Corporate Law Update: 2015 Review
19 January 2016
2015 was an important year for businesses in Ireland.
Key topics in 2015 included:
The commencement of the Companies Act 2014 made last year an historic one for company law in Ireland. 2015 was a boom year for M&A and signs are positive for continued growth into 2016.
The Companies Act 2014 (the “Act”) came into operation on 1 June 2015. This is the largest piece of legislation Ireland has ever seen, comprising a total of 25 parts, 1,440 sections and 17 schedules.
The Act has repealed the Companies Acts 1963 to 2013 and consolidated them into a single piece of legislation. The Act:
- introduced two new forms of private company: (1) a private company limited by shares (“LTD”); and (2) a designated activity company (“DAC”). A DAC retains the characteristics of the “old” form of limited liability company but a range of streamlined governance reforms now apply to the LTD;
- makes it possible for companies to carry out certain corporate transactions which were previously unavailable, restricted or prohibitively expensive;
- codifies directors’ duties for the first time by unifying duties from the common law, equity and statute;
- changes the requirements relating to directors’ loans;
- widens the audit exemption to include guarantee companies, dormant companies and qualifying group companies;
- requires certain large companies to form an audit committee; and
- requires DACs, LTDs and companies limited by guarantee, which meet certain conditions, and all PLCs (excluding investment companies) to include a compliance statement in the directors’ report attached to the financial statements.
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Some of the innovations introduced under the Act which facilitate and simplify corporate transactions include:
- changes to the distribution rules to enable certain transfers at book value;
- a liberalisation of the financial assistance rules that previously prevented certain actions by companies;
- a new streamlined whitewash procedure called the Summary Approval Procedure, which allows companies to enter into previously prohibited transactions such as the giving of loans to directors and connected persons and unlocking pre-acquisition profits;
- removing the need to obtain court approval for certain corporate actions such as reductions of capital; and
- domestic mergers and divisions of any kind of company.
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Last year saw further growth in the Irish economy and increased activity in the M&A market. Data from Thomson Reuters quantified the value of Irish M&A at $84.7bn, up from $68bn in 2014.
According to the European Commission, Irish GDP grew by 6% in 2015. This growth, coupled with record low interest rates, created a favourable climate for deal-making. In addition, M&A activity was increasingly financed by alternative sources of funding such as private equity, mezzanine finance and the bond markets.
The Corporate team in Mason Hayes & Curran were involved in some of the biggest and most exciting transactions in Ireland in 2015:
- We are advising Activision Blizzard, a member of the S&P 500, on its US$5.8bn recommended offer for King Digital Entertainment plc., the publisher of Candy Crush
- We are advising McKesson Corporation on its acquisition of the pharmaceutical distribution business of UDG
- We advised Deutsche Bank AG, London Branch on IAG’s takeover of Aer Lingus
What’s on the Horizon for 2016?
The European Commission have forecast further growth for the Irish economy in 2016 and healthy levels of M&A activity are expected to continue.
Directors of “old” limited liability companies will need to decide which form of company, a DAC or LTD, is most suitable for their business. There are no filing fees for conversion to a DAC or LTD during the transition period, ending on 30 November 2016, but on that date all limited liability companies will automatically be converted into an LTD.
For more information, please contact a member of our Corporate team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.