“When implemented, the (New Companies Bill) will be the most dramatic modernization and simplification of company law in the history of the state” Dr. T Courtney (Chairman CLGR) “
Date: 17 July 2012
Submitted by:Adrienne Lonergan
The Company Law Review Group (CLRG) was established in 2001 as a statutory body under the Company Law Enforcement Act 2001. The purpose of the CLRG was to review the entire body of Irish company legislation which encompasses the thirteen Companies Acts, various Statutory Instruments, the influence of European Commission directives as well as inference of common law. The aim of the CLRG was to consolidate all company law into a single and more simplified piece of legislation in order to enhance Irish law as a factor of competitiveness making it simple to establish and operate a company in Ireland.
Small to medium private companies represent 86% of Irish companies. The review is an acknowledgement that the existing legislation is not fit for purpose as the Companies Acts presume the most common corporate entity is a plc whereas in reality private limited companies are in the majority. Many businesses find the current legislation complex, unwieldy and out of date. The draft Companies Consolidation and Reform Bill 2007 (“the Bill”) is a major overhaul of Irish company law and is the result of the first comprehensive review of Irish company law since 1958.
The CLRG published its first report in February 2002 where it focused on the need to provide transparency and simplicity. This report established the framework for consolidating all existing legislation into one single Act and put forward 195 recommendations. The scope of the review puts the private limited company central, while taking into consideration enhancing Irish competitiveness, operational and practical regulation of the sector alongside managing creditor and shareholder protection. Further CLRG reports have been published alongside annual reports which provide updates on matters under review and consideration for inclusion within the particular year. It is thought that when enacted, it will dramatically change the substance and structure of company law.
The Minister for Jobs, Enterprise and Innovation, Richard Bruton published Pillar A of the Bill on 30th May 2011 in advance of the completion of drafting of the entire Bill to allow those who will be affected to prepare for the changes made by the legislation. It is expected that the remainder of the Bill will be published in late 2012, with speedy enactment thereafter.
This assignment will discuss the consolidation of the existing legislation and the many significant changes to the law which will impact Irish companies upon enactment of the Bill.
Architecture of the Scheme
At present, company law is mainly written with large companies in mind but according to the Company Registrar, Helen Dixon company registration records show 1% of companies registered are public limited companies. It appears that it would be more appropriate if the focus of company law was on the majority rather than on a small minority. Over 86% of Irish companies are small to medium sized private companies limited by shares. Historically, the same law was applicable to both private and public companies with the result of onerous obligations being imposed on smaller companies to comply with company laws, some of which bore no relevance to the running of their business. The Institute of Directors review stated that “the need to radically refocus Company Law but cognisant of the problems inherent in a “one fits all” approach”.
The proposed changes put forward by the CLRG in the form of the Heads of the Bill, separate the legislation into two volumes, namely Pillar A and Pillar B. Pillar A is exclusively concerned with the private company limited by shares while Pillar B pertains to other entities such as PLC’s, unlimited companies,...