A breif summary on the ins and outs of Irish Company Law.
Irish company law has evolved over the past number of years so it is very important that you and your company are reviewing it regularly to ensure compliance. With the introduction of the Companies Act 2014 certain changes to corporate governance practice has made life a lot easier for businesses.
We set out below some key reforms that make completing corporate transactions in Ireland a lot more, straight forward.
Pre the 2014 Act, Ireland did not have any statutory rule book in relation to the merger of private companies in Ireland. Now, since the introduction of the Act in 2015, where two Irish companies intend merging one can transfer its assets and liabilities to the other, provided one of the companies is limited and the former company is then dissolved. The are three different ways that the parties to a merger can go about merging their companies, these are:-
Merger by absorption – this is where an existing company acquires all of the assets and liabilities of its wholly owned subsidiary and that subsidiary is dissolved without going into liquidation.
Merger by acquisition – this is where an acquisition by a company of all of the assets and liabilities of another company in exchange for the issuing of shares or securities in the acquiring company to the members of company being acquired. The company that has been acquired is then dissolved without going into liquidation and
Merger by formation – this is where two or more companies transfer all of their assets and liabilities into a newly formed company in exchange for the issue of shares or securities in the newly formed company to the members of two existing companies, which are subsequently dissolved without going into liquidation.
Of course, these types of merger procedures will be of great assistance to groups that have complicated group structures. For example, a group could simplify or clean up its structure by merging and dissolving certain companies which are dormant without having to put those companies into liquidation.
2. SAP – Summary Approval Procedure
This is a new procedure which allows for the approval of certain transactions and restricted activities which would otherwise be prohibited. These restricted transactions can be approved by special resolution provided the directors confirm by way of declaration that the Company, post transaction shall be solvent. Transactions that can be carried out by this method in a private company include:
- financial assistance for the acquisition of shares.
- a reduction in the capital of the Company.
- variation of company capital on re-organisation.
- members voluntary winding up.
- prohibition of loans to directors and connected parties.
- prohibition on pre-acquisition profit or losses being treated in holding company’s financial statements as profits available for distribution.
There are different rules in relation to public companies, this procedure can only be used for loans to directors and connected persons, distributions and to effect a members’ voluntary winding up.
Previously these types of activities required and application to the High Court.
3. Written Resolutions – Majority Rules
The legislation allows for members or shareholders of the company to pass a majority written resolution subject to particular conditions. For an ordinary resolution to be passed, the resolution will be valid if signed by a member or members representing more than 50% of the total voting rights and for a special resolution to be passed at least 75% of the members with voting will have to have to sign the written resolution. If you meet the criteria then the requirement to hold a formal general meeting is disposed of, saving both time and cost.
All of these procedures help to make the running of businesses less formal and less time consuming. However, it is important that the procedures are followed and that resolutions are signed and proper notice is given.
If you have any queries in relation to any of the issues raised above, please do not hesitate in contacting us for advice on Irish Company Law.