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While Most Directors are Aware of the Impact of Changes in New Companies Act, Majority are Yet to Begin Preparations

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In the first in a series of surveys by the Institute of Directors in Ireland (IoD) relating to the new companies legislation, 9 in 10 (89%) directors have signalled some level of awareness as to how the Companies Act 2014 will affect them or their company, yet 3 in 5 (60%) directors surveyed are currently unprepared for the commencement of the legislation, which is expected in June 2015.

Plcs tend to most prepared with 62% of directors of Plcs saying they are either prepared or very prepared for the commencement of the legislation, compared to just one-third (35%) of directors of companies with less than 100 employees.

Speaking this morning at a dedicated IoD event on the Companies Act 2014, the first in a series of events in conjunction with McCann FitzGerald, Maura Quinn, IoD Chief Executive, said:

“While it is encouraging that most directors have some level of awareness of the changes in the Act at this point, with its commencement still some months away and a further transition period of up to 18 months, we want to ensure that directors are fully informed and well prepared for this important new legislation.”

The Companies Act 2014 was signed into law in December 2014 and introduces significant reforms to company law in Ireland, affecting every Irish company, its directors and shareholders.

The Act aims to make it easier to operate a company in Ireland, particularly for private companies limited by shares and directors have rated the following measures as having the most positive impact in this regard:

  • 70% say codifying directors’ duties into law will have a positive impact on operating a company in Ireland
  • 51% say the introduction of a one document constitution for certain companies, replacing the separate Memorandum and Articles of Association will make it easier to operate a company
  • 50% rate new rules allowing for online filing of accounts as having a positive impact
  • 44% believe the allowance for certain companies to have only one director will contribute to making it easier to operate a company in Ireland

41% of directors surveyed say their company intends to dedicate specific resources to manage compliance and implementation of the Act and unsurprisingly, this is higher among large companies (250 or more employees) and Plcs, with 60% of those intending to put specific resources in place to deal with the changes.

In terms of company structure, almost half (48%) of directors of existing private companies limited by shares intend to opt into the new regime for a private limited company by shares (LTD), allowing companies to avail of a range of reforms, including the option to have just one company director, rather than the existing two. 1 in 3 (36%) directors of existing private companies limited by shares remain as yet undecided as to which company structure they will opt for.

“It is particularly encouraging to see 70% of directors welcoming the codification of directors’ duties into law, a move that is both good for governance and good for directors by making the law in this area more accessible and transparent.

“While there is still time to prepare, the new Companies Act will affect every company in Ireland and the onus is on all company directors to ensure that they are adequately prepared for the significant impending reforms,” said Maura Quinn.