On the horizon
Ten years on from the Companies Act 2014, the company-law teapot is brewing very nicely, thank you! In the second half of 2024, a bumper crop of new and proposed legislation has been infusing. Neil Keenan stirs the pot
For those of us who have been practising company law for some time, the Companies Act 2014 is still the ‘new’ Companies Act, so it is hard to believe that it is now ten years since it was first enacted (albeit that it was commenced during 2015 with a transitional period thereafter).
While the 2014 act was a very welcome and much-needed consolidation of company law, it has been subject to quite significant amendment since its original enactment.
The more notable amendments include the Companies (Accounting) Act 2017, which amended the thresholds for small, medium and large companies and introduced the concept of a ‘micro’ company, and which also brought many unlimited companies within the obligation to file financial statements.
The Companies (Corporate Enforcement Authority) Act 2021 replaced the Office of the Director of Corporate Enforcement with the Corporate Enforcement Authority (CEA) and introduced a number of other company-law changes, including to corporate-governance requirements and insolvency law.
The Companies (Rescue Process for Small and Micro Companies) Act 2021 introduced the very welcome ‘SCARP’ rescue process for small and micro companies.
We have also, in the interim, had the COVID-19 pandemic and a number of temporary changes to company law that were required to deal with the challenges of that period.
These were provided for in the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 and the regulations made thereunder.
These changes included the facilitation of virtual shareholder meetings, some relaxation of the requirements for affixing a company seal to facilitate electronic signing, an increase in the thresholds at which a company would be deemed to be unable to pay its debts, and an extension of the period in which a company could remain in examinership.
Some of these measures expired at the end of 2023. In practice, many of these changes were actually very useful to facilitate the new ways of remote working that we all discovered during the lockdown period and the much more remote and online environment that we found ourselves in afterwards.
Bumper year
Now that we are at the end of 2024, we are finding that this is actually a ‘bumper’ year for corporate and business lawyers, with a raft of new legislation or proposed legislation, including the Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024, which gives employees increased protections in an insolvency situation, but has also introduced significant changes to insolvency law, particularly on the tests for fraudulent and reckless trading and the periods during which a liquidator can potentially set aside transactions.
We have also seen the European Union (Adjustment of Size Criteria for Certain Companies and Groups) Regulations 2024, which increased the thresholds for micro, small, medium and large companies by 25%, and the European Union (Corporate Sustainability Reporting) Regulations 2024 (supplemented by the European Union (Corporate Sustainability Reporting (No. 2) Regulations 2024, which implemented the EU Corporate Sustainability Reporting Directive.
We have recently seen the scheme of a bill to replace the Limited Partnerships Act 1907 and the Registration of Business Names Act 1963, and a draft Cooperative Societies Bill is expected shortly.
It is notable that some important changes to the 2014 act have actually been made by way of statutory instrument, which is making it quite difficult to track what the most up-to-date legislative position is.
An updated text of consolidated company law would be very welcome at this point. In the meantime, the website of the Law Reform Commission is a very good source of up-to-date legislation.
Many of the changes and proposed changes we have seen in company law are arising from various reports of the Company Law Review Group (CLRG).
The Business Law Committee of the Law Society has also made submissions to the CLRG, particularly on some improvements it identified that could be made to aspects of the wording of the 2014 act.
Some of the changes in the new act – the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024 (which is the primary subject of this article) – arise from various CLRG reports and recommendations.
The 2024 act was signed in to law on 12 November 2024 but, at the time of writing, is still to be commenced.
These reports and recommendations include the 2019 CLRG Report on the Regulation of Receivers; the 2021 CLRG Report on Company Law Issues Arising Under Directive (EU) 2017/828 of 17 May 2017 (SRD II), Central Securities Depositories Regulation (EU) 909/2014 (CSDR) and the Companies Act; and the CLRG Report on Certain Company Law Issues Under the Companies Act 2014 Relating to Corporate Governance (May 2022).
Certain changes also arise pursuant to a review by the Department of Justice of structures and strategies to prevent, investigate, and penalise economic crime and corruption.
The 2024 act itself had a detailed preparation phase, with a public consultation issued in May 2023 and a general scheme of a bill along with a regulatory impact assessment published in March 2024.
The 2024 act is very similar to the general scheme of the bill, albeit with certain provisions not taken forward.
The changes in the 2024 act could best be grouped under the headings identified in the public consultation, being corporate governance, company-law administration, company-law enforcement and supervision, and corporate insolvency, including the regulation of receivers.
Corporate governance and administration
a) The ability contained in the 2020 COVID-19 Act whereby a company may hold hybrid or virtual shareholder general meetings is to be made permanent, unless a company’s constitution states otherwise. The requirements around this largely replicate the COVID-19 Act, and the act does set out certain procedures for the convening and conduct of a hybrid or virtual shareholder meeting.
b) A provision that expired at the end of 2023 and introduced by the COVID-19 Act, permitting companies to execute sealed documents in multiple counterparts, is reinstated. This allows documents to which the common seal of a company is affixed to be executed by the persons signing and countersigning the affixing of the seal in different counterparts to the version to which the seal is affixed.
c) A change will be made to the procedures for statutory mergers by absorption to allow multiple mergers by absorption within the same corporate group to be undertaken by way of the one transaction. In addition, statutory domestic mergers can be undertaken where all of the merging companies are ‘designated activity companies’ (DAC). The 2014 act required at least one of the parties to such a merger to be a limited company, due to some unintentional wording in that legislation.
d) There are a few changes implemented in relation to public limited companies (PLCs), specifically as follows:
- Section 1087G of the 2014 act has been amended to provide that the record date for an adjourned shareholder meeting shall be the record date of the original meeting where the adjourned meeting is held within 14 days of notice being given to members. This again is to facilitate shares held in a CSD (central securities deposit), the holders of which cannot make use of the opportunity to refresh voting instructions in a proxy form because a changed record date or a change in previously submitted voting instructions is not permitted for CSDs.
- A PLC is entitled to investigate the ownership of its shares by requiring information from persons that the company knows or has reasonable cause to believe has an interest in the shares. An obligation is to be introduced on a person to reply to such an enquiry within five days (rather than a ‘reasonable period’, which is the provision in the current law).
e) The Companies Registration Office (CRO) will be enabled to require evidence to verify a company’s registered address when a constitution or change of registered address is being registered.
f) There is an interesting provision in the 2024 act providing for the voluntary disclosure of information by companies in relation to the gender balance among their board of directors that can be filed with a company’s annual return. This is something that could potentially become mandatory in the future.
g) A useful amendment has also been made whereby a company that is entitled to the audit exemption will lose it only if there is a failure to deliver its annual return on time for a second or subsequent time in the preceding five years. Currently, any late filing of the annual return will cause a loss of the audit exemption for the subsequent year.
h) There will be a prescribed form for approval by a person or entity to act as an electronic filing agent and similar provisions will be introduced for the provision of registered office facilities to companies. Many law firms provide these services.
i) A legislative basis has been introduced for the prescribed form used by the CRO for the filing of declarations by companies that are using the ‘summary approval procedure’. Currently, many different types of such declarations may be submitted.
Enforcement and supervision
a) The 2024 act introduces additional grounds for the involuntary strike-off a company, being
- Where a company fails to notify the registrar of beneficial ownership of information in relation to the beneficial owner of a company,
- Where a company fails to notify the CRO of a change in registered address, and
- Where a company fails to record a company secretary. There are also some procedural provisions around these requirements. Strike-off on any of these new grounds won’t give rise to directors being disqualified as a consequence.
b) There is a new notification requirement in respect of bankrupt individuals. The Corporate Enforcement Authority (CEA) will need to be notified if any undischarged bankrupt applies to act in certain roles regarding a company 14 days before the matter comes to court, and can object.
c) There are safeguards covering information obtained by the CEA, so that it would only be able to disclose information to other competent authorities for certain functions linked to the functions of the competent authorities listed in the act and the CEA itself. The range of competent authorities to which information can be disclosed will be expanded.
d) The CEA will be given a longer period (14 rather than the current seven days) to apply to court for a determination as to whether information it has seized is legally privileged. It will be possible for the CEA to make the application on an ex parte basis. A court also may appoint more than one independent legal expert to examine materials to determine whether materials are subject to legal privilege and report to the court.
e) New offences of obstructing a CEA officer or staff member or intimidating a CEA officer or staff member are created.
f) The CEA is given new powers to gather information, including access to court orders relating to the restriction and disqualification of directors, an expansion of the statutory bodies that may disclose information to the CEA, and enhancement of the ability to share information with those bodies.
g) Liquidators and certain process advisers must report “forthwith” offences by a past or present officer or member of a company.
h) The Probation of Offenders Act 1907 will not apply to an offence caused by a company failing to file an annual return, as required by the 2014 act.
Insolvency and receivers
a) The 2024 act introduces a right of access to information for the members and creditors of a company regarding receivers’ fees, which must be shared within seven days of a request by members or creditors.
b) Receivers will also have rights in relation to remuneration, regardless of the situation in which the receiver is engaged, similar to the rights that liquidators have with respect to their fees. Fees can be set by way of a percentage, the length of time of the receivership, or another method or thing. There are also various criteria set out where a court is asked to fix the amount owed to the receiver.
c) An obligation is imposed on liquidators to apply to court for the restriction of directors of an insolvent company. Such an obligation applies throughout the liquidation process, including in circumstances where appeals are brought.
d) There is streamlining of the process under which liquidators must refer offences committed by officers and members of a company to the CEA and the Office of the Director of Public Prosecutions. Referrals to the CEA have to be made without delay, and as close a time as possible in relation to referrals to the DPP.
e) Certain returns that have to be made by liquidators to the CRO are to be pursuant to forms prescribed in legislation (rather than the administrative forms currently used).
f) There are some technical corrections and clarifications to the SCARP process.
In summary the 2024 act , along with legislation already enacted and other legislation proposed, heralds very significant changes that practitioners in company and business law should review carefully and advise their clients accordingly.
Neil Keenan is a corporate partner with Pinsent Masons Ireland LLP, a member of the Law Society’s Business Law Committee, and is the Law Society’s representative on the Company Law Review Group
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