The Companies Act 2014 is now in force for all Irish companies.
The Act has many benefits, including:
- Consolidating all company law provisions into one piece of legislation, rather than being spread over 17 Acts and numerous Statutory Instruments
- Making legal obligations clearer and easing the administrative burden on companies
- Simplifying procedures for carrying out certain corporate transactions, removing the need to obtain court approval in certain instances (for example when reducing company capital)
- Widening the audit exemption to include dormant companies, qualifying group companies and guarantee companies and expanding the exemption thresholds
One of the most significant features of the Act is that it provides for two new forms of private company limited by shares.
The current form of private company limited by shares will cease to exist 18 months after the commencement of the Act.
To deal with this situation, existing private companies limited by shares have three options:
- Convert to a new form company limited by shares
- Convert to a designated activity company
- Do nothing and be deemed a designated activity company during the transition period and a company limited by shares thereafter
Although the Act provides for an automatic default to a company limited by shares at the end of the transition period, it is not recommended that existing private companies take no action and merely rely on the default provisions in the Act to convert to the new company type.
While most of the Act became law on 1 June 2015, there are a limited number of provisions, mainly related to the preparation of financial statements, which will only take effect in respect of financial years beginning after 1 June 2015:
- The obligation on certain companies to establish an audit committee (or explain why they have not done so)
- The requirement for certain companies to produce a directors’ compliance statement on an annual basis
- The requirement for the directors to state in the directors’ report that all relevant audit information has been supplied to the auditors
- The new rules concerning disclosure of gains made by directors on the exercise of share options
For further information on the new Act, please go to the dedicated section of our website.
Contributed by Barbara Kenny.