UNLESS YOU KEEP a very close eye on what’s going on in our parliament then it probably escaped your attention that TDs and Senators have recently been discussing the largest piece of legislation in the history of the State.
But what could this historic piece of legislation be? Chances are you probably haven’t heard of it and even if you have there’s a very remote possibility you’ve read it.
At 1,136-pages, with 1,429 sections and costing some €109 if you want a copy of it, it’s fair to say the Companies Bill 2013 does not make for light reading, nor has it featured much in political coverage in recent months.
But it is a bill which proposes to significantly reform company law in this country, consolidating over a dozen existing Companies Acts and promising to cut red-tape and do all sorts of good things to benefit businesses in this country.
We thought that given its size and importance, we’d give the law a quick look as it currently makes its way through the Oireachtas…
A bit of history
The bill, when published last December, was and is considered to be the culmination of a landmark project which began at the turn of the century when the then Enterprise Minister Mary Harney set up the Company Law Review Group (CLRG).
This group comprised of all the necessary stakeholders, including professional bodies, employer and business interests, regulators and trade unions, and spent the next six years producing some 14 reports, before submitting what’s known as the general scheme of the bill in 2007.
It then took another four years for the first volume of the draft law to be published.
Eventually the Companies Bill came before the Dáil last April and spent several days at committee stage earlier this month. It’s scheduled to reach report stage in the New Year with the government allotting plenty of time to debate its vastness.
In fact the bill was to spend a whole week if not more at committee earlier this month but ended up being disposed with quicker than had been anticipated as there was an unusual outbreak of cross-party support.
So, what’s the purpose of the bill?
The Companies Bill consolidates 16 existing Companies Acts which date from 1963 – when the first Companies Act was passed – to 2012 into one single piece of legislation. The bill also proposes a number of reforms which are designed to make it easier to operate a company in Ireland.
Significantly it places the most common type of company in this country – a private company limited by shares or Ltd for short – at the centre of Irish company law.
Around 90 per cent of companies registered with the Companies Registration Office (CRO) are Ltd companies and parts 1 to 15 of this bill set out the life-cycle of these companies from incorporation to ongoing operation to winding-up.
When introducing the bill at second stage in the Dáil earlier this year, Jobs Minister Richard Bruton pointed out that up to now it’s not been clear to companies what parts of company law are applicable to them.
“Company law is technical by nature,” he told TDs. “It is important to bear in mind that the last major review and consolidation of Irish company law was in the lead- up to the 1963 Companies Act, over 50 years ago.”
Since then there have been the aforementioned dozen acts as well as Ireland undertaking a significant number of EU obligations, which harmonise laws across the continent and add to the size and complexity of Ireland’s company law.
Why is company law so complex?
Company law involves balancing conflicting and in some cases competing interests.
The law must be protective of the way a company is governed, it must ensure that a company complies with the laws of the land. But at the same time it must strike the balance between protecting company’s shareholders and protecting its creditors.
“This necessary balancing of interests undoubtedly contributes to the intricate nature of company law,” Bruton said.
What else is in the bill?
After parts 1 to 15, the remaining parts of the bill deal with how the law stated in volume one is applicable to other companies such as public limited companies (PLCs) or investment companies.
While 1 to 15 deals with Ltd companies, many of the remaining sections are dedicated to different company structures. So for example, part 16 is for designated activity companies, part 17 refers to PLCs, part 18 refers to guarantee companies, part 19 refers to unlimited companies.
Other parts of the bill deal with external companies, unregistered companies, and investment companies.
Overall, what are the main changes and benefits of the Bill?
One of the main changes included in the bill is that companies will have greater flexibility to change form one type of company to another.
For Ltds, who, remember, account for 90 per cent of companies in Ireland, there are a number of changes which the Department of Jobs has highlighted including:
- They will now only need one director and not two as is currently the case.
- There will be no requirement to hold an actual, physical annual general meeting. All of this can be done in writing.
- A company will have the same legal capacity as an actual person meaning that there will be no requirement for the company to set out what it has the capacity to do and not do.
- Private companies will be able to engage in mergers and divisions. Quite remarkably there is no facility in law at present for two Irish private companies to merge.
- Guarantee companies and dormant companies will be able to exempt themselves from audits. This will apply to companies in the voluntary sector and charities.
- Rather than have a Memorandum of Association and Articles of Association a new Ltd company will only have to have a single-document constitution.
- Small companies will be able to apply to the Circuit Court to go into examinership instead of having to go to the High Court. This will have the primary benefit of reducing costs.
- Offences under company law will be ‘streamlined’ and categorised into four categories in descending order of severity. A category one offence carries a maximum fine of €500,000 or a maximum jail sentence of 10 years, an increase on the current penalties.
Other changes include streamlining the regime for external companies operating in Ireland so as that they can register a ‘branch’ in Ireland.
Currently, a foreign company who does business in Ireland from a fixed address must file its constitutional documents, a list of its directors, and the address of its ‘place of business’ in Ireland with the CRO.
What do other parties and politicians think of it?
This bill is unusual not only for its size and its complexity but for the fact that it also has cross-party support, including among those on the independent benches.
It’s no surprise that Fianna Fáil would welcome a piece of legislation that its administration put a good deal of work into. In April, the party’s jobs spokesperson, Dara Calleary, gushed: “I commend the phenomenal job of work.
“The Bill is an excellent example of tidying up legislation while maintaining very strong legislation in all areas.”
When he was Sinn Féin’s jobs spokesperson, Peadar Tóibín welcomed the legislation and said that the party “share[s] the aims of the bill and will work to ensure its timely process through the Oireachtas”.
Though broadly welcoming the bill, two independent TDs raised some concerns.
Waterford deputy John Halligan raised queries about the bill’s lack of recognition for workers’ rights, arguing they should be the ones to be paid first in circumstances where a company goes into examinership.
Tipperary South TD Mattie McGrath pointed out that the cost of the bill in printed form is “excessive” and added that “the bill is too lengthy”.
“Very few directors would have time to read its 1,300 pages.”
In typical McGrath style, he added: “One could read a novel by the late Maeve Binchy or even Deputy Shane Ross’s book on the bankers quicker.”
When will the bill become law?
It is hoped that the bill, once it completes its passage through the Oireachtas in the New Year, will enacted and enforced sometime next year.