Insights

Companies (Amendment) Act 2009

 

The Act is a product of the recent economic crisis in Ireland and its introduction has been fuelled by the disclosures of large loans made by banks to their directors and is an attempt to increase regulation in the financial sector.

The Bill was recently passed by both houses of the Oireacthas and was signed by the President on the 12th July last and therefore the bill is now enacted into law as the Companies (Amendment) Act .

Below are the main changes introduced by the Act;

Powers of the Office of the Director of Corporate Enforcement (the ODCE) 

The Act enlarges the powers of the ODCE to ensure compliance with and to investigate suspicions of breaches of the Companies Acts. The changes are as follows;

Section 2 amends section 194 of the Companies Act 1963 which places a duty on a director of a company to declare any interests he may have in contracts or proposed contracts with his company. Section 194 also requires the company to keep a copy of any such declarations in a book kept for this purpose. The amendment in section 2 is designed to give the Director of Corporate Enforcement a specific right of access to this book and the power to take copies of this book.

Section 4 amends section 19 (3) of the 1990 Act and clarifies the ODCE’s power to require the production of records from third parties where such records relate to a business of a company under investigation by the DCE.

Section 5 makes a number of amendments to section 20 of the Companies Act 1990, which deals with the entry and search of premises by authorised officers of the DCE on foot of a search warrant issued by a judge of the District Court in order to allow such persons to inspect the premises where they suspect there may be material information which has not been produced in compliance with the companies act.

Section 5 makes provision for the extension of the period of a search warrant beyond the original one -month limit to a period at a judge’s discretion.  Section 5 also now allows authorised officers to seize material information, which is compromised in something else, which does not form part of the material information, (for example a pc, with material information contained in it, may be removed). Where such material information is removed from the premises in question, the section has inserted safeguards for access, storage, determination and return of the material information.

Section 6 amends section 23 of the Companies Act 1990 and permits the ODCE to seize information that is claimed to be legally privileged and provide for its storage by the ODCE, without having been examined, pending determination by the High Court as to whether any privilege attaches.

Company Transactions with Directors

The Act to increases disclosure obligations in respect of certain transactions between a company and any of its directors;

Section 7 substitutes section 40 of the Companies Act 1990, which sets out the penalty for a breach of section 31 of the 1990 Act, which contains a prohibition on companies entering into certain transactions with directors of the company or to persons connected with such directors.. The substituted provision provides that if a company enters into a transaction that contravenes section 31, every officer of the company who is in default will be guilty of an offence.

Section 40 previously provided that an officer of a company who authorised or permitted the company to enter into a transaction or arrangement knowing or having reasonable cause to believe that the company was thereby contravening section 31 was guilty of an offence. The Act aims to remove the defence for directors that they did not know the loan was illegal and therefore directors need to be fully aware of this provision.

Section 8 amends sections 41 and 43 of the 1990 Act and deals with disclosure in the annual accounts of loans made by a company to its directors and to persons connected with them. The section makes these amendments in relation to companies, which are solely licensed banks. Essentially all loans above a de minimis threshold (€3,174.35) to each individual director must be disclosed separately in the annual accounts, (previously it was only the aggregated amount of loans that was to be disclosed).  The aggregate data provision still applies to loans made to persons connected with directors where such loans are on more favourable terms than are generally available to customers of the licensed bank.

Section 9 amends section 44 of the 1990 Act and states that a licensed bank will continue to be required to maintain a register of loans to directors and connected persons and that register will now have to be accessible to the ODCE.

Director’s Residency Requirements

Section 10 amends sections 43 of the Companies (Amendment)(No. 2) Act 1999, which required at least one director of an Irish registered company to be resident in the State or alternatively for the company to provide a bond to the value of €25,394.76 available to pay fines and penalties under the Taxes Code and the Companies Code.  The amendment proposes to require that a director need only be resident in an EEA member state instead, (that being one of the 27 member states of the European Union, together with Iceland, Lichtenstein and Norway).

Under Section 44 of the 1999 Act, the requirement for directors to be Irish resident did not apply if the Company Registrar granted a certificate that the company had a real and continuous link with one or more economic activities that were being carried on in the State. This section continues to apply for Irish registered companies with no EEA-resident directors. The only change is additional clarification of the methods by which a company can prove that it has a link with an economic activity in the State.

Please note that the above is based on the Companies Bill , which was passed by Seanad Eireann. The actual act is due to be published by the Government at the end of the month and therefore the bill passed by the Seanad is the only publication currently available and the writer herein is not aware of any changes that may have been made to the bill since being passed by the Seanad.

Disclaimer

This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Reddy Charlton for any action taken in reliance on the information contained herein. Any and all information is subject to change.


Keywords: Publication, Corporate Transactions, Insolvency

< Back to Insights