Incorporation & Consequential Matters

Part 2 – Incorporation & Registration

The Companies Act 2014 simply states that “a company may be formed for any lawful purpose by any person or persons subscribing to a constitution” as long as the requirements of the Act are fulfilled.

What are those requirements?

They relate to the constitution of the company, the fact that the company must carry on its activity in the State and provisions concerning the company’s name. The requirements are set out in Part 2 of the Act, which spans Sections 15 to 63. Most of the relevant requirements can be found in “Chapter 2” of Part 2.

The principle of limited liability is unchanged and can be found here (Section 17 (2)).

The maximum number of members of a company has been increased from 99 to 149 (Section 17(3)). If more than 149 members are registered, the registration of those who have been registered after the limit has been reached will be deemed void. The 149 limit does not take into account employee-members and former employees who were members at the time of their employment.

If two or more people hold one or more shares jointly, they are treated as being a single member.

The principle that a company cannot be registered unless its activities will be carried on in the State is re-enacted.

Private companies limited by shares cannot carry on the business of credit institution or insurance undertaking.

The memorandum and articles of association are no more. In an effort to simplify matters, all CLS are to have a one document “constitution”.

In a significant change, the constitution will not contain an objects clause.

So what form should the new company constitution take? You can find the statutory guidelines here (Section 19). It must state [1] the company’s name; [2] that the company is a CLS; either [3A] the amount of authorised share capital and how the division of the capital into shares works; or [3B] a statement of how the share capital is divided at the time of the company’s registration; [4] the number of shares to be taken by each subscriber; [5] whether the company is adopting supplemental regulations (and if so, which ones).

The constitution should look like this: Schedule 1. Its paragraphs should be numbered and it should be authenticated by signing and sealing (Section 888).

When the constitution is delivered to the Registrar it should be accompanied by:

• A statement of consent (Section 22).

• A declaration which states the purpose of the company and that all the requirements have been complied with and all particulars are correct. This declaration can be made by a director, a secretary or joint-secretary, or the solicitor engaged in the formation of the company.

• Also, if none of the persons involved in the formation of the company are resident in an EEA state, a bond to the value of €25,000 must be delivered to the CRO (Section 22(6) and Section 137(2)).

• Or, if any person named in the statement as a director has been disqualified from being a director in another State, that person is obliged to deliver a separate statement, outlining the jurisdiction in which he/she was disqualified, and the date and the period of disqualification.

The Act allows the Registrar to accept the declaration made by the director, secretary or solicitor as sufficient evidence that the requirements have been complied with. It should be noted that the declaration is not a sworn one.

The old “Section 25” is re-enacted in Section 31 of the Act:

Once it is registered, the constitution binds the company and the members to the same extent as if it had been signed and sealed by each member. A company may provide otherwise in its constitution, but if it does not, the rule outlined above is deemed to be the status quo.

Each member can request a copy of the company’s constitution and the company must send it to the member free of charge (Section 37). If the member asks for more than one copy, each additional copy may require a €5 payment to the company.

A company can amend its constitution by special resolution. Any amendment will be as valid as if it had been there from the beginning; amendments can also be amended by special resolution.

The amendment and a copy of the amended constitution should be sent to the Registrar. The Registrar has a new obligation – to publish in the CRO Gazette, notice of the delivery of certain documents which are listed here (Section 33).

On the registration of a company, the Registrar certifies in writing that the company is incorporated and issues its certificate of incorporation. The certificate of incorporation is conclusive evidence that the company is registered under the Act.

From this moment, the subscriber(s), along with anyone who later becomes a member, become a body corporate, with perpetual succession and a common seal.

The persons named in the statement (Section 22) are automatically appointed as its first directors and secretary. If a person is not named in the statement, that person can not be named as director in the constitution; such nominations are void.

There are a number of sections relating to the company name (“provisions as to names of companies”, “trading under a misleading name”, “reservation of a company name”, “effect of reservation of a name”, “change of name”).

There is nothing new in any of the above. The main points contained in the sections are as follows:

• As before, a company must have “limited” or “teoranta” in its name (and these may be abbreviated to “ltd” and “teo”);

• Business names ought to be registered where the corporate name isn’t being used;

• Undesirable names won’t be registered (though decisions in this area can be appealed);

• Entities that are not companies are not allowed trade using “limited” or “teoranta” in their names. A breach of this provision can lead to a €5,000 fine. (Section 27);

• A person can reserve a company name before the company is formed for a 28 day period. This period can be extended once for a further 28 days. (Section 28);

• A company may change its name if it passes a special resolution to do so and receives the approval of the Registrar (Section 30);

• If a company has been registered under a name that is too similar to an already-registered company name, the Registrar may order a name-change within six months of the company’s registration. If this happens, and the company does not change its name, the company and any of its officers may be subject to a €5,000 fine. A name-change under these circumstances doesn’t affect any legal proceedings in being by or against the company.

A company may authorise a person – the “electronic filing agent” (or “EFA”) – to do a number of acts on its behalf.

They can be found here (Section 35). These provisions are a re-enactment of s 57 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005.

Information about EFAs can be found on-line by searching “CRO Information Leaflet No. 15/September 2005, ‘Statutory Electronic Filing Agent’.”