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Charities Towards 2012:Company Law for the 21st Century –
The Proposed Companies Consolidation and Reform Bill
Dr Thomas B Courtney
Outline of Presentation
Company Law Reform in Ireland The Company Law Review Group CLRG’s First Report – the New Private Company Selected Specific Simplifications The Report on the General Scheme The Guarantee Company The Time Frame
Company Law Reform in Ireland
The McDowell Working Group on Compliance and Enforcement (1998)
Only 13% of companies complied with their obligations to file their annual returns on time.
Stop-start law reform unacceptable. Recommended one comprehensive and
comprehensible company law code.
The Company Law Review Group
CLRG established on an administrative basis. “…shall seek to promote enterprise, facilitate
commerce, simplify the operation of the Companies Acts, enhance corporate governance and encourage commercial probity.”
Minister sets work programmes. Currently on fourth work-programme.
CLRG’s First Report – the New Private Company Published February 2002 with 195
Recommendations. A unanimous blueprint! The “big idea” – segregate the private company. Move from legislative after-thought to centre stage. Pillar A – Private Company Limited by Shares. Pillar B – All other Companies, including Guarantee
Companies.
Selected Specific Simplifications
Allowing All Private Companies Dispense with the AGM– Already permitted for single-member
– Proposed to extend to all private companies
Selected Specific Simplifications
Private Companies should be permitted to have only One Director – Token directors are anathema to modern corporate
governance;
– Wrong to force people to assume duties and responsibilities to meet a numeric statutory requirement.
Selected Specific Simplifications
Codification of directors’ duties in statute– Primarily a codification of the existing common law.
– Duty to act honestly and responsibly.
– Can have regard to shareholder that appoints director.
– But duties only enforceable by the company.
– Will also apply to Guarantee Companies.
Selected Specific Simplifications
Replacing Memorandum and Articles of Association for Private Company – Providing for a one-document constitution;– Name clause, liability clause, share capital clause,
association clause and whatever articles as to internal management as might be desired.
– Table A’s provisions have been migrated to the Act and will automatically apply to the company “unless the constitution provides otherwise”.
Selected Specific Simplifications
Ultra Vires should be abolished for Private Company
private companies will have the same legal capacity as a natural person – no more objects clause!
Other companies (e.g. Guarantee Companies) must, however, have an objects clause although doctrine of ultra vires has been mitigated.
Selected Specific Simplifications
Omnibus validation Procedure– The same validation procedure will facilitate:
Financial assistance; Guarantees and security for directors and connected
persons; Redemption of shares; Voluntary winding up.
The Importance of the Other Company Types such as PLCs, Guarantee Companies, Unlimited Companies etc
The Report on the General Scheme
Published in May 2007. Accompanies the two-volume Heads.
– Commends General Scheme to Minister;
– CLRG and its Work;
– Principles: simplification, modernisation & consolidation
– Regulatory Impact Analysis;
– Architecture;
– Exposition of Pillar A;
– Exposition of Pillar B.
Pillar A – The Private Company
The General Scheme will give effect to the primacy of the private company as the preferred corporate entity of choice and it will be moved to centre stage and be the new model company in Irish company law.
Pillar A will be self-contained and all law relating to the private company limited by shares will be here.
Pillar A – 14 Parts
Definitions and Interpretation Incorporation and Registration Shares and Share Capital Corporate Governance Duties of Directors and Others Accounts, Audit and Annual
Return Debentures and Charges Receivers
Reconstructions & Arrangements Examinership Winding-Up Strike-Off and Restoration Compliance, Investigation and
Enforcement Powers and Duties of the
Minister and Regulatory and
Advisory Bodies
Pillar A – Key Features of Private Company
Limited by shares and must has a share capital. Same capacity as a natural person. One-document constitution: no M&A. 99 members. No prospectus; no listing shares or debenture. Can have just one director.
Pillar A – Key Features of Private Company
Can have just one member. Members can waive the requirement to hold an
AGM. Members can pass a majority written resolution. Eligible for audit exemption.
Pillar B – Other Corporate Forms and Miscellaneous Provisions The public limited company, or PLC – limited by
shares The designated activity company or DAC
- limited by shares or- limited by guarantee having a share capital
The Guarantee Company – limited by guarantee without a share capital
Pillar B – Other Corporate Forms and Miscellaneous Provisions The Unlimited Company
– private unlimited company with a share capital (ULC);– public unlimited company with a share capital (PUC);– public unlimited company without a share capital (PULC)
External Companies Unregistered Companies Investment Companies
Pillar B – Other Corporate Forms and Miscellaneous Provisions
legitimate users of each type of company company law should be facilitative of business and
the wider community by making appropriate provision for different types of companies.
the structure will discipline future thinking on the appropriateness of particular provisions to the different types of company.
Guarantee Companies In Part 4 in Pillar B, the law that applies to the
private company, as set out in Pillar A is expressly applied to the Guarantee Company, subject to the dis-application of certain provisions that are not relevant to it.
Also applied to Guarantee Companies are 85 additional Sections that are not contained in Pillar A (because they are of no relevance to private companies) but which are relevant to Guarantee Companies.
Guarantee Companies
No charity, or other activity-specific, provisions will be contained in Companies Acts.
Companies Acts should address formation, management, membership and other matters integral to the legal entity that is the company not the activities which companies engage in.
Other Departments and regulators are better suited to legislating for activities which can indeed be pursued by legal entities other than companies.
Guarantee Companies
The Companies Acts will continue to be available for use by charities and to my mind will provide a far more suitable vehicle than spawning some new form of legal entity.
Charities could, however, benefit from a Regulator fixing upon a standard form of articles of association (or objects clause) which, the Regulator could require, be adopted by every registered corporate charity .
Guarantee Companies
Appropriate persons (regulators or Departments) should be able to apply additional requirements over and above the Companies Acts’ requirements (e.g. Charities Regulator could require charities that are companies to state their annual charitable activities in their Directors’ Report and be empowered to enforce this).
Guarantee Companies
A regulator should, with DETE’s consent, be able also to disapply certain Companies Acts provsions to companies engaged in activities for which that regulator is responsible.
Transparency must be maintained, though, and any disapplication of a Companies Acts provision to a particular company would have to be recorded on the CRO’s register.
The Time Frame…
General Scheme is currently with the office of the parliamentary draftsman.
Hopefully drafted by mid 2008. Passage through the houses of the Oireachtas. Hopefully enacted in 2009! Most likely commencement would be 12 months
later…
Company Law Reform Goes On…
Minister has set a fourth work programme for the CLRG.
Five work streams:– Registration & Incorporation
– Partnership Law
– Auditors and Financial Statements
– Criminal & Enforcement
– Modernisation for Competition
Company Law Reform Goes On…
Any proposed changes recommended, which are accepted by the Minister and the Government, will then be passed on to the parliamentary draftsman to ensure that the Bill produced reflects state-of-the-art thinking in company law.
Conclusion
CLRG is not infallible and there will be gaps in the heads.
The time for the users of company law to point these out is now.
The prize we are playing for is a state of the art Company Law Code which will promote Irish enterprise, facilitate commerce, simplify the operation of the Companies Acts, enhance corporate governance and encourage commercial probity.
Arthur CoxCompany Secretarial ServicesDr. Thomas B. CourtneyPartnerHead of Company Secretarial ServicesArthur CoxEarlsfort CentreEarlsfort TerraceDublin 2Tel: (+ 353 1) 618 0000Fax : (+ 353 1) 618 3919Email: [email protected]
www.arthurcox.com
