Companies act 2014 tax presentation

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The Companies Act 2014:

Tax Presentation

29 April 2015


Background to the Companies Act 2014

The Companies Bill was published on 21 December 2012 by the Minister for Jobs, Enterprise and Innovation.

It also introduces a number of reforms, which are designed to make it easier to operate a company in Ireland.

Set out across 25 Parts its aim is to ease accessibility of the law for each different company type

Consolidates the 16 Companies Acts as well as the many statutory instruments and court judgements

The aim is to make it easier for companies to know and understand their legal obligations. It will also implement a series of major reforms to reduce red tape and make it easier and

cheaper to run a company in IrelandThe Companies Act 2014 was signed into law on 23 December 2014 and will commence on 1

June 2015.Companies continue to operate under The Companies Act 1963-2013 until commencementThe Companies Act 2014 is available for download at http://www.oireachtas.ie

http://www.oireachtas.ie/


New Company Types

The vast majority of companies currently registered in Ireland are private companies limited by shares (EPCs- Existing Private Limited Companies).

The Act proposes two new forms of private company to replace all existing private companies

limited by shares.

LTD-Private Company Limited by Shares DAC-Designated Activity Company

A new form of simplified company limited by shares with unlimited legal capacity with a single constitutional document.

Similar to existing form of private limited company. Will continue to have a M&A, with an objects clause limiting its legalcapacity.


New Company Types

LTD Private Limited by Shares DAC- Designated Activity Company

It may have just one director but it must have a separate secretary if it has only one director.

It must have at least 2 directors

It can have between 1 and 149 members It can have between 1 and 49 members

Both single and multi member companies can dispense with the need to hold an AGM

Multi member companies are required to hold AGMs

It has a one-document constitution which replaces the need for a memorandum and articles of association.

It has a constitution document which includes a memorandum and articles of association.

It will not have an objects clause because it has full unlimited capacity to carry on any legal business, subject to any restrictions in other legislation.

It has stated objects for which the company was incorporated.

It has limited liability and has a share capital. It is a Private companyIt is a Private company and has limited liability. It has a share capital or is a private company limited by guarantee with a share capital.

It can pass majority written resolutions (special and ordinary).It can pass majority written resolutions

Name must end in “Limited” or “Teoranta”Name must end in “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” unless qualified for an exemption


New Company Types

PLC- Public Limited Companies

Guarantee Companies Unlimited Companies

Will retain objects clause Will retain objects clause Will retain objects clause

No name change required Name change may be required (if no exemption is in place)

Name change may be required (if no exemption is in place)

Can have a single member Can now have a single member

Can now have a single member

Minimum of two directors Minimum of two directors Minimum of two directors

Can offer shares to the public Can now avail of audit exemption is the criteria is met


Memorandum and Articles of Association


In accordance with 1176 (6) the memorandum and articles of association will continue in force save to the extent that they are inconsistent with a mandatory provision.

Review of the companies memorandum and articles of association highly recommended to ensure that they comply with all mandatory provisions of the Act. M&As that are in contravention of the Act will lead to confusion as their terms will be misleading.

Doing nothing is not recommended as the conversion process offers a company the opportunity to discuss with its advisers, directors and members the steps to be taken to ensure that the company has the required regulations incorporated into its new constitution.

Taking no action means the company will not have had an opportunity to review its current articles of association to see if any of those provisions are contrary to mandatory provisions.



Course of Action for

ARTICLES OF ASSOCIATIO

N

Full review of the articles, modifying where necessary and adopting

any new favourable provisions arising out of the

Companies Act 2014

Maintain existing Articles as constitution modifying only where necessary

Maintain existing Articles as the Constitution.

Mandatory provisions will prevail and company will

not necessarily have availed of any favourable

provisions


Directors’ Fiduciary Duties

8 Fiduciary Directors

DutiesCodified under Section 228

To act honestly and

responsibly

Act in accordance

with Company’s Constitution

A Director will not use the Company's

property, information or opportunities for their own interest

To exercise care, skill and

diligence

Avoid Conflicts of Interest

Have regard to the interests of

Members

To act in good faith for the

best interests of Company

Not to restrict power of Director’s

independent judgement


It is duty of each director of a company to ensure that the Companies Act 2014 is complied with (section 223(1)).

Directors will also be obliged to acknowledge their duties and obligations when consenting to act (section 223(3)).

“I acknowledge that, as a director, I have legal duties and obligations imposed by theCompanies Act, other statutes and at common law.”

Directors to have regard to interests of employees (section 224).

Duty of director to disclose his or her interest in contracts made by company (section 231).

Other Important Duties to Consider


Company Secretary Role

All Companies required to have a Company Secretary (section 129(1))

Duty placed on the Director to appoint a Company Secretary who has the:

“skills or resources necessary to discharge his or her statutory and other duties.” (section 129(4))

To comply with new requirement Directors may seek to:

appoint a Company Secretary who has the necessary skills.

obtain Company Secretarial Services.

Single Director Companies will require that Company Secretary to be a different person (section 129(6)).

Some other key duties:

Duties delegated by the Board of Directors without deviating from the secretary’s statutory and other legal duties

(section 226(4)).

the skills necessary so as to enable him or her maintain (or procure the maintenance of) the records (other than

accounting records) (section 226(2)).

Secretaries will also be obliged to acknowledge their duties and obligations


Audit Exemption

The provisions contained in Volume 1 Part 6 Financial Statements, Annual Return and Audit. The directors of a company are required to arrange for audit unless the company is entitled to

and chooses to avail itself of the audit exemption. (Sec 333)Members may requisition an auditFor dormant company audit exemption, the Act does state the directors must be of the

opinion that the company will satisfy the conditions and hold the board meeting in the financial year.

One significant change to the old legislation is if the company files the first annual return late it cannot avail of audit exemption for the first financial year.

Companies that can avail Company Limited by Shares (LTD) that is a small company Designated Activity Company Company Limited By Guarantee Small Groups Dormant companies that have no significant accounting transactions or permitted assets & liabilities Non-designated Private Unlimited Company (ULC)


Financial Statements- Size Criteria Companies Act 2014

Small Medium Large Group

Balance sheet total not exceeding€4.4m

Balance sheet total not exceeding€10m

Balance sheet total exceeding€10m

the balance sheet total of the group exceeds €10m

Turnover not exceeding€8.8m

Turnover not exceeding€20m

Turnover exceeding €20m

the amount of the turnover of the group exceeds

€20m

Employees not exceeding50

Employees not exceeding250

Employees exceeding 250

the average number of persons employed the group exceeds 250


Summary Approval Procedure The Summary Approval Procedure is covered in Chapter 7 of Part 4 of the Companies Act 2014. It is a new procedure and it covers several different areas of the Act and the procedure permits certain

restricted activities that would otherwise be prohibited. It is a means by which companies can engage in restricted activities by ensuring that the persons those

restrictions are designed to protect, consent to the action. The summary approval procedure requires that the members pass a special resolution (and in the case

of mergers, a unanimous resolution) approving the transaction and a director’s declaration in relation to the post-completion solvency of the company.

New summary approval procedure will provide a general validation process for overcoming the following restricted types of transaction:

the financial assistance for the acquisition of shares (section 82), reduction in company capital (section 84), variation of company capital on re-organisations (section 91), prohibition on pre-acquisition profits or losses being treated in holding company’s financial statements as profits

available for distribution (section 118), prohibition of loans to directors and connected persons (section 239), domestic merger (section 464), members voluntary winding up (section 579).

Charges: 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.

http://www.irishstatutebook.ie/2014/en/act/pub/0038/sec0200.html


Companies Act 2014- Summary

Company CapitalA company’s capital will now be made up of the following elements: The aggregate value of the consideration received by the company in respect of shares allotted by the

company – expressed as a currency amount; and 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.


Companies Act 2014- Summary

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 is no longer

required.

Winding-up 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


Bastow CharletonMember Crowe Horwath InternationalMarine HouseClanwilliam CourtDublin 2Ireland

www.crowehorwath.ie

Bastow Charleton is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity. Bastow Charleton and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.

Contact us

For further details on Companies Act 2014 ,SORP, or any other financial or advisory services:

Sharon Gallen, Audit Partner [email protected] | 01 488 2200

Roseanna O’Hanlon, Audit Partner [email protected] | 01 488 2200

Shane McQuillan, Advisory Partner [email protected] | 01 488 2200

John Byrne, Tax Partner [email protected] | 01 488 2200

Grainne Howard, Company Secretarial Manager [email protected] | 01 488 2200

Companies act 2014 tax presentation

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