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The Companies Act 2014
Apr 22, 2015

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The Companies Act 2014 (the “Act”), consolidates Irish Company legislation and aims to simplify and reform the obligations of smaller companies by introducing a new model type for private companies limited by shares. Once the Act commences in June 2015, it will provide a modern state of the art Company Law Code and make it easier to transact business in Ireland

What are the key impacts of the Act?
The Act has 24 parts with the first fifteen covering the new model private company limited by shares (LTD). The remaining parts of the Act provide for the other company model types; designated activity company (DAC), company limited by guarantee (CLG), public limited company (PLC), public unlimited company with share capital (PUC), public unlimited company without share capital (PULC), private unlimited company with share capital (ULC), unlimited company (UC).

Essentially, the vast majority of Irish companies in existence at present are private companies limited by shares. As such, all companies that are currently registered as private companies limited by shares will need to choose whether to convert to a LTD or to a DAC.

Some of the main elements of a LTD and DAC are as follows:

It is expected that the majority of private companies limited by shares will convert to the LTD model. They will have a simplified constitution, can have a minimum of one director and will not be required to change their name. The DAC, on the other hand, will have a two part constitution document, must have a minimum of two directors and will require a change of name. Certain regulated funds companies and financial institutions will be required to convert to a DAC.

Once the Act commences, there will be an 18 month transition period which will allow private companies limited by shares to convert from their current status to a LTD or DAC. A company can elect to become a LTD before 30 November 2016 by passing a special resolution and lodging the necessary filings with the Companies Registration Office (“CRO”). To convert to a DAC, a company must pass an ordinary resolution and lodge the necessary filings with the CRO before 31 August 2016.

If within 18 months of the commencement of the legislation, an existing private company has not re-registered, it will be deemed to be a LTD company with a single document constitution consisting of the existing provisions of its Memorandum and Articles of Association but without the objects clause. Any existing article that is in contravention of the new Companies Act provisions will be void. Therefore, doing nothing could expose the directors of the company to a claim from shareholders.

Secretary’s Duties
Each company must have a company secretary who will be responsible for the co-signing of the annual return with one of the directors of the company, ensuring that all CRO and Revenue filing requirements are met within the specified timeframes, maintaining the statutory registers and maintaining up to date minute books of meetings of both the Board and the Members. The directors of the company must ensure that the company secretary has the necessary skills and resources to perform his/her duties.

Each company secretary must, on appointment, make a declaration acknowledging their responsibilities as company secretary.

A body corporate can continue to act as company secretary.

Directors’ Duties
Under the Act, directors’ fiduciary duties have been codified making it easier to determine what is expected of a director. Directors
are now responsible for complying with the Companies Acts (previously this was the responsibility of the company secretary).

The duties of the director are now much clearer and cover:

  • acting in good faith in the best interests of the company;
  • acting honestly and responsibly in relation to the conduct of the affairs of the company;
  • acting in accordance with the company’s constitution and exercising those powers only for lawful purposes;
  • not using company property unless approved by the members or permitted in the company’s constitution;
  • not agreeing to restricting the director’s power to exercise an independent judgment;
  • avoiding conflicts of interest unless released by the members or by the company’s constitution;
  • exercising care, skill and diligence; and,
  • having regard for the employees and members of the company.

Directors’ Compliance Statements
All PLCs and any CLGs, LTDs or DACs with a balance sheet total greater than €12.5m and turnover in excess of €25m for the year, will be required to prepare a directors’ compliance statement.
Unlimited companies are not subject to this obligation.

New categories of offences
The act details four categories of offences:

  • Category 1 offences are the most serious and carry a fine up to
    €500,000 and/or up to a prison term of 10 years.
  • Category 2 offences up to €50,000 fine and/or up to a 5 year prison term.
  • Category 3 offences carry a maximum €5,000 fine and/or up to 6 months in prison.
  • Category 4 offences cover fines not exceeding €5,000.

Financial Statements – The Main Changes
All changes become relevant for financial periods beginning on or after 1st June 2015.

  • It will be necessary for large companies that have an annual turnover of
    €50m and above, in the previous two financial years to have an audit committee.
  • It will be possible to avail of audit exemption where a company meets any two out of three prescribed criteria; this will lead to more companies being in a position to avail of the exemption.
  • The ability to claim audit exemption has also been extended to certain dormant companies and companies limited by guarantee as well as certain small groups.
  • Changes have also been introduced relating to the alignment of year eds for subsidiary companies and new procedures to allow for defective financial statements from a prior year, to be revised.

Summary Approval Procedure
A new written approval process has been developed which is intended to simplify the procedure for certain restricted transactions. Restricted transactions that may be dealt with using the new procedure include:

  1. financial assistance for purchasing a company’s own shares;
  2. reduction of share capital;
  3. variation of share capital in a reorganisation;
  4. loans to directors;
  5. members voluntary winding up;
  6. domestic private company mergers; and,
  7. treatment of pre-acquisition reserves in respect of profits available for distribution

In all cases, the Summary Approval Procedure will require a special resolution of the members (mergers must have unanimous approval of the members) and a declaration of solvency from the directors of the company. In some cases it will also be necessary to have an independent report (generally from someone qualified to be the company’s auditors). There will also be strict filing requirements for the declarations. Overall, it is expected that the process will be less time consuming and less expensive for companies as there will be no requirement to attend the High Court.

Other initiatives in the act include


New two tier process introduced for registering a charge  where notice of a lender’s intent to create a charge may be provided to the CRO. This would allow the lender the opportunity to secure priority (up to 21 days in advance) before the charge is created.

Company Capital

A company’s capital will now be made up of the following elements:

  1. The aggregate value of the consideration received by the company in respect of shares allotted by the company – expressed as a currency amount; and
  2. Un-denominated capital which includes the share premium account, the capital conversion reserve fund and the capital redemption reserve fund.

A company will be entitled to vary its capital in advance of reorganisations where it is disposing of one or more assets, an undertaking/part of an undertaking, or a combination of assets and liabilities to a body corporate where the consideration meets certain criteria. Such reorganisation must have been approved using the Summary Approval Procedure. Where the criteria has been met, the company may, by ordinary resolution, vary the structure of its capital by reducing the reserves and company capital by an amount equal to the book value of the transferred assets and undertakings.

It is expected that this will make reorganisations much simpler and will facilitate the completion of reorganisations by companies that would have been prohibited from doing so in the past by virtue of having negative or low reserves.

Directors Loans

Must now be properly documented and approved in writing.

Mergers of Private Companies

In the past, private companies could only merge with companies in other EU jurisdictions under the EU Cross Border Merger Regulations. This has been amended by the new Act and private companies may choose to merge with another company using either the Summary Approvals Procedure or through the Courts.

Persons binding the company

There is an option to register the names of individuals who are authorised to bind the company with the CRO.

Recording of Residential address

In cases where the personal safety or security of a director or secretary is in question, an exemption to recording the usual residential address of that officer in the register of directors and secretaries may be allowed.

Redeemable Shares

It will no longer be necessary to maintain a non-redeemable portion of the issued share capital (there was a 10% threshold previously).

Share notifications

Any disclosure of interest in shares and share options below 1% of the nominal issued share capital (de minimus) is no longer required.

Share Premium and Merger Relief

For the first time in Irish Company Law, the Act introduces the concept of merger relief. There are now certain exceptions to the current requirement that the proceeds in relation to the issue of shares which are greater than the nominal value of the shares being issued must be accounted for in a Share Premium account, including:

  • Mergers - where one company has secured at least 90% equity share capital holding in another company.
  • Group re-constructions – where a company allots shares to its holding company (or another wholly-owned subsidiary of the holding company) in consideration for the transfer of assets, other than cash, from any member of the group which comprises the holding company and all its wholly-owned subsidiaries.
  • Acquisition of shares of a body corporate – where a company, “A”, allots shares to the members of another company, “B”, in exchange for all of the issued shares of “B” so that “B” becomes a wholly-owned subsidiary of “A”.


The new act formalises and legislates for voluntary strike off. There are a few small changes to the method currently used to close unwanted companies. Those include a requirement to pass a special resolution within three months of the application date and to have all of the directors of the company to sign the application to the CRO. The requirements to publish the company’s intention to apply for strike off and to obtain a letter of no objection from the Revenue remain. However, the latter must be dated within 3 months of the application being made to the CRO.


It will be possible to approve a members’ winding-up using the new Summary Approval Procedure. In general the Act has made the legislation in relation to the different methods that may be employed to wind up a company more intelligible and logical.

Should you wish to discuss your business requirements and how you will be impacted as a result of the implementation of the new Companies Act or if you have any queries in general, please contact the Corporate Secretarial Department (David McCormick, Orla Kelly or John Burns) on 01 4700 000.

Beaux Lane House
Mercer Street Lower
Dublin 2
t: 01 4700000

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