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Companies Bill 2012: Second Stage (Continued)

Tuesday, 23 April 2013

Dáil Éireann Debate
Vol. 800 No. 3

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(Speaker Continuing)

[Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton] This is in contrast to the "new LTD company", dealt with in Volume 1 of the Bill, the constitution of which will no longer contain an objects clause.

The DAC limited by shares will be the closest type of company to the existing private company limited by shares under the current law. During the transition period, existing private companies may elect whether to opt into the new regime for private companies or alternatively, to retain their objects clause by converting to a DAC. Alternatively, an existing private company that does not wish to opt in to the new regime can do so easily by following the procedure laid down in the Bill. It is envisaged that entities which would welcome the DAC include special purpose companies, for example, those incorporated for joint ventures or for use in a financial transaction. However, the Bill does not restrict the availability of DACs to persons engaged in such activities.

Part 17 of the Bill is concerned with public limited companies, PLCs. The law in Volume 1 applies to PLCs as it does to the new model private company limited by shares, subject to the exceptions set out in its table of disapplications and any other adaptations made in this Part. The key difference between public limited companies and private companies is that only PLCs will be permitted to list their shares an a stock exchange and offer them to the public. It is provided that the authorised minimum issued share capital of a PLC must be at least €25,000 or such greater amount as the Minister may specify by order. A PLC is now permitted to have as few as one member and there is no maximum number on the membership of such a company. A PLC must have at least two directors. A PLC is obliged to establish an audit committee and corporate governance provisions for certain PLCs are set out.

Acting Chairman (Deputy Paudie Coffey): Information on Paudie Coffey Zoom on Paudie Coffey I apologise for interrupting the Minister. His time has now elapsed but I can ask Members if they agree to an extension of time for the Minister in order for him to finish his contribution. Is that agreed? Agreed.

Deputy Richard Bruton: Information on Richard Bruton Zoom on Richard Bruton I apologise to the House. I am not reading quickly enough.

Part 18 makes provision for companies limited by guarantee, not having a share capital. Such companies are known as CLGs. The law in Volume 1 applies to CLGs as it does to the new model private company limited by shares, subject to the exceptions set out its table of disapplications and adaptations made in this Part. Since guarantee companies do not have a share capital, members of such companies do not have a distinct economic interest in their capital. It is for this reason that CLGs are a popular type of company for charities, sports and social clubs and management companies. A CLG may be exempt from the requirement to use such a suffix to its name, for example, if it has a charitable object.

In a guarantee company, the members' liability is limited to such amount as they undertake in the constitution of the company to contribute to assets of the CLG in the event of its winding-up. The audit exemption is now being extended to guarantee companies under the Bill if a company fulfils the criteria for a small company. It is expected that this will benefit many guarantee companies that are charities or sports clubs, etc. Any one member of the company is entitled to object to the exemption and thus force a company to carry out an audit.

Part 19 makes provision for unlimited companies. This Part is structured in such a way that it covers both private unlimited companies and public unlimited companies. In this regard, three different types of unlimited companies are being catered for - the private unlimited company with a share capital, ULC, the public unlimited company with a share capital, PUC, and the public unlimited company that has no share capital, PULC. All three types of unlimited company already exist.

The law in volume 1 applies to unlimited companies as it does to the "new LTD company", subject to the exceptions set out in the table of disapplications and any other adaptations made in this Part. All types of unlimited company will be permitted to have just one member but will be required to have at least two directors.

Part 20 makes provision for re-registration of companies. A company will generally be permitted to re-register as another type of company, subject to complying with the requirements applicable to the latter company type. Re-registration will involve the passing of a special resolution and the delivery of certain documents including a compliance statement to the CRO. Additional requirements may apply, depending on the type of company, following re-registration.

Part 21 makes provision for the registration and disclosure requirements of external companies, also referred to as foreign companies or overseas companies, which have been formed and registered outside the State but which have a connection with Ireland. The company law review group has proposed that the law in relation to external companies be modified from the current position which provides for both the concept of "place of business" and the concept of "branch", to a position where the new law would provide only for the "branch" concept. By not retaining the concept of "place of business", it is hoped to remove the uncertainty of the current law whereby it can be unclear whether a particular company is a branch or a place of business. The consequence of this will be that external companies can elect to register as a branch and will thus be required to file accounts.

Part 22 deals with unregistered companies and joint stock companies and the application of the Bill to companies formed or registered under previous Acts. It also provides a mechanism for an unregistered company to register as a PLC. The most important unregistered company in Ireland is the Governor and Company of the Bank of Ireland.

Part 23 contains the provisions relating to prospectus law, market abuse law, and transparency law. In particular, provisions are set out regarding the consequences of a breach of a measure forming a part of any of these, and requiring a company with traded securities to prepare a corporate governance statement. For the sake of clarity, these provisions are housed in a stand-alone Part rather than in Part 17 of the Bill on PLCs, as originally envisaged in the general scheme.

Part 24 of the Bill makes provision for the establishment of companies as investment companies, currently provided for under the 1990 Act. In order to be permitted to operate, these companies must be authorised by the Central Bank. Such companies are a key constituent of the set of legal structures under which the international collective investment funds industry operates in Ireland. An investment company is a type of PLC.

Part 25 of the Bill contains miscellaneous provisions that do not naturally fit in any preceding Parts of the Bill, such as foreign insolvency proceedings, the prohibition on partnerships with more than 20 members and certain public auditor requirements.

In conclusion, I am delighted with the significant benefits which the Bill will bring to all companies, big and small, across the country. It will make it easier to run a business as a company. An entrepreneur will be able to start a company with a single director. Time will not need to be spent on convening and holding a formal AGM. There will be no need for ordinary businesses to be tied up with objects clauses and articles of association, although the Bill will retain these concepts for those companies that need them.

This Bill will enhance Ireland's competitive position as a place in which to start or to grow a business. Indeed, it will feed directly into the Government's aim to make Ireland the best small country in the world in which to do business. I look forward to working with Deputies on progressing this Bill to enactment. I believe it will bring significant benefits to companies and to business life in Ireland.

I wish to thank all those who have worked on the drafting of this Bill. The House has only seen the tip of the iceberg of work which has been done. I commend the Bill to the House.

Deputy Dara Calleary: Information on Dara Calleary Zoom on Dara Calleary I thank the Minister for his speech. I thank him also for the information on the Bill provided by his office over the past number of days. I compliment all the officials involved and all those who have been involved since 2000, the members of the Company Law Review Group. I suspect they feel like parents seeing their child go off to school for the first time - they have nurtured and cared for this child and they will worry what will happen next. I assure them we will look after it. We will be supporting the Bill on Second Stage and in the interests of the child's education we might make some suggestions on Committee Stage.

I previously expressed frustration at the slow pace of the preparation of the Bill. However when preparing my contribution I read the 1962 debate. The then Minister introduced the Bill on 14 November 1962. He apologised that the preparation of the Bill had taken rather longer than he had expected. The Opposition spokesman, Deputy Liam Cosgrave, paid tribute to the work of the company law reform committee which had been set up in 1951 and reported in 1958. The legislation eventually came to the House in 1962. Everything changes but many things remain the same. 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. The legislation has been simplified but the message must be that it is not being made easier to evade one's responsibilities as a company director or company operator. The Minister made it clear on a number of occasions that the Bill is designed to provide easier access to information and to legislation.

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