The Companies Act 2014: dealing with priorities
The vast bulk of the Companies Act 2014 was commenced on 1 June 2015. The legislation is a substantial challenge, but also an opportunity. The Law Society has focused on arming the profession with the knowledge of company law required to deal with this legislation.
There has been a series of articles in the Gazette, with more to follow. An extensive programme of CPD events throughout the country has been conducted, with a further major CPD event to take place in Cork on 10 June (proceeds to go to the Irish Rule of Law charity).
In addition, practitioners need tools such as practice notes and precedents. The act introduces two types of private company limited by shares: the new model private company limited by shares (LTD) and the designated activity company (DAC). The overwhelming majority of companies will be LTDs, the constitutional documents of which are quite different to those to which we are accustomed. During the transition period of 18 months from the commencement date, existing private companies will have to consider which corporate structure they will assume. The priority of the Business Law Committee has been to prepare a specimen constitution for an LTD that would be of assistance to the profession.
The suite of documents accompanying the practice notes here are also available under Precedents in the Business Law Committee’s webpage.
The first practice note (‘Adopting a new constitution under the Companies Act 2014– an overview’) gives an overview of what is required to navigate the changes contemplated by the legislation and the options available to existing companies. That practice note also directs readers to the relevant documents to assist them.
The best approach for dealing with the change would be for the members to make a positive decision to adopt a new constitution. The second practice note (‘Adoption of a new constitution by members’) gives guidance on what needs to be done and how it should be accomplished.
The committee has prepared a draft model constitution, which is available on the committee’s webpage. The committee has also prepared draft resolutions that are also available on our webpage.
If a constitution is not adopted by the members, in certain circumstances, the directors have an obligation to prepare a constitution. This is the subject of the third practice note (‘Constitution prepared by directors’). In order to show how the process would work in practice, the committee has prepared a case study showing how a sample memorandum and articles of association would be converted into a constitution of an LTD by the directors. The practice note directs the reader to the case note on the committee’s webpage.
For those companies that chose to convert to a DAC, there is help available in the fourth practice note (‘Constitution on conversion to a DAC’). Again, a draft resolution for the assistance of the profession had been prepared and is available on the committee webpage.
The committee is indebted to a subcommittee of its members that devoted very considerable resources to the preparation of these documents. We would also like to thank Elizabeth Fitzgerald, solicitor, who was of invaluable assistance and to extend our thanks to Paul Heffernan of McCann FitzGerald, who kindly made available to the committee material that had been prepared by him.
It must be emphasised that these documents are specimens only. Inevitably, in preparing drafts, views were taken that may not be appropriate in particular cases. Solicitors should be aware that there are many provisions of the act that are optional and can be adjusted and/or deleted to accommodate particular circumstances.
Observations and suggestions for improvement would be welcome.
The Business Law Committee hopes that these tools, and others that follow, will be of service to the profession.
Paul Keane, chairman