New bill seeks to streamline business regulations

On 5 March, the Cabinet approved the priority drafting of the General Scheme of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024. Within today’s fast-moving business environment, this was an important step forward in ensuring Irish company law remains relevant and fit for purpose.

“The provisions within the General Scheme reflect the recommendations of the Company Law Review Group,” commented Neil Keenan, a partner at Pinsent Masons and the Law Society’s representative on the Company Law Review Group (CLRG). “It’s streamlining a number of aspects for businesses, which is positive, but there are a few things in there that directors need to note around enforcement and the powers of the Corporate Enforcement Authority (CEA).

“There’s a bit of a step change around enforcement of company law, particularly with the CEA, which is being given additional surveillance powers in this legislation. That’s all part of a general trend in terms of approving legislation and dealing with white collar crime.”

There must still be a careful balance between reducing administrative burdens and maintaining financial transparency and accountability standards

For boards and corporate governance professionals, there are a number of positive moves in the legislation; for instance, the Bill makes permanent the ability of companies to hold virtual general meetings, which was previously just an allowance during the Covid-19 pandemic.

“There are a few things to be noted from a corporate governance point of view,” said Keenan. “Making virtual meetings permanent is an important part – and inevitable, considering the way in which we are now working. Another provision that will make things easier for small businesses is the changes to the audit exemption rules. Before, small and micro companies lose their audit exemption on the first occasion that they fail to deliver an annual return on time; under the new legislation, the exemption would only be lost when the company fails to deliver a return on time for a second or subsequent time, within five consecutive years.”

While this eases the regulatory burden on smaller companies, Keenan warned that there must still be a careful balance between reducing administrative burdens and maintaining financial transparency and accountability standards.

A particular part of the new legislation that directors should be aware of is the additional involuntary strike-off grounds. “These should be especially noted; for instance, in cases where companies have failed to file information in respect of their beneficial owners, these are now grounds for strike off.”

If a company is struck off the Register of the Companies, the directors of that company are under risk of penalties such as disqualification, yet liabilities remain and could be enforced.

A final area covered by the General Scheme is some streamlining regarding mergers. Under the current legislation, only one company at a time could be absorbed into a successor company; under the new Bill, for private companies, it would be possible to facilitate the absorption of a group of the subsidiary companies wholly owned by the same parent company in one transaction.

These are just a few of the changes in this new Bill, with plenty more to read and absorb; Keenan also warned that there will be more regulatory changes over the next year – and directors should stay aware of the changes and seek advice when needed.

“There is going to be quite a bit of new company law this year, with a number of other recommendations to come from the CLRG that will have to be implemented,” Keenan noted. “That’s in addition to the likes of the Corporate Sustainability Reporting Directive, which needs to be implemented this year. So companies must stay vigilant and keep abreast of the ongoing regulatory developments, and make sure they are getting the right expert advice to ensure they stay compliant.”