In this article I will summarise the effects of the new Irish Companies Act 2014 (CA 2014) on the types of corporate transaction that we come across regularly in day-to-day practice.
The fundamental principle evident in CA 2014 is that it has sought to clarify issues that have arisen when implementing corporate transactions under the existing legislation. This simplification was timely and will allow corporate reorganisations, restructurings and transformations to take place on a more solid legal (and accounting) basis.
We will see in the article that although CA 2014 has the effect of simplifying processes, there is also by implication an increase in the risks and obligations for directors as a result of the changes.
The various reserves that Irish companies were required to maintain was becoming cumbersome, and this is acknowledged by CA 2014.
We now have the new concept of "company capital", which is:
the share capital (defined as the aggregate amount of the value of the nominal value of the shares); and the share premium account, the capital conversion reserve fund (the reserve created after the Euro change-over) and the capital redemption reserve fund. Known collectively as "undenominated capital"
As we will see in more detail below, there will be greater fluidity and ability for companies to move between different elements of share capital. This contrasts with the existing situation where, for example, any proposed reduction of the share premium account by companies requires an application to the High Court for the purposes of s62 CA 1963.
CA 2014 also helpfully clarifies what "paid-up share capital" is: a share will be taken as paid up in cash where consideration for allotment is paid by:
cash, a cheque received in good faith, the release of liability from a liquidated sum, or an undertaking to pay cash to the company on demand or at an identified or identifiable future date that the directors have no reason to suspect will not be complied with. (One could query whether this simply increases the risk for directors and they should instead ask for the subscription amount to be paid upfront.) Companies will now have rights (some of which they had under the existing legislation) to issue shares of different nominal values, in different currencies or with different amounts payable on them. The ability of companies to issue redeemable shares (unless their constitution provides otherwise) is retained, with the added benefit that the current obligation on companies to retain 10% of the share capital as non-redeemable is removed.
There is no requirement for a company to have an authorised share capital, so the new single-document constitution can simply state the class of shares and their nominal (par) value, without setting a cap on the amount of shares that can be issued.
Payment for Shares
The status quo largely prevails here: shares may be paid for in money or money's worth (including goodwill and expertise). The main changes of relevance are that:
shares cannot be issued at a discount to their nominal value And companies may allot bonus shares. Section 71(5) of CA 2014 repeats the existing law...