relevant registrar of the Court shall deliver to the Registrar for registration an office copy of such order within 21 days after the date of perfection thereof.

Explanatory note

This section is a new section inserted in accordance with the view of the Company Law Review Group. It is designed to prevent instances, which have occurred in practice, whereby people have delayed registering restoration orders for periods of months and, occasionally, even years. Such a practice undermines the accuracy of the records for third parties who cause searches to be made in the CRO.

Head 11 Disclosure of information

If the question of whether a statement, which a company has failed to deliver to the Revenue Commissioners in accordance with section 882(3) of the Taxes Consolidation Act, 1997, has or has not been subsequently delivered to them falls to be determined for the purpose of the exercise by the Registrar of any of the powers under this Part, the Revenue Commissioners may, notwithstanding any obligations as to secrecy or other restriction upon disclosure of information imposed by or under statute or otherwise, disclose to the Registrar any information in their possession required by the Registrar for the purpose of that determination.

Explanatory note

This section is an amended re-enactment of section 12D of the Companies (Amendment) Act 1982, as inserted by section 46 of the Companies (Amendment) (No.2) Act 1999. References to the registrar of companies have been replaced by references to the “Registrar” and cross-references have been updated in accordance with the structure of the Bill

Head 12 Devolution of property of struck-off company; determination of claims by the State to such property; waiver of rights of the State to such property

(1) Where the name of a company is struck off the register pursuant to this Part, all property which was vested in or held in trust for such company immediately before its dissolution (other than property held by such company upon trust for another person) shall, immediately upon such dissolution, become and be the property of the State, subject however to any encumbrances or charges affecting the property immediately before such dissolution;

(2) Subsection (1) of this section shall have effect subject to and without prejudice to any restoration by the Registrar under Part A12, Head 8 [equivalent of section 311A of Companies Act 1963] or any order made by a court under Part A12, Head 9 [equivalent of section 311 of Companies Act 1963].

(3)

(a) Whenever the Minister for Finance claims that any property (including land) has become the property of the State by virtue of subsection (1), the Minister may, if he so thinks fit, apply to the High Court for an order declaring that such property has so become the property of the State.

(b) Every application to the High Court under paragraph (a) of this subsection shall in the first instance be made ex parte and the High Court shall thereupon give such directions as it thinks proper in regard to service or publication of notice of such application and shall not finally determine such application unless or until the directions so given have been complied with and such time as the Court shall consider reasonable in the circumstances has elapsed since such compliance.

(c) An order made by the High Court on an application under paragraph (a) of this subsection declaring that any property has become the property of the State by virtue of subsection (1) shall (subject to appeal to the Supreme Court) be conclusive evidence binding on all persons whatsoever (whether they had or had not notice of such an application) that the said property has so become the property of the State in accordance with such declaration.

(d) Whenever any property of whatsoever nature or kind has becomes the property of the State by virtue of subsection (1), the Minister for Finance may, if he thinks proper so to do, waive, in whole or in part and in favour of such person and upon such terms (whether including or not including the payment of money) as he thinks proper having regard to all the circumstances of the case, the right of the State to such property.

Explanatory note

This section is a new section. These provisions have been imported from the State Property Act 1954 for the purpose of clarity and completeness in accordance with the view of the Company Law Review Group.

Subsection (1) is taken, in substance, from subsections 28(1) and (2) of the State Property Act 1954.

Subsection (2) is taken, in substance, from subsection 28(3) of the State Property Act 1954. It has been amended to include references to administrative restoration.

Subsection (3)(a)-(c) is taken, in substance, from section 30 of the State Property Act 1954.

Subsection (3)(d) is taken, in substance from section 31 of the State Property Act 1954.

Chapter 4 Voluntary Strike-Off

Head 13 Voluntary Strike-off

(1) A company may apply to the Registrar to have its name struck-off the register where it satisfies the following conditions:

(a) The company has, within the preceding period of three months, resolved by special resolution that:

(i) by reason of not carrying on business, it should seek to be dissolved by means of a voluntary strike-off;

(ii) pending the determination or withdrawal of its application for voluntary strike-off the company will not carry on any business.

(b) All outstanding annual returns required by Part A6, Head 000 [equivalent of section 125 Companies Act 1963] or Part A6, Head 000 [equivalent of section 126 Companies Act 1963] have been delivered to the Registrar together with the related fees and penalties, if any;

(c) A document in the prescribed form has been delivered to the Registrar, signed by each of the company’s directors to certify that, as at the date of application to the Registrar, the company has no assets and no liabilities (including any contingent or prospective liabilities);

(d) The company has caused the Registrar to be furnished with confirmation from the Revenue Commissioners

that they have no objection to the company being the subject of a voluntary strike-off;

(e) The company has satisfied the Registrar that, within the preceding period of one month, it has caused an advertisement in the prescribed form to be published in at least one daily newspaper circulating in the State;

(2) The Registrar shall not strike a company off under this section until after the expiration of 3 months from the publication by him or her in the CRO Gazette of a notice—

(a) stating that he may exercise his power under this section in relation to the company, and

(b) inviting any person to show cause why he should not do so.

(3) Where the Registrar strikes a company off under this section, he shall publish notice of that fact in the CRO Gazette.

(4) On the publication in the CRO Gazette of a notice under subsection (3), the company to which the notice relates is dissolved.

(5) The liability, if any, of every director, officer and member of such a company shall continue and may be enforced as if the company had not been dissolved.

(6) Nothing in this section affects the power of the court to wind up a company, the name of which has been struck off the register.

Explanatory note

This section is a new section governing the process for voluntary strike-off of companies. Voluntary strike-off is available to companies under subsection 311(1) of the Companies Act 1963. This involves the company taking the initiative to be struck-off by approaching the Registrar to exercise his powers under subsection 311(1) by being tendered “reasonable cause to believe that the company is not carrying on business”.

In practice, the Registrar has made it clear that this is a discretionary power which he is prepared to use only if a director of a company furnishes a statement to the effect that the company has ceased trading or has never traded, that it has no assets or liabilities and that it wishes that its name be struck off the register.

In addition, such a statement must be accompanied by all outstanding annual returns (including accounts, filing fees and late filing fees where applicable), a letter of no objection from the Revenue Commissioners and a copy of an advertisement in the prescribed form published in one daily newspaper indicating the intention to have the company struck off the register.

The Company Law Review Group took note of such procedure and recommended that it be put on a statutory basis, albeit with some amendments.

Subsection (1) sets out the conditions to be satisfied before a company may apply to the Registrar to have the company struck-off. It is now required that the company pass a special resolution to such effect within the 3 months preceding the application. All the other conditions prescribed in subsection (1) are those used in practice set out previously.

Subsection (2) provides that the Registrar shall not strike-off the company until three months after the publication of a notice, in the CRO Gazette, of his intention to strike that company off the register which invites any person to show why he should not do so.

Subsection (3) requires the Registrar to publish a notice of the strike-off in the CRO Gazette and subsection (4) provides that the company is dissolved on the date of such publication, as is the case in other instances of strike-off.

Subsection (5) is a safety mechanism whereby any liability of the directors, officers and members of the company shall continue, following the strike-off, as if the company had never been dissolved.

Subsection (6) is also a safety mechanism whereby the court retains the power to order the winding up of a company which has been struck off the register.

PART A13 – COMPLIANCE, INVESTIGATION AND ENFORCEMENT

Chapter 4 Disqualification and Restriction of Directors and Other Officers

Head 29 Application of Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990]

(1) Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] applies to any company if—

(a) at the date of the commencement of its winding-up it is proved to the court, or

(b) at any time during the course of its winding-up the liquidator of the company certifies, or it is otherwise proved, to the court,

that it is unable to pay its debts (within the meaning of Part A11, Head 10[equivalent of section 214 of the Companies Act 1963]).

(2) Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] applies to any person who was a director of a company to which this section applies at the date of, or within 12 months prior to, the commencement of its winding-up.

(3) Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] shall not apply to a company which commences to be wound up before 1st August 1991.

(4) For the purposes of this Chapter:

“disqualification order” shall have the same meaning and effect as in Part A13, Head No.39 [equivalent of section 159 of the Companies Act 1990];

“disqualification undertaking” means an undertaking by any person that, for a period specified in the undertaking that person shall not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way, whether directly or indirectly, concerned or take part in the promotion, formation or management of any company or any society registered under the Industrial and Provident Societies Acts, 1893 to 1978;

“a person to whom Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] applies” shall be construed as a reference to a person who has given such a restriction undertaking;

“restriction undertaking” means an undertaking by any person that, for a period of 5 years from the date of the undertaking that person shall not be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in Part A13, Head No.30 [equivalent of section 150(3) of the Companies Act 1990];

(5) This Chapter applies to shadow directors as it applies to directors.

Explanatory note

This section is an amended re-enactment of section 149 Companies Act 1990. All cross-references have been updated in accordance with the structure of the Bill.

Subsection 149(4) of the Companies Act 1990 provided has not been included. The reason for this is that Group A only applies to the CLS and overseas companies formed outside the State (registered under Part XI of the Companies Act 1963) will now be dealt with In Group B.

A new subsection (4) has been inserted. These defined terms are made necessary by the introduction of a means by which a person may give a voluntary undertaking to be restricted or disqualified. This process was introduced in accordance with the view of the Company Law Review Group following consideration of similar UK provisions (i.e. the Company Directors Disqualification Act 1986 (UK) as amended by the Insolvency Act 2000 (UK).

The introduction of this process is aimed primarily at reducing unnecessary use of resources in the making of court applications (both resources of the parties to the action and of the Courts Service). Such voluntary undertakings also had the potential to restrict or disqualify unfit directors in a more expeditious manner. Following consideration of the UK process, the Review Group observed that approximately 80% of disqualifications were made by way of this procedure. Furthermore, there was no obvious increase in the numbers being disqualifed and the costs involved in disqualifying directors by undertaking were substantially less following the introduction of this procedure.

Head 30 Restriction

(1) The court shall, unless it is satisfied as to any of the matters specified in subsection (2), declare that a person to whom Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] applies shall not, for a period not exceeding five years, be appointed or act in any way, whether directly or indirectly, as a director or secretary or be concerned or take part in the promotion or formation of any company unless it meets the requirements set out in subsection (3); and, in subsequent provisions of this

Chapter [equivalent of Part VII of the Companies Act 1990], the expression “a person to whom Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] applies” shall be construed as a reference to a person in respect of whom such a declaration has been made.

(2) The matters referred to in subsection (1) are—

(a) that the person concerned-

(i) has acted honestly and responsibly in relation to the conduct of the affairs of the company; and

(ii) has, when requested to do so by the liquidator, cooperated with the liquidator insofar as he may reasonably be expected to do so in connection with the conduct of the winding up; and

(iii) there is no other reason why it would be just and equitable that he should be subject to the restrictions imposed by this section, or

(b) subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a financial institution in connection with the giving of credit facilities to the company by such institution, provided that the institution in question has not obtained from any director of the company a personal or individual guarantee of repayment to it of the loans or other forms of credit advanced to the company, or

(c) subject to paragraph (a), that the person concerned was a director of the company solely by reason of his nomination as such by a venture capital company in connection with the purchase of, or subscription for, shares by it in the first-mentioned company.

(3) The requirements specified in subsection (1) are that—

(a) the company shall have an allotted share capital, the par value of which shall not be less than €70,000,

(b) each allotted share to an aggregate amount not less than the amount referred to in paragraph (a) shall be fully paid up, including the whole of any premium thereon, and

(4) Where a court makes a declaration under subsection (1), a prescribed officer of the court shall cause the Registrar to be furnished with prescribed particulars of the declaration in such form and manner as may be prescribed.

(5) An application for a declaration under subsection (1) may be made to the court by the Director of Corporate Enforcement, a liquidator or a receiver.

(6) The court, in hearing an application for a declaration under subsection (1) from the Director of Corporate Enforcement, a liquidator or a receiver, may order that the directors against whom the declaration is made shall bear the costs of the application and any costs incurred by the applicant in investigating the matter.

(7) In this section—

“financial institution” means—

(a) a licensed bank, within the meaning of Part V, Head No.1 [equivalent of section 25 of the Companies Act

1990], or

(b) a company the ordinary business of which includes the making of loans or the giving of guarantees in connection with loans, and

“venture capital company” means a company prescribed by the Minister the principal ordinary business of which is the making of share investments.

Explanatory note

This section is an amended re-enactment of section 150 Companies Act 1990, as amended by section 41 of the Company Law Enforcement Act 2001. All cross-references have been updated in accordance with the structure of the Bill. References to the registrar of companies have been have been replaced by references to the Registrar and references to the Director have been replaced by references to the Director of Corporate Enforcement.

Subsection (1) has been amended by replacing the period of restriction of 5 years to ” a period not exceeding 5 years”. The effect of this amendment is that the court may now order restrictions for a period of less than 5 years, whereas under section 150 of the Companies Act 1963 the period of restriction was a mandatory 5 year period.

Head 31 Duty of liquidator under Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990]

(1) Where it appears to the liquidator of a company to which under Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] applies that the interests of any other company or its creditors may be placed in jeopardy by the relevant matters referred to in subsection (2) the liquidator shall inform the court of his opinion forthwith and the court may, on receipt of such report, make whatever order it sees fit.

(2) The relevant matters are that a person to whom Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] applies is appointed or is acting in any way, whether directly or indirectly, as a director or is concerned or is taking part in the promotion or formation of such other company as is referred to in subsection (1).

Explanatory note

This section is a slightly amended re-enactment of section 151 Companies Act 1990. All cross-references have been updated in accordance with the structure of the Bill and the particulars of the fine in subsection (3) have not been included as they will be provided for later in the Bill.

Head 32 Relief

(1) A person to whom Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] applies may, within not more than one year after a declaration has been made in respect of him under that section, apply to the court for relief, either in whole or in part, from the restrictions referred to in that section or from any order made in relation to him under Part A13, Head No.31 [equivalent of section 151 of the Companies Act 1990] and the court may, if it deems it just and equitable to do so, grant such relief on whatever terms and conditions it sees fit.

(2) Where it is intended to make an application for relief under subsection (1) the applicant shall give not less than 14 days’ notice of his intention to the liquidator (if any) of the company the insolvency of which caused him to be subject to this Chapter.

(3) On receipt of a notice under subsection (2), the liquidator shall forthwith notify such creditors and contributories of the company as have been notified to him or become known to him, that he has received such notice.

(4) On the hearing of an application under this section the liquidator or any creditor or contributory of the company, the insolvency of which caused the applicant to be subject to this Chapter may appear and give evidence.

Explanatory note

This section is a slightly amended re-enactment of section 152 Companies Act 1990. All cross-references have been updated in accordance with the structure of the Bill.

Subsection (2) has been amended insofar as a new sub-paragraph has been inserted in accordance with the view of the Company Law Review Group. The additional requirement is that “… the person concerned… has, when requested to do so by the liquidator, cooperated with the liquidator insofar as he may reasonably be expected to do so in connection with the conduct of the winding up…”. The reason for the insertion of this provision is to promote greater co-operation by the directors and other officers with the liquidator in the event of the company being wound up.

Subsection (3) has been amended by replacing nominal value with par value and the removal of subparagraph (3)(a)(i) as PLC’s will be dealt with later in Part B2 of the Bill. The required par value of the allotted share capital of the company has been converted into euro and rounded upwards to €70,000.The language of subsection (3)(a) has also been amended to clarify the fact that a company may not escape this capitalisation requirement by reason of not having a share capital.

Head 39 Interpretation of Part A13, Head No.39 and Head No.40 [equivalent of Part VII, Chapter 2 of the Companies Act 1990] and Part A13, Head No.41 to Head No.49 [equivalent of Part VII, Chapter 3 of the Companies Act 1990]

In Part A13, Head No.39 and Head No.40 [equivalent of Part VII, Chapter 2 of the Companies Act 1990] and Part A13, Head No.41 to Head No.49 [equivalent of Part VII, Chapter 3 of the Companies Act 1990], except where the context otherwise requires—

“the court” means the High Court except in relation to a disqualification order made by a court of its own motion under Part A13, Head No.40(4), paragraph (a), (b), (c), (d) or (f) [equivalent of section 160(2)(a), (b), (c), (d) or (f) of the Companies Act 1990], in which case it includes any court;

“default order” means an order made against any person under Part 000, Head No.000 [equivalent of section 371 of the Companies Act 1963] by virtue of any contravention of or failure to comply with any relevant requirement (whether on his own part or on the part of any company);

“disqualification order” means an order under this Chapter [equivalent of Part VII of the Companies Act 1990] that the person against whom the order is made shall not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way, whether directly or indirectly, concerned or take Part in the promotion, formation or management of any company, or any society registered under the Industrial and Provident Societies Acts 1893 to 1978, or

“officer” in relation to any company, includes any director, shadow director or secretary of the company;

“relevant requirement” means any provision of this Act which requires or required any return, account or other document to be filed with, delivered or sent to, or notice of any matter to be given to, the Registrar.

Explanatory note

This section is a slightly amended re-enactment of section 159 Companies Act 1990. All cross-references have been updated in accordance with the structure of the Bill and references to the registrar of companies have been replaced by references to the Registrar.

The interpretation of “company” has been deleted given that this Part applies to the CLS.

Paragraph (b) of the interpretation of disqualification order has been deleted given that section 184 of the Companies Act 1963 has been repealed by section 6(1) of the Companies Act 1990.

Head 40 Disqualification of certain persons from acting as directors or auditors of or managing companies

(1) Where a person is convicted on indictment of any indictable offence in relation to a company, or involving fraud or dishonesty, then during the period of five years from the date of conviction or such other period as the court, on the application of the prosecutor and having regard to all the circumstances of the case, may order—

(a) he shall not be appointed or act as an auditor, director or other officer, receiver, liquidator or examiner or be in any way, whether directly or indirectly, concerned or take Part in the promotion, formation or management of any company or any society registered under the Industrial and Provident Societies Acts, 1893 to 1978;

(b) he shall be deemed, for the purposes of this Act, to be subject to a disqualification order for that period.

(2) Without prejudice to subsection (1), a person who –

(a) fails to comply with Part 000, Head No.000 [equivalent of section 3A(1) of the Companies (Amendment) Act 1982], or Part A4, Head No.18(8) [equivalent of section 195(8) of the Companies Act 1963], or

(b) in purported compliance with the said Part 000, Head No.000 [equivalent of section 3A(1) of the Companies (Amendment) Act 1982], or Part A4, Head No.18(8) [equivalent of section 195(8) of the Companies Act 1963], permits the first-mentioned statement in the said Part 000, Head No.000 [equivalent of section 3A(1) of the Companies (Amendment) Act 1982], or, as the case may be, the first-mentioned notification in the said Part A4, Head No.18(8) [equivalent of section 195(8) of the Companies Act 1963], to be accompanied by a statement signed by him which is false or misleading in a material respect,

shall, upon the delivery to the Registrar of the said statement or notification or, as the case may be, the said statement or notification accompanied by a statement as aforesaid, be deemed, for the purposes of this Act, to be subject to a disqualification order for the period referred to in subsection (3).

(3) The period mentioned in subsection (2) is –

(a) so much as remains unexpired, at the date of the delivery mentioned in that subsection, of the period for which the person concerned is disqualified under the law of the other state referred to in Part 000, Head No.000 [equivalent of section 3A(1) of the Companies (Amendment) Act 1982] 1982, or Part A4, Head No.18(8) [equivalent of section 195(8) of the Companies Act 1963] from being appointed or acting in the manner described therein, or

(b) if the person is so disqualified under the law of more than one other such state and the portions of the respective periods for which he is so disqualified that remain unexpired at the date of that delivery are not equal, whichever of those unexpired portions is the greatest.

(4) Where the court is satisfied in any proceedings or as a result of an application under this section that—

(a) a person has been guilty, while a promoter, officer, auditor, receiver, liquidator or examiner of a company, of any fraud in relation to the company, its members or creditors; or

(b) a person has been guilty, while a promoter, officer, auditor, receiver, liquidator or examiner of a company, of any breach of his duty as such promoter, officer, auditor, receiver, liquidator or examiner; or

(c) a declaration has been granted under Part A11, Head 48 [equivalent of section 297A of the Companies Act 1963] in respect of a person; or

(d) the conduct of any person as promoter, officer, auditor, receiver, liquidator or examiner of a company, makes him unfit to be concerned in the management of a company; or

(e) in consequence of a report of inspectors appointed by the court or the Minister under this Act, the conduct of any person makes him unfit to be concerned in the management of a company; or

(f) a person has been persistently in default in relation to the relevant requirements; or

(g) a person has been guilty of two or more offences under Part A6 Head No.000 [equivalent of section 202(10) of the Companies Act 1990]; or

(h) person was a director of a company at the time of the sending, after the 4th August 2001, of a letter under PartA12, Head No.3(a) [equivalent of section 12(1) of the Companies (Amendment) Act 1982], to the company and the name of which, following the taking of the other steps under that section consequent on the sending of that letter, was struck off the register under Part A12, Head No.6 [equivalent of section 12(3) of the Companies (Amendment) Act 1982]; or

(i) a person is disqualified under the law of another state (whether pursuant to an order of a judge or a tribunal or otherwise) from being appointed or acting as a director or secretary of a body corporate or an undertaking and the court is satisfied that, if the conduct of the person or the circumstances otherwise affecting him that gave rise to the said order being made against him had occurred or arisen in the State, it would have been proper to make a disqualification order otherwise under this subsection against him;the court may, of its own motion, or as a result of the application, make a disqualification order against such person for such period as it sees fit.

(5)

(a) For the purposes of subsection (4)(f) the fact that a person has been persistently in default in relation to the relevant requirements may (without prejudice to its proof in any other manner) be conclusively proved by showing that in the five years ending with the date of the application he has been adjudged guilty (whether or not on the same occasion) of three or more defaults in relation to those requirements.

(b) A person shall be treated as being adjudged guilty of a default in relation to a relevant requirement for the purposes of this subsection if he is convicted of any offence consisting of a contravention of a relevant requirement or a default order is made against him.

(6) The court shall not make a disqualification order under paragraph (h) of subsection (4) against a person who shows to the court that the company referred to in that paragraph had no liabilities (whether actual, contingent or prospective) at the time its name was struck off the register or that any such liabilities that existed at that time were discharged before the date of the making of the application for the disqualification order.

(7) A disqualification order under paragraph (i) of subsection (4) may be made against a person notwithstanding that, at the time of the making of the order, the person is deemed, by virtue of subsection (2), to be subject to a disqualification order for the purposes of this Act, and where a disqualification order under the said paragraph (i) is made, the period of disqualification specified in it shall be expressed to begin on the expiry of the period of disqualification referred to in subsection (3) to which the person, by virtue of subsection (2), is subject or the said period of disqualification as varied, if such by the case, under subsection (8).

(8) An application under paragraph (a), (b), (c) or (d) of subsection (4) may be made by—

(a) the Director of Public Prosecutions; or

(b) any member, contributory, officer, employee, receiver, liquidator, examiner or creditor of any company in relation to which the person who is the subject of the application—

(i) has been or is acting or is proposing to or being proposed to act as officer, auditor, receiver, liquidator or examiner, or

(ii) has been or is concerned or taking part, or is proposing to be concerned or take part, in the promotion, formation or management of any company, and where the application is made by a member, contributory, employee or creditor of the company, the court may require security for all or some of the costs of the application.

(9) An application under paragraph (e) or (g) of subsection (4) may be made by the Director of Public Prosecutions.

(10) An application under paragraph (f) of subsection (4) may be made by—

(a) the Director of Public Prosecutions; or

(b) the Registrar.

(11) In addition to the persons who in pursuance of subsections (8), (9) and (10) may make such an application, an application under subsection (4)(a), (b), (c), (d), (e), (f), (g), (h) or (i) may be made by the Director of Corporate Enforcement.

(12) Where it is intended to make an application under subsection (2) in respect of any person, the applicant shall give not less than ten days’ notice of his intention to that person.

(13) Any person who is subject or deemed subject to a disqualification order by virtue of this Part may apply to the court for relief, either in whole or in part, from that disqualification and the court may, if it deems it just and equitable to do so, grant such relief on whatever terms and conditions it sees fit.

(14) A disqualification order may be made on grounds which are or include matters other than criminal convictions notwithstanding that the person in respect of whom the order is to be made may be criminally liable in respect of those matters.

(15) In considering the penalty to be imposed under this section, the court may as an alternative, where it adjudges that disqualification is not justified, make a declaration under Part A13, Head No.30 [equivalent of section 150 of the companies Act 1990].

(16) The court, in hearing an application for a disqualification order under subsection (4), may order that the persons disqualified or against whom a declaration under Part A13, Head No.30 [equivalent of section 150 of the companies Act 1990] is made as a result of the application shall bear the costs of the application and, in the case of an application by the Director, the Director of Public Prosecutions, a liquidator, a receiver or an examiner, any costs incurred by the applicant for the disqualification order in investigating the matter.

(17) A reference in any other enactment to section 184 of the Companies Act 1963 shall be construed as including a reference to this section

Explanatory note

This section is an amended re-enactment of section 160 Companies Act 1990 as amended by section 14 and section 42 of the Company Law Enforcement Act 2001.

All cross-references have been updated in accordance with the structure of the Bill. References to the registrar of companies have been have been replaced by references to the Registrar and references to the Director have been replaced by references to the Director of Corporate Enforcement.

Head 49 Disqualification and Restriction undertakings

(1) Where it appears to the Director of Corporate Enforcement that circumstances have arisen which are specified in Part A13, Head No.40(4)(a)-(i) [equivalent of section 160(4)(a)-(i) of the Companies Act 1990] , the Director of Corporate Enforcement may in his discretion accept:

(a) a disqualification undertaking from any person and that person shall be deemed, for the purposes of this Act, to be subject to a disqualification order for that period; or

(b) as an alternative to a disqualification undertaking, a restriction undertaking from any person and that person shall be treated as if the Court had made a declaration pursuant to Part A13, Head No.30(1) [equivalent of section 150(1) of the Companies Act 1990] in respect of that person.

(2) Where it appears to the Director of Corporate Enforcement that a person is a person to whom Part A13, Head No.29 to Head No.38 [equivalent of Part VII, Chapter 1 of the Companies Act 1990] (including in applications made pursuant to Part XI, Head No.000 [equivalent of section 251 of the Companies Act 1990]), the Director of Corporate Enforcement may in his discretion accept a restriction undertaking from that person and that person shall be treated as if the Court had made a declaration pursuant to Part A13, Head No.30(1) [equivalent of section 150(1) of the Companies Act 1990] in respect of that person.

(3) The maximum period which may be specified in a disqualification undertaking is 15 years and the minimum period which may be specified in a disqualification undertaking is two years.

(4)

(a) Where a disqualification undertaking is given by a person who is already subject to such a disqualification undertaking or to a disqualification order, the periods specified in that undertaking and in the disqualification undertaking or disqualification order shall run concurrently for the periods for which the undertaking or the declaration overlap.

(b) Where a restriction undertaking is given by a person who is already subject to such a restriction undertaking or is a person to whom Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] applies, the period specified in that undertaking and in the restriction undertaking or the declaration pursuant to Part A13, Head No.30(1) [equivalent of section 150(1) of the Companies Act 1990] shall run concurrently for the periods for which the undertaking and the order overlap.

(5) In determining whether to accept a disqualification undertaking or a restriction undertaking by any person, the Director of Corporate Enforcement may take account of all matters including :-

(a) the conduct of the individual (whether in connection with a company or otherwise);

(b) the conduct of companies of which he was an officer or in any way associated (including the indebtedness of such company or companies);

(c) the representations of parties affected by the aforementioned company or companies (including creditors and members of the company or companies); and

(d) the public interest.

(6) Where a restriction undertaking is accepted by the Director, it shall be treated for the purposes of Part A11, Head 112 [equivalent of section 56 of the Company Law Enforcement Act 2001] as if an application was made by the liquidator pursuant to Part A13, Head No.30 [equivalent of section 150 of the Companies Act 1990] during the period prescribed by Part A11, Head 112 [equivalent of section 56(2) of the Company Law Enforcement Act 2001].

(7) Where an restriction undertaking or a disqualification undertaking is accepted by the Director of Corporate Enforcement, he shall cause the Registrar to be furnished with prescribed particulars of the restriction undertaking and/or the disqualification undertaking at such time and in such form and manner as may be prescribed.

(8) The Minister may make regulations in respect of any matter that is referred to in this section or that is necessary or advisable for giving effect to this section, including regulations

(a) prescribing the forms of the restriction undertaking and disqualification undertaking; and

(b) prescribing the form to be utilised in registering the restriction undertaking and disqualification undertaking

(9) The Director of Corporate Enforcement and the party giving the restriction undertaking or disqualification undertaking may agree the costs of investigation of the matters upon which the undertaking is based and of the negotiation of the terms of the undertaking and such agreement may prescribe terms for the payment of the aforementioned costs.

(10) The costs agreed under paragraph (a) of this subsection shall be treated as a simple contract debt between the parties to the agreement for the payment of costs.

Explanatory note

This section is a new section. It introduces a regimes by which a person may give a voluntary undertaking to be restricted or disqualified. This process was introduced in accordance with the view of the Company Law Review Group following consideration of similar UK provisions (i.e. the Company Directors Disqualification Act 1986 (UK) as amended by the Insolvency Act 2000 (UK).

The introduction of this process is aimed primarily at reducing unnecessary use of resources in the making of court applications (both resources of the parties to the action and of the Courts Service). Such voluntary undertakings also had the potential to restrict or disqualify unfit directors in a more expeditious manner. Following consideration of the UK process, the Review Group observed that approximately 80% of disqualifications were made by way of this procedure. Furthermore, there was no obvious increase in the numbers being disqualified and the costs involved in disqualifying directors by undertaking were substantially less following the introduction of this procedure.

PART B3 – DESIGNATED ACTIVITY COMPANIES

Chapter 1 Preliminary and Definitions

Head 1 Defined terms:

(1) In this Part:

“designated activity company” or “dac” means

(a) a private company limited by shares with the capacity, including the power, to do only those acts or things set out in its constitution [memorandum of association], or

(b) a private company limited by guarantee and having a share capital with the capacity, including the power, to do only those acts or things set out in its constitution.

“member” means member of a designated activity company or DAC

“constitution” has the meaning ascribed to it in Head 5 of this Part.

Explanatory note

The concept of a “designated activity company” is derived from paragraphs 10.9.9 to 10.9.13 of the First Report of the Company Law Review Group. The concept was originally came from the recognition that there would be a need to provide for a type of company similar to the existing private company limited by shares, i.e. a private company with an objects clause. On further reflection the Steering Committee concluded that it would also be appropriate to include private companies limited by guarantee and having a share capital within this type of company.

Head 2 Interpretation of this Part

The provisions of Parts A1 to A14 of Group A apply to DACs subject to such amendments thereto, or exclusions therefrom, as are contained in this Part.

Chapter 2 Incorporation and Consequential Matters

Head 3 Way of forming a designated activity company

(1) A DAC may be formed for any lawful purpose by any person or persons subscribing to a constitution and complying with the registration requirements in this Part.

(2) The number of members is limited to 99 not including current or former employees of the DAC.

(3) A company may be registered as a DAC following:

(i) Re-registration as a DAC of an existing company other than a DAC, pursuant to [Part B9];(ii) the merger of two or more DACs pursuant to [Part B3, Chapter 9]; or(iii) the division of a DAC into two or more DACs pursuant to [Part B3, Chapter 9]

(4) The liability of each member shall be limited to the amount, if any, unpaid on the shares held by him, if any, or to such amount as the members have undertaken to contribute to the assets of the DAC in the event of its being wound up.

(5) A DAC shall not be formed and registered unless it appears to the Registrar of Companies that the DAC, when registered, will carry on an activity in the State.

(5) [Part A2, Head 2] shall not apply to the formation of a DAC.

Explanatory note

This section sets out the manner in which a DAC may be formed, and delimits the liability of any member of such a company. The text of the section broadly follows the model of Head 2, Part A2. It allows for single member companies.

Subsection (4) recognizes that members may be limited either by shares or by shares and guarantee.

Head 4 The form of the constitution

(1) Subject to subsection (3) the constitution of a DAC shall be in the form of a memorandum and articles of association which together shall be referred to in this Part as a constitution.

(2) The memorandum of association of a DAC shall state-

(a) its name;

(b) that it is a DAC, registered under this Part;

(d) the amount of share capital with which the DAC proposes to be registered, and the division thereof into shares of a fixed amount.

(3) If a DAC adopts supplemental regulations, those regulations shall be in the form of articles of association.

(4) The constitution shall—

(a)

(i) in the case of a private company limited by shares with the capacity, including the power, to do only those acts or things set out in its constitution, be in the prescribed form [as set out in Schedule 000] or as near thereto as circumstances permit.

(ii) in the case of a a private company limited by guarantee and having a share capital with the capacity, including the power, to do only those acts or things set out in its constitution, be in the prescribed form [as set out in Schedule X] or as near thereto as circumstances permit.

(b) be printed in an entire format;

(5) Where the constitution is delivered to the Registrar of Companies otherwise than in legible form and is authenticated by each subscriber in such manner as is directed by the Registrar of Companies, the requirements in subsection (4) for signature by each subscriber in the presence of at least one witness and for attestation of such signature shall not apply.

(6) [Part A2, Head.3] shall not apply to a DAC.

Explanatory note

The wording at subsection (4) has been amended to reflect the fact that the constitution of a DAC is a two-part document and to reflect the intention to attach a Schedule (model constitution) for DACs consisting of two Parts: Part I will set out the contents of the memorandum and Part II will be blank to allow for supplemental regulations.

The wording at subsection 2(d) has been modelled on the wording of Head 4(2)(d) of Part B2.

Signature requirements are as set out at Head 5, Part A2, i.e. the statement accompanying the constitution shall be signed by or on behalf of the subscribers and shall be accompanied by a consent signed by each of the persons named in it as a director, secretary or joint secretary to act in that capacity.

A new subsection (5) is added to facilitate online incorporation. It is modelled on Section 2(6)(A) of the UK Companies Act 1985.

[N.B. Heads 4,5, 6and 7 of A2 apply]

Head 5 Provisions as to names of DACs

(1) The last words of the name of a designated activity company shall be designated activity company or [Irish equivalent]

(2) The words “designated activity company” may be abbreviated to “dac”/ “DAC” or “d.a.c.”/”D.A.C.” in any usage after the registration by any person including the DAC

(3)The words “Irish equivalent” may be abbreviated to “ooo”/ “OOO” or “o.o.o.”/”O.O.O.”in any usage after the registration by any person including the [Irish equivalent].

( (4) Every DAC carrying on business under a name other than its corporate name shall register in the manner directed by law for the registration of business names but the use of the abbreviations in subsections (2) and (3) shall not of itself render such registration necessary.

(5) [Part A2, Head 8] shall not apply to a DAC

Explanatory note

This Head is modelled on Head 5 of Part B2 dealing with Provisions as to names of PLCs. It is recognised that currently a charity may apply for a licence under section.24 of the Companies Act 1963 to dispense with the ltd./teoranta in its name, see Head below.

Head 6 Power to dispense with “designated activity company” or “Irish equivalent” in name of charitable and other companies

(1) A DAC shall, notwithstanding its registration as a company with limited liability, be exempt from the provisions of this Act relating to the use of the words “designated activity company” or “Irish equivalent” as part of its name and the publishing of its name, but shall enjoy all the privileges and shall (subject to this section) be subject to all the obligations of DACs, where -

(a) its objects are the promotion of commerce, art, science, education, religion, charity or any other prescribed object, and

(b) its constitution -

(i) requires its profits (if any) or other income to be applied to the promotion of its objects,

(ii) prohibits the payment of dividends or the making of distributions to its members, and

(iii) requires all the assets which would otherwise be available to its members to be transferred on its winding up to another company whose objects comply with paragraph (a) and which meets the requirements of this paragraph, and

(c) a director or secretary of the company (or, in the case of an association about to be formed as a limited company, one of the persons who are to be the first directors or the person who is to be the first secretary of the company) has delivered to the Registrar a statement in the prescribed form that the company complies or, where applicable, will comply with the requirements of paragraphs (a) and (b).

(2) The Registrar shall refuse to register as a DAC any association about to be formed as a DAC by a name which does not include the word [“dac”] or [”000”] unless a declaration as provided for under subsection (1)(c) has been delivered to the Registrar of Companies.

(3) An application by a company registered as a DAC for a change of name including or consisting of the omission of the words “designated activity company” shall be made in accordance with Part A2, Head 11 of Part A2 [equivalent of section 23 of the Companies Act 1963] and the Registrar shall refuse to accede to the application unless a declaration as provided for under subsection (1)(c) has been delivered to him.

(4) A DAC which is exempt under subsection (1) and which is permitted to omit the words “designated activity company” from its name shall not alter its constitution so that it ceases to comply with the requirements of that subsection.

(5) If it appears to the Registrar that a company which is registered under a name not including the words “designated activity company” -

(a) has carried on any business other than the promotion of any of the objects mentioned in subsection (1)(a),

(b) has applied any of its profits or other income otherwise than in promoting such objects, or

the Registrar may, in writing, direct the DAC to change its name within such period as may be specified in the direction so that its name ends with the words “designated activity company”, and the change of name shall be made in accordance with Part A2, Head 11 [equivalent of section 23 of the Companies Act1963].

(6) A DAC which has received a direction under subsection (5) shall not thereafter be registered by a name which does not include the words “designated activity company” without the approval of the Registrar

(7) A person who -

(b) alters the constitution of a DAC in contravention of subsection (4), or

shall be guilty of an offence.

(8) Summary proceedings in relation to an offence under subsection (7) may be brought and prosecuted by the Registrar.

Explanatory note

Amended re-enactment of section.24Companies Act1963.

[N.B. Heads 9 -15 of A2 applies]

Head 7 Way in which and extent to which objects of a DAC may be altered

(1) Notwithstanding Part A2, Head 13, a DAC may only alter its objects in accordance with this section.

(2) Subject to subsection (3), a DAC may by special resolution, alter the provisions of its constitution by abandoning, restricting or amending any existing object or by adopting a new object and any alteration so made shall be as valid as if originally contained therein and be subject to alteration in like manner.

(3) If an application is made to the court in accordance with this section for the alteration to be cancelled it shall not have effect except in so far as it is confirmed by the court.

(4) Subject to subsection (5) an application under this section may be made-.

(a) by not less than 15% of the DAC’s members; or

(b) by the holders of not less than 15% of the DAC’s debentures, entitling the holders to object to alterations of its objects,

(5) An application shall not be made under this section by any person who has consented to or voted in favour of the alteration.

(6) An application under this section must be made within 21 days after the date on which the resolution altering the DAC’s objects was passed and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(7) On an application under this section, the court may make an order cancelling the alteration or confirming the alteration either wholly or in part and on such terms and conditions as it thinks fit, and may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interests of dissenting members, and may give such directions and make such orders as it may think expedient for facilitating or carrying into effect any such arrangement so, however, that no part of the capital of the DAC shall be expended in any such purchase.

(8) The debentures entitling the holders to object to alterations of a DAC’s objects shall be any debentures secured by a floating charge which were issued or first issued before the operative date [1 April 1964] or form part of the same series as any debentures so issued, and a special resolution altering a DAC’s objects shall require the same notice to the holders of any such debentures as to members of the DAC, so however that not less than 10 days’ notice shall be given to the holders of any such debentures.

In default of any provisions regulating the giving of notice to any such debenture holders the provisions of the DACs articles regulating the giving of notice to members shall apply.

(9) In the case of a DAC which is, by virtue of a permission from the Registrar granted under Part B3, Head 6 [equivalent of s.24Companies Act1963], exempt from the obligation to use the word ["dac"] or ["000"] as part of its name, a resolution altering the DACS’s objects shall also require the same notice to the Registrar as to holders of debentures.

(10) Where a DAC passes a resolution altering its objects-

(a) if no application is made with respect thereto under this section, it shall within 15 days from the end of the period for making such an application, deliver to the Registrar a printed copy of its constitution as altered; and

(b) if such an application is made it shall-

(i) forthwith give notice of that fact to the Registrar; and

(ii) within 15 days from the date of any order cancelling or confirming the alteration, deliver to the registrar an office copy of the order and, in the case of an order confirming the alteration, a printed copy of the constitution as altered.

The court may by order at any time extend the time for delivery of documents to the Registrar under paragraph (b) for such period as the court may think proper.

(11) If a DAC makes default in giving notice or delivering any document to the Registrar as required by subsection (10), the DAC and every officer of the DAC who is in default shall be guilty of an offence and liable to a fine.

[(12) In relation to a resolution for altering the provisions of a DAC's constitution relating to the objects of the DAC passed before the operative date [1 April 1964], this section shall have effect as if in lieu of subsections (3) to (11), there had been enacted subsections (2) to (7) of section 10 of the Companies Act 1908.]

Explanatory note

This is an amended version of section 10 Companies Act 1963.

Subsection (4) of this Head is identical to the UK provision (s 5(2) of 1985 UK Act)

The permission of the Registrar referred to in subsection (9) links back to the application which a DAC may make to the Registrar in this regard under Head 6(3).

Subsection 12 is bracketed to indicate subsection 10(11) of Companies Act 1963 may be spent as transitional.

Head 8 Corporate Capacity of a DAC

(1) A DAC shall have the capacity to do any act or thing stated in the objects set out in its constitution.

(2) [Part A2, Head.16] shall not apply to a DAC.

Explanatory note

This Head and Heads 10 and 11 mirror Heads 7, 8, and 9 of Part B2 respectively.

Head 12 Re-registration of existing private companies limited by shares as DACs

Pursuant to Part A2, Heads 32 to 38 every existing private company limited by shares may re-register as a DAC by passing an ordinary resolution after the status date and before the end of the transition period resolving that the company be so registered and complying otherwise with the provisions of this Part.

Explanatory note

This mirrors the provisions at Part A2, Head32. Heads 33 to 38 are relevant if the procedure set out at Head 32 is followed.

Chapter 4 Corporate Governance

[Head 1 of A4 applies]

Head 14 Directors

(1) Every DAC shall have at least two directors.

(2) [Part A4, Head 2] shall not apply to a DAC.

Explanatory note

This Head gives effect to the recommendation given by the CLRG in its First Report, that the minimum requirement of two directors should remain for all companies other than CLS including unlimited companies [Para 11.8.11]. The Head mirrors Part B2, Head 55.

[Heads 3 – 9 of Part A4 apply]

Chapter 5 Duties of Directors and other Officers

[Heads 1-37 of Part A4 apply]

Chapter 5 Accounts, Audit and Annual Return

PART A6 – HAS YET TO BE FINALIZED

Note: The working hypothesis is that Part A6 will apply to B3 Companies as it will to the CLS.

However, hitherto a DAC cannot avail of the audit exemption. As currently drafted, a DAC will not be able to avail of the audit exemption under the new Bill, as Head 66 of Part A6 will not apply to a DAC.

PART B4 – GUARANTEE COMPANIES

This part will apply only to guarantee companies not having a share capital. Under the existing code all of these companies were public companies. Companies under the current code having both a guarantee and a share capital are private companies. This latter type of company will in the new companies regime be classified as a dac (designated activity company). The dac classification of company will consist of a private limited liability company with an objects clause which is limited by shares or by shares and guarantee.

Chapter 1 Preliminary and Definitions

Head 1 Defined terms:

(1) In this Part:

“company limited by guarantee” or “guarantee company” means a company which does not have a share capital and which has the liability of its members wholly limited by the constitution to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up.

“constitution” has the meaning ascribed to it in Head 5 of this Part.

“member” means member of a company limited by guarantee or clg.

Explanatory note

The definition of “company limited by guarantee” is derived from section 2 Companies Act 1963 and paragraph 5(2)(b) Companies Act 1963, with the substitution of the term “memorandum” by the term “constitution”.

In principle, the CLRG agreed the need for a designated name for all guarantee companies, e.g. clg (company limited by guarantee).

In this respect, it must be acknowledged that a charity may dispense with ltd/teoranta in its name via the exemption procedure under section 24 of the Companies Act 1963 (as amended by section 88 of Company Law Enforcement Act 2001). Under that section, a company may make a declaration to the registrar that it meets certain conditions

Head 2 Interpretation of this Part

The provisions of Parts A1 to A14 of Group A apply to Guarantee Companies subject to such amendments thereto, or exclusions there from, as are contained in this Part.

Chapter 2 Incorporation and Consequential Matters

Head 3 Definitions

(1) Part A2, Head 1 shall not apply to guarantee companies.

Head 4 Way of forming a Guarantee Company

(1) A CLG may be formed for any lawful purpose by any two or more persons subscribing to a constitution and complying with the registration requirements in this Act.

(2)There is no limitation on the number of members of a CLG.

(3) A company other than a CLG may be registered as a CLG following:

(i) Re-registration as a CLG of an existing company pursuant to [Part A9];

(ii)the merger of two or more guarantee companies pursuant to [Part B4, Chapter 9]; or

(iii) the division of two or more guarantee companies pursuant to [Part B4, Chapter 9]

(4) The liability of the member or members shall be limited to such amount as the members have undertaken to contribute to the assets of the CLG in the event of its being wound up.

(5) Part A2, Head2 shall not apply to the formation of a CLG.

Explanatory note

This is a new Head.

Subsection (1) reduces the minimum number . of members for a public guarantee to 2.

ss(3) is taken in substance from Part B2 provisions. This is done on the understanding that Part B9 will provide for the full scheme of conversions for guarantee companies.

ss(4) provides for the liability of members in a guarantee company

Head 5 The form of a Guarantee Company’s constitution

(1) Subject to subsection (3) the constitution of a CLG shall be in the form of a memorandum and articles of association which together shall be referred to in this Part as a constitution.

(2) The memorandum of association of a CLG shall state-

(a) its name;

(b) that it is a guarantee company, registered under this Part;

(3) If a CLG adopts supplemental regulations, those regulations shall be in the form of articles of association.

(4) The constitution shall—

(a) be in the prescribed form [as set out in Table 000] or as near thereto as circumstances permit.

(b) be printed in an entire format;

(5) Where the constitution is delivered to the Registrar otherwise than in legible form and is authenticated by each subscriber in such manner as is directed by the Registrar, the requirements in subsection (4) for signature by each subscriber in the presence of at least one witness and for attestation of the signature do not apply.

(6) Part A2, Head 3 shall not apply to a CLG.

Explanatory note

Subsection (1) is new.

Paragraphs 2(a)-(c) are an amended restatement of section 6(1)(a) Companies Act 1963.

Subsections (3) to (6) are new.

[N.B. Heads 4 - 7 of A2 apply]

Head 6 Provisions as to names of guarantee companies

(1) The name of a company limited by guarantee shall end with one of the following:

- company limited by guarantee

- cuideachta faoi theorainn ráthaíochta;

(2) The words “company limited by guarantee ” may be abbreviated to “clg”/ “CLG” or “c.l.g.”/”C.L.G.” in any usage after the registration by any person including the company limited by guarantee.

(3) The words “cuideachta faoi theorainn ráthaíochta” may be abbreviated to “ctr”/ “CTR” or “c.t.r”/”C.T.R.”in any usage after the registration by any person including the company limited by guarantee.

(4) Every CLGcarrying on business under a name other than its corporate name shall register in the manner directed by law for the registration of business names but the use of the abbreviations in subsections (2) and (3) shall not of itself render such registration necessary.

(5) Part A2, Head 8(4) and 8(5) shall not apply to a CLG

Explanatory note

This Head is modelled on Head 5 of Part B2 dealing with Provisions as to names of PLCs. It is recognised that currently a charity may apply for a license under s.24 of the Companies Act 1963 to dispense with the ltd./teoranta in its name, see Head below.

Chapter 3 Share Capital

Head 14 Prohibition on issue of shares by a guarantee company

(1) No CLG may be formed with the power to issue share capital.

(2) Notwithstanding any provision in its constitution no CLG may have a share capital or have the power to issue share capital after the transition date.

(3) Any existing guarantee company with an issued share capital shall after the transition period be deemed to be a designated activity company (dac).

Explanatory note

This is a new head. The Head places a prohibition on the formation of a clg with a share capital. Existing guarantee companies are prohibited from having a share capital or having the power to raise share capital. Any existing guarantee company with a share capital at the end of the transition period will be re-designated as DACs.

Head 15 Shares

(1) Where a CLG is prohibited by its constitution or by this Part from having members other than by guarantee then the provisions of Part A3 that relate to membership by shareholding shall not apply.

(2) Part A3, Heads 4 to 36, and 38 to 46 shall not apply to a CLG.

Explanatory note

Chapter 4 Corporate Governance

[N.B. Head 1 applies]

Head 17 Directors

(1) Every CLG shall be required to have at least two directors

(2) Part A4, Head 2 shall not apply to CLGs.

Explanatory note

New section. This Head gives effect to the recommendation given by the CLRG in its First Report, that the minimum requirement of two directors should remain for all companies other than CLS including unlimited companies [Para 11.8.11]. The Head mirrors Part B2, Head 55.

[N.B. Heads 3-9 of Part A4 apply]

Head 20- Audit Committee

(1) In this section—

‘affiliate’ in relation to an auditor, means a firm, body corporate or partnership considered under PartA6, Head.000 [equivalent of section 182(2) of Companies Act 1990] to be an affiliate of the auditor at the relevant time;

‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in Part A6, Head.000 [equivalent of section 8 of Companies (Amendment) Act 1986];

‘internal audit’ means an examination of the internal control system of a CLG that is conducted within the company at the request of its audit committee, directors or other officers;

‘internal auditor’ means a person who conducts an internal audit;

‘parent undertaking’ and ‘subsidiary undertaking’ have the same meaning as in the Part A1, Head No.000 [equivalent of S.I. No.201 of 1992, EC (Companies: Group Accounts) Regulations, 1992];

(2) The responsibilities of a committee of directors, to be known as the audit committee, may include, but are not limited to, the following:

(a) reviewing, before they are presented to the board of directors for approval—

(i) the CLG’s annual accounts, and

(ii) if the CLG is a parent company, the group accounts of the group of undertakings of which the company is the parent company;

(b) determining whether the annual accounts so reviewed comply with Part VI, Head No.000 [equivalent of section 205A(2) of Companies Act 1990] and whether, in the committee’s opinion, they give at the end of the financial year a true and fair view of—

(i) the state of affairs of the CLG, and

(ii) the profit or loss of the CLG, even if, by virtue of Part A6, Head.000 [equivalent of section 3(2) of Companies (Amendment) Act 1986], Part A6, Head No.000 [equivalent of section 3(1) of Companies (Amendment) Act 1986] does not apply to the CLG’s profit and loss account;

a true and fair view of—

(i) the state of affairs of the group of undertakings of which the CLG is the parent company, and

(ii) the profit or loss of that group;

(d) recommending to the board of directors whether or not to approve the annual accounts and group accounts so reviewed;

(e) determining, at least annually, whether in the committee’s opinion, the CLG has kept proper books of account in accordance with Part A6, Head.000 [equivalent of section 202 of Companies Act 1990];

(f) reviewing, before its approval by the board of directors, the statement required to be made under Part A6, Head 000 [equivalent of section 205E(5) and (6) of Companies Act 1990];

(g) determining whether, in the committee’s opinion, the statement so reviewed—

(i) complies with Part A6, Head.000 [equivalent of section 205E(5) and 5(6) of Companies Act 1990], and

(ii) is fair and reasonable and is based on due and careful enquiry;

(h) recommending to the board of directors whether or not to approve a statement reviewed under paragraph (f);

(i) advising the board of directors as to the recommendation to be made by the board to the shareholders concerning the appointment of the CLG’s auditor;

(j) monitoring the performance and quality of the auditor’s work and the auditor’s independence from the CLG;

(k) obtaining from the auditor up to date information to enable the committee to monitor the CLG’s relationship with the auditor, including, but not limited to, information relating to the auditor’s affiliates;

(l) recommending whether or not to award contracts to the auditor or an affiliate of the auditor for non-audit work;

(m) satisfying itself that the arrangements made and the resources available for internal audits are in the committee’s opinion suitable;

(o) performing any additional functions prescribed by regulation under Part A6, Head 000 [equivalent of section 48(1)(m) of the Companies (Auditing and Accounting) Act 2003];

(p) performing any other functions relating to the CLG’s audit and financial management that are delegated to it by the board of directors.

(3) The board of directors of each CLG shall either—

(a) establish an audit committee that—

(i) has all or some of the responsibilities specified in subsection (2), and

(ii) subject to subsection (8), otherwise meets the requirements of this section, or

(b) decide not to establish an audit committee.

(4) The board of directors of each large CLG to which subsection (3) applies shall state in their report under Part A6, Head.000 [equivalent of section 158 of Companies Act 1963]—

(a) whether the CLG has established an audit committee or decided not to do so,

(b) if the CLG has established an audit committee, whether it has only some of the responsibilities specified in subsection (2), and

(5) The audit committee is to consist of such directors as the board of directors concerned thinks fit, provided, subject to subsection (7), both of the following requirements are met:

(a) the committee consists of not fewer than 2 members;

(b) all those appointed to the committee qualify under subsection (6).

(6) A director qualifies for appointment to the audit committee unless he or she—

(a) is, or was at any time during the 3 years preceding appointment to the committee—

(i) an employee of the CLG concerned, or

(ii) an employee of any subsidiary of the CLG concerned, or

(b) is the chairperson of the board of directors.

(7) The requirements specified in paragraphs (a) and (b) of subsection (6) do not apply if—

(a) only one director on the board of directors of the CLG concerned qualifies under subsection (6),

(b) that director—

(i) is appointed as the sole member of the audit committee, or

(c) any conditions prescribed under section Part A6, Head 000 [48(1)(m) of the Companies (Auditing and Accounting) Act 2003] are met, and

(d) the directors of the CLG concerned state in their report under Part A6, Head 000 [Equivalent of section 158 of the Companies Act 1963] the reasons for the CLG’s exemption from those requirements.

(8) Written terms of reference concerning the audit committee’s role in the audit and financial management of the CLG concerned shall—

(a) be prepared and approved by the board of directors,

(b) be submitted for the information of the shareholders of the CLG concerned at its annual general meeting, and

(9) Without limiting the matters that may be included under subsection (8), the terms of reference must—

(a) specify how the audit committee will discharge its responsibilities, and

(b) provide for a programme of separate and joint meetings with the management, auditor and internal auditor of the CLG or undertaking concerned.

(10) Subsection (8) applies also in relation to any amendments of the audit committee’s terms of reference.

(11) Where the director of a CLG fails to take all reasonable steps to comply with the requirements of subsection (4) the director is guilty of an offence.

(12) Part A4, Head 29 shall not apply to a CLG

Explanatory note

This is an amended version of Part A4, Head 29 of Part A4. The section in effect extends the ‘comply or explain’ requirement for an audit committee to all guarantee companies, and to any group of companies which has a guarantee company as its parent.

Head 21 Definition of member

(1) The subscribers of the constitution of a CLG shall be deemed to have agreed to become members of the CLG, and, on its registration, shall be entered as members in its register of members.

(2) Such other persons as the directors admit to membership and who give the requisite guarantee shall be members of the CLG and their names shall be entered in its register of members.

(3) Membership is not transferable and ceases on resignation or death.

(4) Part A4, Head 30, shall not apply to a CLG

Explanatory note

This Head imports Model Regulation 3 of Table C of the First Schedule to the Companies Act 1963.

The Head sets out the principle that new members may not be admitted unless approved by the directors. . It also requires that new members must give the requisite guarantee. Membership is not transferable and ceases on resignation or death. The duration of membership and the events or acts which will terminate will be set out in the articles. For example, in the case of apartment management companies it is common to provide that membership ceases when ownership of one of the apartments ceases.

Head 22 Register of Members

(1) Subject to subsection (4), every CLG shall keep a register of its members and enter therein the following particulars:

(a) the names, addresses of the members and

(b) the date at which each person was entered in the register as a member;

(2) The entries required under paragraphs (a), and (b) of subsection (1) shall be made within 28 days after the conclusion of the agreement with the CLG to become a member or, in the case of a subscriber of constitution, within 28 days after the registration of the CLG.

(3) The entry required under paragraph (c) of subsection (1) shall be made within 28 days after the date when the person concerned ceased to be a member, or, if he ceased to be a member otherwise than as a result of action by, the CLG, within 28 days of production to the CLG of evidence satisfactory to the CLG of the occurrence of the event whereby he ceased to be a member.

(4) Subject to subsection (5), the register of members shall, except when it is closed under the provisions of this Act, be kept at the registered office of the CLG, so, however, that—

(a) if the work of making it up is done at another office of the CLG, it may be kept at that other office; and

(b) if the CLG arranges with some other person for the making up of the register to be undertaken on behalf of the CLG by that other person,

it may be kept at the office of that other person at which the work is done.

(5) The register of members shall not be kept at a place outside the State.

(6) Subject to subsection (7), every CLG shall send notice to the Registrar of the place where its register of members is kept and of any change in that place.

(7) A CLG shall not be bound to send notice under subsection (6) where the register has, at all times since it came into existence or, in the case of a register in existence on the operative date, at all times since then, been kept at the registered office of the CLG.

(8) Where a CLG makes default in complying with any of the requirements of subsections (1) to (5) or makes default for 14 days in complying with subsection (6), the CLG and every officer of the CLG who is in default shall be guilty of an offence and liable to a fine.

(9) Part A4, Head 31 shall not apply to a CLG

Explanatory note

Subsection (1) of Part A4, Head 31 has been amended so as to remove the requirement for the particulars of the shareholding of a member. In effect it reflects the requirements in section 116 of Companies Act 1963 rather than those in Head 31.

S.116 Companies Act 1963 requires every company to keep a register of members which should be open to inspection by the public.

[Heads 32 to 35 of Part A4 apply]

Head 31 Remedy in case of oppression

(1) Any member of a CLG who complains that the affairs of the CLG are being conducted or that the powers of the directors of the CLG are being exercised in a manner oppressive to him or any of the members (including himself), or in disregard of his or their interests as members, may apply to the court for an order under this section.

(2) In a case falling within subsection (1), the Director of Corporate Enforcement may apply for an order under this section.

(3) If, on any application under subsection (1) or subsection (2) the court is of opinion that the CLG’s affairs are being conducted or the directors’ powers are being exercised as aforesaid, the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether directing or prohibiting any

act or cancelling or varying any transaction or for regulating the conduct of the CLG’s affairs in future, or for the payment of compensation or otherwise.

(4) Where an order under this section makes any alteration in or addition to the CLG’s constitution, then, notwithstanding anything in any other provision of this Act but subject to the provisions of the order, the CLG concerned shall not have power without the leave of the court to make any further alteration in or addition to the constitution inconsistent with the provisions of the order; but, subject to the foregoing provisions of this subsection, the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the CLG, and the provisions of this Act shall apply to the constitution as so altered or added to accordingly.

(5) An office copy of any order under this section altering or adding to or giving leave to alter or add to a CLG’s constitution shall, within 21 days after the making thereof, be delivered by the CLG to the Registrar for registration; and if a CLG fails to comply with this subsection, the CLG and every officer of the CLG who is in default shall be liable to a fine.

(7) If, in the opinion of the court, the hearing of proceedings under this section would involve the disclosure of information the publication of which would be seriously prejudicial to the legitimate interests of the CLG, the court may order that the hearing of the proceedings or any part thereof shall be in camera.

(8) Part A4, Head 61, shall not apply to a CLG.

Explanatory note

This Head is the equivalent of Part A4, Head 61, with references to share dealings and to transmission of shares or interest on death deleted.

Chapter 5 Duties of Directors and other Officers

Head 32- Interpretation Provisions

(1) In this Chapter:

(2) This section shall apply in addition to Part A5, Head 1

[Heads 1 to 5 of Part A5 apply]

Head 33 Directors’ compliance statement and related statement

Part A5, Head 6 shall not apply to a CLG

Explanatory note

Part A5, Head 6 is an amended re-enactment of section 205E of the Companies Act 1990 as inserted by section 45 of the Companies (Auditing and Accounting) Act 2003. The effect of disapplying Part A5, Head 6 under this Head is that directors of a guarantee company are not required to make a directors’ compliance statement.

[Head 7 to 11 of Part A5 apply]

Chapter 6 Accounts, Audit and Annual Return

Part A6 has not yet been finalised. This Chapter will be reviewed upon finalisation of Part A6 and modifications and/or new provisions are likely to be inserted.

Head 36 Merger of Guarantee companies

(1) In this Chapter, unless the context otherwise requires—

“merging company” means a company which is a party to a proposed merger.

(1) Part A9, Heads.6-9, 11, 12, 14, 15, 16, 17 and 18 shall not apply to guarantee companies.

Explanatory note

Mergers by acquisition and mergers by formation of a new company have been disapplied to guarantee companies as this essentially involves these involve the issue of shares to the members. As guarantee companies do not have a share capital, this is not possible.

The net effect of this provision is to provide for the simplified merger by validation procedure as introduced for the CLS.

[Part A9, Head 10, 13 and 19-25 apply].

Head 37 Division of Guarantee companies

(1) In this Chapter, unless the context otherwise requires—

“division” means division by validation procedure.

(2) Part A9, Heads.26-29, 31, 32, 34, 35, 36, 37 and 38 shall not apply to guarantee companies.

Explanatory note

Division by acquisition and division by formation of a new company have been disapplied to guarantee companies as again, these essentially involve the issue of shares to the members. As guarantee companies do not have a share capital, this is not possible.

The net effect of this provision is to provide for the division by validation procedure as introduced for the CLS.

PART B5 – UNLIMITED COMPANIES

Chapter 1 Preliminary and Definitions

Head 1 Defined terms

In this Part:

“constitution” has the meaning assigned to it in Head 5.

“member” means member of an unlimited company or [ULC]

“PUC” means a public unlimited company

“ULC” means an unlimited company

“unlimited company” or [“ULC”] means:

(a) a public company with or without a share capital, or

(b) a private company

not having any limit on the liability of its members.

Explanatory note

The definition of unlimited company replaces paragraph 5(2)(c) Companies Act 1963,which provides that a company incorporated under the Act may be an unlimited company.

Head 2 Interpretation of this Part

(1) The provisions of Parts A1 to A14 of Group A apply to unlimited companies subject to such amendments thereto, or exclusions therefrom, as are contained in this Part.

Chapter 2 Incorporation and Consequential Matters

Head 3 Way of forming an unlimited company

(1) A ULC may be formed for any lawful purpose by any person or persons subscribing to a constitution and complying with the registration requirements in this Act.

(2) In the case of a public unlimited company, the number of members is limited to a minimum of two.

(3) Each member shall have unlimited liability

(4) A company may also be registered as an unlimited company following:

(i) re-registration as a ULC of an existing company other than an ULC pursuant to [Part B9]; or

(ii) the merger of two or more ULCs pursuant to [Part B5, Chapter 9]; or

(iii) the division of a ULC into two or more ULCs pursuant to [Part B5, Chapter 9]

(5) A ULC shall not be formed and registered unless it appears to the Registrar that the company, when registered, will carry on an activity in the State.

(6) Part A2, Head 2 shall not apply to a ULC.

Explanatory note

This section sets out the manner in which an unlimited company may be formed. Following a determination made by the Steering Committee, it amalgamates separate heads applying to private and public companies in Part A2 and Part B2 respectively. Subsection (4) provides for the unlimited liability of members.

The proposed head provides for single member private unlimited companies and adopts the two member minimum for public companies under Part B2.

Head 4 The form of a the constitution for a private unlimited company

(1) Subject to subsection (3) the constitution of a private unlimited company shall be in the form of a memorandum and articles of association which together shall be referred to in this Part as a constitution.

(2) The memorandum of association of a private unlimited company shall state-

(a) its name;

(b) that it is a ULC, registered under this Part;

(3) If a private unlimited company adopts supplemental regulations, those regulations shall be in the form of articles of association.

(4) The constitution shall—

(a) be in the prescribed form [as set out in Schedule 000] or as near thereto as circumstances permit.

(b) be printed in an entire format;

(6) Part A2, Head 3 shall not apply to a private unlimited company

Explanatory note

This section mirrors Part B3 Head 5, which provides for the form of a constitution of a DAC.

Head 5 The form of the constitution for a public unlimited company

(1)Subject to subsection (3), the constitution of a public unlimited company shall be in the form of a memorandum and articles of association which together shall be referred to in this Part as a constitution.

(2) The memorandum of association of a public unlimited company shall state-

(a) its name;

(b) that it is a ULC, registered under this Part;

(d) in the case of a public unlimited company with a share capital, the amount of share capital with which the public unlimited company proposes to be registered which shall not be less than the authorised minimum, and the division thereof into shares of a fixed amount;

(e)

(3) If the public unlimited company adopts supplemental regulations, those regulations shall be in the form of articles of association.

(4) The constitution shall—

(a) be in the prescribed form [as set out in Schedule 000] or as near thereto as circumstances permit.

(b) be printed in an entire format;

(5) Where the constitution is delivered to the Registrar otherwise than in legible form and is authenticated by each subscriber in such manner as is directed by the Registrar of Companies, the requirements in subsection (4) for signature by each subscriber in the presence of at least one witness and for attestation of the signature do not apply.

(6) Part A2, Head.3 shall not apply to a public unlimited company

Explanatory note

This head largely mirrors Part B3 Head 5 with the insertion of 2(d) to accommodate the requirement for public companies which mirrors Part B2 Head 4 to provide for the form of a constitution in the case of a public unlimited company.

[N.B. Heads 4 to 6 of A2 apply]

Head 6 Effect of registration

(1) On the registration of the constitution of a ULC the Registrar shall certify in writing that the ULC is incorporated and that the company is unlimited, and shall issue a certificate of incorporation for the ULC.

(2) From the date of incorporation mentioned in the certificate of incorporation, the subscriber or subscribers of the constitution, together with such other persons as may from time to time become members of the ULC, shall be a body corporate with the name contained in the constitution, capable forthwith of exercising the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the ULC in the event of its being wound up as is mentioned in this Act.

(3) A certificate of incorporation given under subs (1) shall be conclusive evidence that the requirements mentioned in Part A2, Head 5 [equivalent of s.3 of Companies (Amendment) Act 1982] have been complied with, and that the ULC is duly registered under this Act.

(4) The persons who are specified in the statement required to be delivered to the Registrar pursuant to Part A2, Head 5 [s.3 Companies (Amendment) 1982 Act] as the director or directors, secretary or joint secretaries of the ULC to which the statement refers shall, on the incorporation of the ULC, be deemed to have been appointed as the first director or directors, or secretary, as the case may be, of the ULC, and any indication in the constitution specifying a person as a director or secretary of a ULC shall be void unless such person is specified as a director or as secretary in the said statement.

(5) Part A2, Head 7 shall not apply to a ULC

Explanatory note

This head mirrors Part A2, Head 7 in Part A2. However, subsection (1) has been altered to provide for certification by the Registrar that a company is an unlimited company. Section 18(1) Companies Act previously only provided for the registrar to certify that “in the case of a limited company, that the company is limited”.

Head 7 Provisions as to names of unlimited companies

(1) The name of an unlimited company shall end with one of the following:

- Unlimited company

- [Irish equivalent]

(2) The words “unlimited company” may be abbreviated to [“ulc”/ “ULC” or “u.l.c”/”U.L.C.”] in any usage after the registration by any person including unlimited company.

(3) The words “Irish equivalent” may be abbreviated to “ooo”/ “OOO” or “o.o.o.”/”O.O.O.”in any usage after the registration by any person including theULC.

(4) Every ULC carrying on business under a name other than its corporate name shall register in the manner directed by law for the registration of business names but the use of the abbreviations in subsections (2) and (3) shall not of itself render such registration necessary.

(5) Part A2, Head 8 shall not apply to a ULC

Explanatory note

This Head is modelled on Part B2, Head 5 dealing with provisions as to names of PLCs.

[N.B. Heads 9 to 15 of A2 apply]

Head 8 Corporate capacity of an unlimited company

(1) A ULC shall have the capacity to do any act or thing stated in the objects set out in its constitution.

(2) Part A2, Head 16 shall not apply to a ULC.

Explanatory note

This Head replicates Part B3, Head 8 on the basis that both private and public unlimited companies must have objects clauses.

Head 9 Transitional Measures

(1) On commencement of this Part, all unlimited companies, whether private or public, shall become and be ULCs.

(2) Part A2, Heads 32 to 38 shall not apply to unlimited companies, whether private or public.

Explanatory note

This Head disapplies the transitional arrangements required for private limited companies and preserves the memorandum and articles of association of existing unlimited companies.

Chapter 4 Corporate Governance

[Head 1 of Part A4 applies]

Head 15 Directors

(1) Every ULC shall have at least two directors.

(2) Part A4, Head No 2shall not apply to a ULC.

Explanatory note

[Heads 3 to 35 of Part A4 apply]

Chapter 5 Duties of Directors and other Officers

[Heads 1 to 5 and 7 to 37 of Part A4 apply]

Head 18 Director’s compliance statement and related statement.

(1) Part A5, Head 6 shall not apply to a ULC.

Chapter 6 Accounts, Audit and Annual Return

PART A6 HAS YET TO BE FINALISED.

It is anticipated that the less onerous filing requirements for unlimited companies will be maintained and whether or not an unlimited company is private or public will impact upon the accounting/filing requirements imposed.

All of the provisions regarding the filing of accounts shall apply to an unlimited company, all of whose members have limited liability. However, it will be necessary to provide an exemption for an unlimited company which has one member (a) with unlimited liability, or (b) is an individual.

The CLRG has also made an in principle decision that

that ULCs should not be able to avail of the audit exemption. Under the current draft of Part A6 Head 000[equivalent of section 32 Companies (Amendment) (No 2) Act 1999] shall not apply to a ULC.