CLRG Proposes Reforms To Ireland's Company Law

by Jason Gorringe, for LawAndTax-News.com, London

14 May 2007

The Chairman of the Company Law Review Group (CLRG), Dr Thomas B. Courtney, on Thursday presented the CLRG’s Report on a new Companies Consolidation and Reform Bill to the Minister for Enterprise, Trade and Employment, Micheál Martin, and the Minister for Trade and Commerce, Michael Ahern.

The new Bill consolidates 13 Companies Acts and numerous statutory instruments that span a 43-year period, into a single piece of legislation.

The proposals aim to make it simpler to set up and run a company, and include:

• A one document constitution, in place of the current Memorandum and Articles of Association;
• The possibility to waive the holding of an AGM;
• A minimum of one director instead of two, as currently required; and
• Removal of the need for a company to set down its ‘objects’ thus removing the legal risk of exceeding its powers.

Under the proposed legislation, all companies will also benefit from a reduction in Court involvement in the winding-up of companies, and root and branch updating of criminal offences, leading to a new four-fold categorisation of all but the most serious of offences.

Dr. Courtney announced on Thursday that:

“I have great pleasure in presenting the Report on the Companies Consolidation and Reform Bill and the Heads of Bill to Ministers Martin and Ahern. The Report and Heads of Bill are the culmination of a sustained programme of work by the Review Group’s members and secretariat since its inception in 2001. When implemented, the result of our work will be the most dramatic modernisation and simplification of company law in the history of the State. Our root and branch review has been informed at all times by the principles of enhancing Irish competitiveness, making regulation work better for Irish businesses, both indigenous and foreign direct investment, and optimising creditor and shareholder protection.”

Dr Courtney added that up to now company law has been based primarily around the activities of public companies and explained that:

“Our proposals are laid out so as to treat the private company as the model around which the legislation is built, given that 90% of companies in Ireland are registered as private companies And ‘thinking small, first’ has served us well in developing a robust new legislative model."

The Bill as drafted by CLRG runs to 1,263 sections, one of the biggest ever pieces of legislation in the history of the State. However, in keeping with its simplification agenda, only somewhat over half will apply to the private company limited by shares.

Commenting last week, the Institute of Chartered Accountants in Ireland (ICAI) welcomed the publication of the CLRG report on the Companies Consolidation Bill and the Head of that Bill.

ICAI Director of Technical Policy, Aidan Lambe, observed that:

"Significantly this is not a mere exercise in consolidation. What is being proposed here is a change in the law to reflect reality on the ground, namely that the vast majority of companies in this state are private rather than public limited companies. By recognising this fact in law, by accepting the primacy of the private company model, we should be better able to prepare general regulatory regimes that are appropriate for the majority of Irish companies."

"By bringing all the relevant stakeholders together, the CLRG process will ensure that this move will receive a broad welcome. This consultative model should form the basis for any significant legal and regulatory changes being considered by Government.”

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