On 24 June 2014, the Companies and Limited Partnerships Amendment Bill had its third reading in the House. This Bill creates the Companies Amendment Act (No 4) 2014 and the Limited Partnerships Amendment Act (No 2) 2014.
The main changes to note are:
- Residency of directors/general partners: Companies and limited partnerships will be subject to certain residency requirements.
- Directors’ personal information: Directors and partners of limited partnerships will need to register their date and place of birth with the Registrar.
- Ultimate holding company information: Every company will need to disclose details of its ultimate holding company (if the company has one).
- Criminal sanctions for breaches of directors’ duties: It will be an offence for a director to act in bad faith towards the company, or to dishonestly allow an insolvent company to incur debts.
The residency and information provisions in the Bills will come into force in approximately June 2015 (one year after each Bill receives Royal Assent).
Irish Companies Bill
The Companies Bill 2012 represents the largest piece of legislation in the country’s history. It consolidates 16 existing Companies Acts which date from 1963 to 2013 into one single piece of legislation and includes undertakings from EU legislation, which harmonise laws across the continent and add to the size and complexity of Ireland’s company law. It is clear the Bill will greatly benefit business operations in Ireland. Along with retaining the role of the company secretary, the main changes included will give Irish companies greater flexibility in a number of ways:
- The Private Company Limited by Shares will be known as a Company Limited by Shares (CLS).
- Companies will now only require one director and not two as is currently the case.
- Directors’ common law and equitable duties will be codified, making the law more transparent and accessible.
- The doctrine of Ultra Vires (acting outside its powers) will be removed, which will result in there being no requirement for a company to have an objects clause. This type of company will have the power to carry out any activity which its directors determine. If a company wishes to retain or restrict its objects clause then it will have to re-register as a Designated Activity Company (DAC).
- A CLS will be able to engage in domestic mergers along the lines which are currently only capable of being used in the case of cross-border mergers. Statutory mechanism is provided whereby two Irish companies can merge so that the assets and liabilities (and identity) of one are transferred to the other, before the former is dissolved.
- A CLS will not be permitted to list any securities, whether shares or debts, so the law relating to the model private company can be kept simple; other types of private company such as DACs will continue to be allowed to list debt securities.
- There will be no requirement for a physical annual general meeting, it may be conducted in writing.
- Guarantee companies and dormant companies will be able to exempt themselves from audits. This will apply to the voluntary sector and charities.
- Rather than have a Memorandum of Association and Articles of Association, a new limited company will have to have a single-document constitution.
- Small companies will be able to apply to the Circuit Court to enter examinership instead of applying to High Court. This will reduce costs.
Other changes include streamlining the regime for external companies operating in Ireland so they can register a ‘branch’ in Ireland. Currently, a foreign company which operates in Ireland from a fixed address must file its constitutional documents, a list of its directors, and the address of its ‘place of business’ in Ireland with the Company Registration Office (CRO). In the future, so long as a company is registered in the EU then a ‘branch’ need only file annual returns with the CRO.
The Companies Bill 2012 passed Committee Stage on 6 November 2013. It is hoped that the bill, once it completes its passage through the Irish Parliament this year, will be enacted and enforced in mid 2014.
UK listing rules
The Financial Conduct Authority (FCA) has reviewed free float requirements (the amount of shares in public hands) and controlling shareholders (more than 30%) in premium listed companies. To improve protection of minority shareholders’ interests.
Three requirements are effective from 16 May 2014:
- A mandatory relationship management agreement and enhanced oversight measures to ensure compliance if there is a breach. Including the ability for FCE to vet all transactions and sanctions for independent shareholders to veto transactions between the company and controlling shareholder.
- A dual voting structure for appointment of independent directors whereby a majority of the independent shareholders have to specifically approve the appointment.
- A dual voting structure for cancelling a company’s listing or transferring to a standard listing.
Transactions between the company and controlling shareholder must be at arm’s length and robust disclosures will be required in the Annual Report.
The independent director will have more power and control and the free float percentage remains at 25%. The measures bring an additional regulatory burden, perhaps including amendments to articles around election of independent directors and a relationship agreement, if not already in place. Minority shareholders should benefit from more protection and more transparency and agreed process around how a controlling shareholder is required to behave.