The Companies Act 2014 (the "Act") was recently passed by the Irish parliament and is expected to be brought into force on 1 June 2015 (the "Commencement Date"). The Act is largely a consolidation and modernisation exercise.
However, there are a number of significant areas which modify existing companies legislation and which borrowers and lenders will need to consider, in respect of existing and future financings, both in the run-up to the Commencement Date and afterwards. In particular these relate to:
Registration and priority of charges. Changes to the financial assistance and connected party lending regimes. New private company types. Amendments to existing constitutional documents. Registration and priority of charges - a key change
Under the current companies legislation, priority of security is governed by the date of the charge, provided that any necessary CRO filing has been done within 21 days of creation of the charge.
The Act now provides that it is the date (and time) of registration of the charge at the CRO which regulates priority. (The exception to this general rule is where priority is governed by another statutory regime, e.g. where the charged assets comprise real estate, ships or aircraft.) Under the Act a two-stage filing process will be available so that priority can be achieved from the date of filing of a notice of intention to charge the assets in question, provided the actual charge is executed and filed within 21 days of that notice of intention.
Lenders should consider from a practical perspective whether such filings will be a condition precedent to closing, as opposed to the current practice of filing after closing, but within the prescribed 21 day period. Lenders may well take the view that the two-stage process is preferable because it ensures earlier priority of their security interest. Borrowers and lenders will also need to ensure that the terms of the security documents - especially the assets to be charged - are agreed as far in advance as possible, in order to allow any filings of intention to be made under the two-stage process. This is because successfully completing the two-stage process enables the secured lender to obtain priority from the date of notice of intention, rather than from the date of the charge.
Changes to the financial assistance prohibition
Section 60 of the Companies Act 1963 provides that a company may not give financial assistance where the assistance is given "for the...