Directors should take note of recent updates to Irish company law
The reforms – which cover everything from corporate filing rules, the ongoing fallout caused by the Covid-19 pandemic and white-collar crime – have introduced a new regime for investigating and enforcing corporate breaches in Ireland and some welcome clarifications of Irish company law. .
But changes can also cause logistical headaches for administrators and their advisors and require careful attention.
The new Corporate Enforcement Authority
The Corporate Enforcement Authority 2021, which came into force earlier this year, has dramatically changed the landscape of corporate law enforcement and corporate offenses in Ireland.
The main purpose of the act was to transform the Office of the Director of Corporate Enforcement (ODCE) into a statutory and independent agency called the Corporate Enforcement Authority (CEA). The CEA will have additional means to investigate and prosecute white-collar crime and will be better placed to deal with larger and more complex investigations.
The authority is an autonomous body with a commission structure and may have up to three full-time commissioners, one of whom will be appointed as its chairman. The CEA may also appoint its own staff and appoint up to 16 An Garda Siochana members on secondment.
The law also gives the new authority additional resources compared to those available to the ODCE. New powers and other improvements will be constantly under review.
Changes to company filing rules
Another change introduced by the Corporations (Corporate Enforcement Authority) Act 2021 will alter the rules around corporate reporting. The change, which is expected to come into effect in November this year, will mean that directors will have to include an Irish Personal Public Service (PPS) number with their documents filed with the Companies Registrar. This information will need to be included in new incorporation forms, annual return forms and change of director forms after the rules come into effect.
If a non-Irish tax resident director does not have a PPS number, they will need to apply for a Companies Registrar number instead to enable filing of documents. The exact procedure for filing the company has yet to be finalised, but could involve directors swearing a ‘declaration of identity’ which, if made outside Ireland, will need to be made in the presence of a notary public .
Clarify company law
The 2021 Act also includes some technical amendments to the Companies Act 2014, after the Irish Company Law Review Group, the Business Law Committee of the Law Society of Ireland (of which I am a member) and others identified several areas of the law that needed clarification. .
For example, the new law specifies that a company can transfer its business to another company in return for the issue of shares to the shareholders of the transferring company. The only condition is that the contributing company has distributable reserves at least equal to the value of the contributed business.
The update clarifies that a capital reduction carried out in accordance with the 2014 law is not considered a distribution within the meaning of the law requiring that the normal distribution rules be followed. The 2021 law also specifies how a limited liability company can acquire its own shares without the need for distributable reserves.
If a company acquires its own shares through a merger or statutory division, those shares may be treated as own shares and may be canceled or reissued, in accordance with the new legislation. Clarifications have also been made on the circumstances in which a company’s share premium account can be used.
Further clarification is expected on a number of other issues related to the 2014 Act in future legislation.
Temporary measures to address pandemic related issues were first introduced by the Companies (Miscellaneous Provisions) (Covid 19) Act 2020. While the measures were due to expire at the end of April 2022, they have now been extended until the end of the calendar year.
The temporary measures include rules governing how annual general meetings and extraordinary general meetings can be held entirely virtually, and legislation allowing more flexibility on how Irish companies carry out deeds under the common seal by allowing directors or company secretary who sign and countersign the affixing of the seal to sign in separate counterparties. This measure also facilitates the use of electronic signatures.
Companies in financial difficulty are helped by raising the threshold at which a company is unable to pay its debts, and therefore deemed insolvent, from €10,000 to €50,000. The review period allowing a company to protect itself from its creditors to restructure has been extended to 150 days instead of the maximum period of 100 days which usually applies.
Future legislation should make some of these measures permanent.