COMPANIES ACT: A huge overhaul of company law to make it more easily understandable is to be put in place over the coming two years.
The first report of the Company Law Review Group (CLRG), published yesterday, outlines significant changes to the law that it recommends for implementation and are intended to simplify what is a very complex area.
The changes recommended, which are expected to be made into law, will constitute the largest change in company legislation since 1907.
At the centre of the change is the idea of making the private limited liability company the "model" for company law rather than the public limited liability company, as is the case at present. There are 130,000 private limited liability companies and only 800 public ones.
The Company Law acts will be consolidated with the new act and structured so that the first part will contain everything directors of private companies need to know in relation to their responsibilities. The rest of the act will deal with the additional responsibilities of public and other companies.
At present, the law in relation to different types of companies is spread throughout the various acts.
Speaking at the introduction of the report, the Tanaiste, Ms Harney, said a lot had been done in recent years in terms of enforcing company law.
"The other side of the coin, however, is that obligations arising under the Companies Acts must be clear and easily understood. We have delivered on enforcement. We must now deliver on simplification."
The CLRG report contains 195 recommendations covering a wide range of areas.
Private companies no longer holding annual general meetings if all members consent not to do so, the minimum number of directors of private companies being reduced from 2 to one and companies being able to use e-mails for sending information to shareholders are among the recommendations in the report.
The report recommends that a minimum fine of €500 be introduced for summary offences and a "lowest maximum fine" of €12,500 for indictable offences.
It also recommends that a special commercial division be created in the High Court to deal with business-to-business and business-to-State cases. Increased efficiency in this area could lead to more such cases being held here, as against in other jurisdictions.
Making the Republic a "centre for corporate litigation" could convince multinationals to choose to locate cases here and thereby create a lucrative mini-industry.
Another recommendation is that the fiduciary duties of directors should be stated in the companies acts. Many important duties of directors are the result of legal precedent and are not mentioned in any act.
Included in the matters to be listed are: duty of loyalty, duty to avoid conflicts of interest, duty of obedience to company constitution, duty of avoidance of secret profits and duty of independence of judgment.
The CLRG has begun work on its second report, which should be available in early 2004. It is to concentrate on the areas of shares and share capital, (including insider trading); the winding up of companies; and charges and securities.
The CLRG is a statutory advisory body established by Ms Harney to deliver a world-class companies code in the Republic.
