Directors and the Companies Bill 2012

Directors and the Companies Bill 2012

The Companies Bill 2012 is now passed and will be known as The Companies Act 2014. It is scheduled to come into effect as and from the 1st of June 2015

This is a very significant piece of legislation.  For a start, it is the largest piece of legislation ever enacted, so much so, that no one article could hope to cover adequately all that the Bill includes, suffice to say that it consolidates all Company Law within one piece of legislation and will now be the ‘one stop shop’  for all questions on company law.

The purpose of this article is to touch on two aspects of the legislation – Directors’ Duties and the new type of Companies that will emerge from this legislation.

Directors’ Duties

This Bill introduces for the first time a list of the principle fiduciary duties of the directors of an Irish company.  By doing so, this will bring much greater clarity for directors as to their duties and at the same time, will illustrate very clearly to others, what are those duties which rest on the shoulders of directors.

These duties are primarily owned to the company itself but can and are owned to others who can demonstrate loss by breach of those duties.

The really important point for all directors and office holders is that the legislation very clearly codifies the personal legal liability that rests on the shoulders of office holders.

Company Structures

The second really big change which the new legislation imposes is on the company structure.

Most if not all companies will have to look at their own constitution and take immediate advice on the steps which will be required by them to adapt to the new regime. At present the target date for the commencement of the changeover period is the 1st of June 2015 and a transition period of 18 months is provided for in the legislation.

Numerically speaking the vast majority of companies in Ireland are private limited companies.

These will now have to consider changing into a  ‘Private company limited by shares’  or  a ‘Designated activity company’.

The first category will be known by the designation ‘LTD’ and the second by the designation ‘DAC’.

The benefit of changing into the first category is the simplicity of the structure and the limitless nature of the capacity to act, whereas the second category is as its designation implies, very much a focused entity with stated activities as its objectives.

All directors should commence consideration of the implications of this legislation for both themselves personally and for their company now so that the changes which must be make can be done in an orderly fashion.

 

 

 

 

 

 

 

 

 

 

 

Share this post: