Irish Bill will change company law, insolvency law and corporate enforcement

The Bill is a follow-up to the General Scheme of the Bill (General Scheme) and regulatory impact analysis that was published earlier in the year. The Bill generally follows the proposals in the General Scheme but with some changes – for example, some provisions around the Corporate Enforcement Authority (CEA) being able to exercise certain surveillance functions have not been included. It may be that such provisions will be included in subsequent legislation.

We have taken a look at some of the main provisions in the new Bill.

Corporate governance and administrative matters

The Bill seeks to place, on a permanent statutory footing, the right of companies to hold general meetings virtually or in a hybrid manner, while requiring that appropriate technology is used to allow members to participate in such meetings.

The Bill is also designed to enable companies to execute documents requiring a seal to be affixed in counterpart without the need to affix the seal to all of the signature pages of the document. This was previously permitted on a temporary basis as part of some emergency measures introduced during the Covid-19 pandemic.

The Bill makes provision for three grounds for the involuntary strike off of a company;

• where a company fails to notify the Registrar of Beneficial Ownership (RBO) of information in relation to the beneficial owner of a company;
• where a company fails to notify the Registrar of Companies (ROC) of a change in registered address; and
• where a company fails to record a company secretary.

The Bill looks to empower the RBO to give notice to the ROC that a company has not provided details of its beneficial owner, which in turn would enable the ROC to initiate the process to have a company involuntarily struck off. Under the proposals, the ROC would also be able to initiate this process in respect of companies that fail to notify the ROC of a change in registered address and where a company fails to record a company secretary.

The Bill seeks to permit the ROC to require evidence to verify a company’s registered address when a company is applying to register its constitution or submitting a change of registered address.

The Bill also provides for the voluntary disclosure of information by companies in relation to the gender balance among their board of directors, which can be filed with a company’s annual return.

The Bill, if enacted, would replace the current regime whereby a small company loses its audit exemption on the first occasion of its failure to deliver an annual return. This has been amended such that a company will only lose its audit exemption where it has failed to file an annual return once in the preceding five years.

The Bill seeks to make some changes to the procedures for electronic filing agents, including providing for a requirement for the agent to be approved by the ROC and a requirement that agents that are regulated trust and company service providers produce their authorisation to the ROC.

The Bill further provides that a copy of declarations made under the Summary Approval Procedure provided for under the Companies Act 2014 will have to be delivered in the form prescribed.

The Bill makes provision for mergers by absorptions of a group of private companies in one transaction rather than several transactions, while also permitting ‘designated activity companies’ (DACs) to avail of the statutory merger process – currently, at least one of the companies to a statutory merger needs to be private company limited by shares.

Insolvency and restructuring

The Bill seeks to grant a right of access to information regarding a receiver’s fees to company members and creditors. That information would need to be shared within seven days of such a request by members or creditors.

The Bill proposes to grant receivers rights in relation to remuneration regardless of the situation in which the receiver is engaged. Under the plans, the entitlement could be set out by way of a percentage, the length of time of the receivership, or by reference to any method or thing. The Bill further makes provision for what should happen where a court is asked to fix the amount owed to the receiver. In this regard, any decision would need to be taken with regard the following criteria:

• “the time properly required to be given by the person as receiver and by his or her assistants in attending to the company’s affairs;
• the complexity (or otherwise) of the case;
• any respects in which, in connection with the company’s affairs, there falls on the receiver any responsibility of an exceptional kind or degree;
• the effectiveness with which the receiver appears to be carrying out, or to have carried out, his or her duties;
• the value and nature of the property with which the receiver has to deal.”

The Bill seeks to impose an obligation on liquidators to apply to the court for the restriction of directors of an insolvent company. Such an obligation would apply throughout the liquidation process, including where appeals are brought.

The process under which liquidators must refer offences committed by officers and members of a company to Irish authorities would also be streamlined if the Bill is enacted. Referrals need to be made to the Corporate Enforcement Authority (CEA) and to the Office of the Director of Public Prosecutions (DPP). Under the Bill, referrals to the CEA have to be made without delay and as close in time as possible as to the DPP.

CEA powers

The Bill seeks to introduce a new notification requirement in respect of bankrupt individuals. Under the proposals, the CEA would need to be notified if any undischarged bankrupt applies to act as an officer of or to promote, form or manage a company at least 14 days prior to the matter coming before the court. The CEA would then be able to consider the relevant circumstances and take a position on whether the bankrupt should be allowed to act. The CEA would also be able to object to the bankrupt being granted leave to act, if it is appropriate to do so.

New safeguards in relation to information obtained by the CEA are also envisaged under the Bill. According to the proposals, the CEA would only be able to disclose information to other competent authorities set out in the Act for certain purposes – set out in section 791 of the Bill – for the performance of the functions of the competent authorities listed in the Act and for the functions of the CEA itself.

Under the Bill, the CEA would also be given more time to apply to the court for a determination on the material it has seized as to whether the information is legally privileged.

The Bill provides that the court may appoint more than one independent legal expert to examine materials submitted by the CEA for determination of their privilege status. Those experts would be expected to prepare a report on the information. The proposals are intended to streamline the process for the production of the report for the court.

Under the Bill, new offences of obstructing a CEA officer or staff member or intimidating a CEA officer or staff member would be created.