The New Companies Bill – Better for Business?

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Companies Bill  marks the beginning of landmark change to Irish company law.

The Company Law Review Group (CLRG) has now published the first volume (or Pillar A) of the draft Companies Bill (the Bill) which marks the beginning of landmark change to Irish company law.  The second volume (Pillar B) affects all other company types is expected to be published in draft form in 2012.  These changes are expected take 2 years but could be enacted into law as early as 2013.  It is set to be the largest piece of legislation to be enacted in the history of the State and proposes sweeping reform of how the vast majority of companies in Ireland operate.


Pillar A covers the private company limited by shares (CLS), and has been published to give practitioners and company directors/members an early opportunity to prepare for the expected changes.  The CLS represents in excess of 88% of companies doing business in Ireland and the focus of Pillar A is to modernise, simplify and consolidate the law which applies to CLSs. The proposed changes will, when put into effect, make it easier and more cost effective to register and operate a company here in Ireland.


The CLS is the new model type company for the purposes of the Bill, and the CLRG has recommended that the “private company limited by shares…should be the primary focus of simplification”.   CLSs under the bill will be identifiable as “cls” rather than “ltd” and there are numerous other changes effecting CLSs which include:


A CLS will be given the same contractual capacity as a natural person and will not now be limited to act in accordance with its objects as contained in its memorandum and articles of association.   In fact, the memorandum and articles of association are now to be replaced a single document – “the constitution”, which will be a simpllified document and will not contain a list of company objects.   For example, a company in advance of engaging in a new area of business would usually be required to refer to its objects so as to ensure that it does not act ultra vires or beyond the powers of the company.  On the enactment of the Bill, a CLS will have the “full and unlimited capacity of a natural person and…(will be in a position to) undertake any business or activity, or do any other act or enter into any transaction” it wishes. In effect the doctrine of ultra vires is to be repealed.   The practical effect of this will be to reduce enforcement proceedings against companies acting outside their objects, which in turn will facilitate company business transactions.


In areas of corporate governance, a CLS can now exist with just one director, whereas before a minimum of two were required.  A secretary will continue to be required and must be a different person to the sole director.   The requirement for a CLS to hold a “physical” annual general meeting can now been dispensed with if all company members have completed a written resolution confirming that various aspects of corporate governance have been complied with.   The Bill also introduces a restriction that company directors  must be 18 years of age or older.


The fiduciary duties which a director owes a company are currently derived from case law, but will now be listed clearly in a non exhaustive list for ease of reference.  There are various other provisions which once the bill comes into effect will have to be considered by company members and directors.


Once the Bill its entirety progresses through the public consultation and legislative process, one can expect that further changes will be made.  It is in a company’s interest to take advice so as to “gear-up” for these legislative changes and to be prepared for any practical effect to its business.



Ahern Roberts O’Rourke Williams & Partners ©