The Companies Bill was first published on 21 December 2012 and seeks to consolidate, with amendments, certain enactments relating to companies and to provide for related matters. The Bill, the largest in the State to date with over 1400 sections, contains significant proposals for reform of the existing law which is set to have implications for both Irish fund managers and Irish investment companies.
Part 24 of the Bill establishes an “investment company” which will be materially similar to investment companies established pursuant to Part XIII of the Companies Act, 1990 (non-UCITS investment companies). With a small number of exceptions, Part 24 is effectively a re-statement of the existing law as it currently applies under Part XIII of the 1990 Act. The Bill dis-applies the general requirements relating to private companies as set out in Parts 1 – 14 of the Bill to investment companies.
Continuation in force of M&As
The Bill provides that the current Memorandum & Articles of association (M&As) of an investment company shall continue in force unless they are inconsistent with a mandatory provision of the 2012 Bill.
Status of existing investment companies
Similarly Part XIII companies will continue in existence after the commencement of the Bill but will be deemed to be an investment company to which Part 24 applies.
Corporate governance statement
The Bill also introduces the requirement for an investment company to provide a corporate governance statement in certain circumstances.
The Bill provides for several new types of private company including a designated activity company (DAC). The DAC is the company type under the Bill that is most like the existing private limited company. It is expected that Irish fund managers, along with other private companies regulated by the Central Bank of Ireland, will convert to a DAC on commencement of the Bill.
DACs will be required to produce a two-document “constitution” in place of the M&A which will set out the objects of the company but the Bill also provides that the validity of an act done by a DAC will not be called into question on the grounds of the act not being contained within the objects clause in the constitution of the company.
The Bill also provides that a DAC must have at least two directors and will be able to pass majority written resolutions as opposed to unanimous resolutions. A DAC with one member will have the right to dispense with an AGM but if the DAC has two or more members, the requirement to hold an AGM will still stand.
Existing “limited” companies will be required to change their name to include the words “Designated Activity Company”, its Irish counterpart or the abbreviations thereof. There will be a transitional period of 18 months for this requirement.
It is expected that there will be a requirement to re-register as a DAC and the Bill allows for the following two methods to achieve this:
- By the passing of an ordinary resolution no later than three months prior to the expiry of the transition period; or
- By the serving on the company, by a shareholder or shareholders holding in aggregate more than 25% of the voting rights, of a notice in writing to that effect no later than three months before the expiry period.
The Bill also introduces a codification of directors’ fiduciary duties and part 5 of the Bill sets out a non-exhaustive list of fiduciary duties which will apply to Irish Fund Managers as registered DACs.
Directors may also now be required to sign a compliance statement acknowledging responsibility for compliance by the company with its obligations under the Bill and under tax laws. This requirement will only apply to public limited companies (PLCs) or private companies, including DACs with a balance sheet total exceeding €12.5 million and a turnover exceeding €25 million.
The Bill has now passed Committee Stage in Seanad Éireann with the report and final stages completed on 30 September 2014. It is likely to be enacted before the year end with the majority of provisions taking effect from early to mid 2015.
Contributed by Stuart Connolly