Recent developments in company law
New powers for the Director of Company Enforcement and increased transparency regarding directors’ loans are just some new measures introduced this year
17 November 2009
The Companies (Amendment) Act 2009 came into effect on 12 July. Among its main provisions are:
• Increased powers have been given to the Director of Corporate Enforcement (DCE)
• All officers of a company are guilty where there is a loan made to a director in breach of the legislation
• Disclosure obligations of transactions between licensed banks and their directors have been expanded
• The residency rules for Irish companies requiring an Irish resident director have been changed to require a director resident in the European Economic Area
Powers of the Director of Corporate Enforcement
The powers of search and seizure of the DCE have been extended and strengthened by expanding the powers of seizure. Among other things, the changes include: extending the powers of the DCE to enter and search premises, seize and remove information in either hard copy or electronic form and examine that information elsewhere; allowing DCE search warrants to be extended beyond the existing one-month period; providing that information which is claimed to be legally privileged can be seized on a sealed basis pending determination by the High Court as to whether the information is indeed privileged; and giving the DCE a specific right of access to, and the power to take copies of, the statutory register that records the director’s declaration of his interest in any contract.
Transactions with directors
The Act expands the legislation dealing with loans to directors (or connected persons) in breach of the Companies Acts by making every officer of the company who is in default guilty of an offence. Previously, only those directors who were in wilful default and who authorised or permitted the loans committed an offence.
A company’s accounts must disclose loans made by a company to its directors and to persons connected with them. In the case of a licensed bank: the new powers are in addition to existing rules of the Financial Regulator; the loans to each individual director must be disclosed, including the maximum liability during the financial year; and the aggregate of loans to a person connected with a director must be disclosed, including the aggregate maximum due during the financial year.
A company that is a licensed bank and its holding companies must continue to maintain a register of loans to directors and the register must be made available to the DCE. A licensed bank must also prepare a statement of directors’ and connected persons’ transactions that is made available for inspection by the shareholders before and at the annual general meeting.
However, if the particulars of these transactions are included in the company’s accounts, then no separate statement needs to be made at the AGM. The statement does not require the disclosure of information if it relates to transactions made in the ordinary course of business and on normal commercial terms.
Breach of the disclosure requirements is a criminal offence by the company and by every director, although it is a defence for a director to show that he/she took all reasonable steps to secure the company’s compliance.
Directors’ residency requirements
The Act amends the requirement in place since 1999 that at least one director of an Irish company must be resident in the state. Now, a director who is resident in an EEA member state will suffice or, alternatively, there is still the option to put in place a bond instead of having such a director. The Act also clarifies the circumstances in which a company is to be regarded as having a real and continuous link with one or more economic activities carried on in the state. Such a link removes the requirement for having a resident director.
For further information, contact Alan Browning and Dawn Byrne at email@example.com or firstname.lastname@example.org.