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Proposing various changes to the Companies Act 2014, the General Scheme of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024 (the “Bill”) has been published.
The Department of Enterprise, Trade and Employment note that the changes aim to strike a balance between “simplifying the day-to-day running of a business”…and… “maintaining necessary protections for those dealing with companies, such as creditors and investors”.
Company Law Framework
Mr. Dara Calleary, Minister of State for Trade Promotion, Digital and Company Regulation said: “Company law is dynamic, and a strong company-law framework is essential to support a productive and competitive economy and reinforce Ireland’s reputation as an attractive place to do business.”
Welcome Reform
The Bill introduces welcome changes to the holding of virtual meetings as well as updates to the law around companies’ corporate governance requirements, delivery of a proxy for a shareholder meeting and application of the company seal remotely. It will repeal and replace certain provisions of the Companies Miscellaneous (Covid-19) Act 2020.
Virtual Annual Meetings
Companies will be able to hold their annual meetings either entirely virtually or by way of a hybrid between in-person and virtual attendance.
Company Sealing Requirements
Under the Companies Act, unless varied by a company’s constitution, a company’s seal is affixed in the presence of two directors or a director and the secretary, meaning that in most transaction scenarios both must be present in person together. This can be challenging for a remote completion.
The procedure for allowing a company to execute under seal with the witnesses to the seal signing separately will be permanently reinstated when the Bill becomes law, allowing signing by counterpart which is welcome.
Proxies
Under the Companies Act, unless varied by a company’s constitution, delivery of a proxy to attend meetings in place of a member must be 48 hours before the meeting time. The proposed amendment will exclude public holidays and weekends from this 48-hour timeframe.
Corporate Governance
Other key amendments from a corporate governance perspective are:
Audit Exemption for Small Companies: If a small company fails to deliver its annual return more than two times within a five-year period it could lose its audit exemption.
Summary Approval Procedure: Going forward, these will be submitted using a prescribed form to the Registrar of Companies. Currently, companies must use a form issued by the Registrar.
Gender Composition of a Company’s Board: Companies can voluntarily submit this information for statistical reasons.
Company’s Address: Documents to verify a company’s address may be requested by the Companies Registration Office. This may impact the use by companies of serviced registered offices.
Next Steps
The Bill is at General Scheme phase and will hopefully be passed into law in the coming months.
Conclusion
The proposed changes are to be welcomed, to ensure Ireland’s Companies Act 2014 remains fit for purpose, in a more modern business regulatory environment that reflects international best practice.
The General Scheme covers a wide range of areas and highlights the importance of companies having strong corporate governance practices in place.
Further Information
For further guidance on the implications of the Companies Bill 2024, please contact Gríana O’Kelly, Head of Corporate & M&A and Commercial Contracts.