(June 19, 2015) On June 1, 2015, the Companies Act 2014 took effect in Ireland. (Companies Act 2014, No. 38/2014, IRISH STATUTE BOOK.) This is the largest piece of legislation ever enacted in Ireland, comprising a total of 25 Parts (1448 sections) and 17 Schedules. The Act consolidates 16 existing Companies Acts – dating from 1963 to 2013 – into one piece of legislation, while introducing some innovations. (Companies Act 2014, Companies Registration Office website.)
Sections 54 to 63 of the Act outline the process by which all private companies limited by shares are to convert into one of the new company types. One such type, the private company limited by shares (CLS), is a simplified type of private limited company. This model requires only one director (Companies Act § 128) and has a simplified constitution (Id. § 19.) As this new model’s constitution does not require an objects clause, it allows for the removal of the much criticized doctrine of ultra vires. Previously, every company had been required to state its purpose and the range of activities it intended to carry out in its memorandum of association (Companies Act 1963, No 33/1963, § 6, IRISH STATUTE BOOK.) If a company acted outside these stated objectives (objects) then it was acting ultra vires and the act – often in the form of a contract – was void ab initio. Under the new Act, if a company wishes to retain its objects clause it must opt to form a Designated Activity Company (DAC) (Id. § 967.)
The Small Firms Association has welcomed the creation of the CLS model, which it says will be a “much simpler construct” than has existed up to now. (Laura Slattery, Companies Act Takes Effect and Will Be a ‘Single Rulebook,’ IRISHTIMES.COM (June 1, 2015).) A transition period will be allowed for an existing private company limited by shares to opt for conversion to either a CLS or a DAC. If by the end of this period a private limited company has not chosen one of these options, it will automatically become a CLS. (Companies Act § 61.)
The Act also codifies the principal fiduciary responsibilities of a director, bringing clarity to this area of law. Section 228 outlines eight duties, including the requirement that a director act in good faith, act honestly and responsibly, and act according to the company’s constitution. (Id. § 28.)
Prepared by Lucy Jones, Law Library of Congress intern, under the supervision of Luis Acosta, Chief, Foreign, International, and Comparative Law Division II.