If you own a company in Ireland, you may be looking at some big changes from June 1st 2015 when a new Companies Act is introduced. Private Limited Companies make up around 90 percent of all companies in Ireland so huge numbers of business owners in the country will need to make sure they’re up to speed with the new law.
Change of direction
Previously, when opening a standard company in Ireland, two directors were required with one being a resident of the European Union. However from June, it’s possible to run a Private Limited Company with only one sole director as long as they are a resident of the European Union and over 18 years of age. (Anyone from outside the EU can still open a company in Ireland but they cannot open as a sole director – one other director must be appointed who lives within the EU).
If you do choose to go the route of a single director company, a separate company secretary will need to be appointed. This can be an individual or a corporate body but if they’re an individual, they cannot be the same person who fulfills the director’s role. They must also be over 18 years of age and chosen for their required skills in this position.
Change of constitution
Thanks to the new law, a more simplified format will be introduced for a company’s structure. In previous years, directors of a standard Private Limited Company had to state their business objectives in a document called a Memorandum and Articles of Association before the Irish government permitted them to trade. But under the new Companies Act 2014, a Constitution will replace the old Memorandum and entrepreneurs will no longer have to outline their objectives to the government, meaning business owners will be permitted to trade in any legal business they wish.
From June, Private Limited Companies will get a transition period of 18 months to adopt a new constitution. For any business owners failing to register their new constitution, the government will just apply a blanket standard constitution. This may not be a complete disaster but for companies wishing to be very specific in their trading or on matters such as meetings or director’s powers, it is recommended to file your own tailor-made constitution for your business at the first available opportunity.
Changes of business type
For business owners who incorporated their companies with the old system as a “Private Limited by Shares” (PrC) they’ll need to choose between converting to one of these two new company types – LTD (Private Company Limited by Shares), or DAC (Designated Activity Company). Guarantee companies and unlimited companies will also be required to change their names under the new law.
Changes in directors’ loans
Big changes are afoot regarding the subject of director loans. For example, in the absence of a written document there was an assumption that loans from companies to directors would carry a 5% interest rate and are repayable on demand. But to avoid any tangled issues it is now recommended that all loans to and from the company need to be properly documented, clearly stating the term, the interest rate and whether the loan carries preference over other creditors.
Changes in the director’s duties
To prevent difficulties within the ranks of the company, the Director must also need to stick to a new code which includes:
- acting in good faith
- acting honestly and responsibly
- acting in accordance with the company’s constitution and to exercise those powers only for lawful purposes
- not to use company property unless approved by the members or the company constitution
- to avoid conflicts of interest
- to exercise care, skill and diligence
- to have regard for the interests of members as well as employees
For those Directors who break the code or commit an offence according to their constitution, there is also a simplification of offences ranked on a scale from 1 to 4 (1 being the most serious) for breaching company law. Depending on the severity, directors found guilty of breaching the companies act can be liable to punishments that will range from €5,000 – €500,000 in fines or a maximum jail sentence of 10 years.
Keep ahead of the changes
Whether you’re already a director or an entrepreneur who wants to incorporate a company in Ireland, you can read online the full Companies Act 2014 from the Office of the Attorney General,but if the thought of wading through pages of legal jargon fills you with dread you can always speak to your accountant, lawyer or company formation agent to clarify your position.
This post was written by company formation agent Euro Start Entreprises – helping SME’s open or expand their operations throughout the UK, Europe, US & Emirates.