The Companies Bill 2012: Points For Consideration By Irish Fund Managers And Irish Investment Companies

Author:Ms Karen Jennings
Profession:Dillon Eustace
 
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  1. Introduction

    The Companies Bill 2012 (the "Companies Bill") represents a major overhaul of Irish company law and is an attempt to consolidate all existing Irish Companies Acts and various statutory instruments into a single, and more simplified, piece of legislation. The Bill is the result of the first comprehensive review of Irish company law since the report of the Company Law Review Committee (1958) and, when enacted (expected in next 2 months), will radically reform the substance and structure of Irish company law.

    For an Irish Fund Manager, the key changes will involve reregistering its company as a designated activity company ("DAC"), the introduction of a variety of operational flexibilities (how resolutions are passed, appointment of "registered persons" who can bind the company etc.), the codification of directors fiduciary duties, and (only in the case of large firms) new directors' compliance statement and audit committee requirements.

    For Irish Investment Companies, there are far fewer implications as they have no re-registration requirement and are exempt from the directors' compliance statement and audit committee requirements.

    It is currently anticipated that the Companies Bill will be enacted within the next two months, with its commencement date expected to be 1 June, 2015.

    A number of major areas of reform are proposed, including:

    the private company limited by shares becoming the model company (rather than the public company, as is currently the case); the codification of directors' duties; new registration and priority of charges rules; and a requirement for liquidators to have appropriate qualifications. 2. New Forms of Company

    The Companies Bill provides for several new types of company. These include a designated activity company ("DAC"), a company limited by shares ("CLS"), a public limited company/ societas europaea, an unlimited company, a guarantee company, an unregistered company and an investment company.

    (i) CLS: Company Limited by Shares

    The new model private company, the CLS, is intended to replace the existing private company limited by shares. There are many similarities between these legal entities, however there are some important distinctions such as that:

    the CLS will be capable of being formed with just one director (provided that there is a separate secretary); the CLS will operate with a single constitutional document, with no objects clause; the CLS will be able to pass majority written resolutions and will be able to dispense with the need to hold an AGM in accordance with the conditions set out in Part 4 of the Bill; and the CLS will have full and unlimited contractual capacity. The "ultra vires" rule (i.e. the rule whereby a company's legal capacity was limited to the objects set out in its memorandum of association) is being abolished.

    (ii) DAC: Designated Activity Company

    The other form of private limited company provided for under the Companies Bill is the DAC. It is anticipated that Irish Fund Managers, and indeed all private companies regulated by the Central Bank of Ireland, will be established as DACs post the commencement of the Companies Bill.

    A DAC will embody certain features which are different to those of a CLS, the key features being:

    the DAC will continue to have a memorandum in its constitution. This will state the objects for which the company is incorporated (the validity of an act done by a DAC shall not however be questioned on the ground of lack of capacity by reason of anything contained in the DACs objects); the DAC will have limited liability and will have a share capital or is a private...

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