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Companies (Amendment) Act 2009
The Companies (Amendment) Act 2009 came into effect on 12 July 2009.
The Act enhances the authority of the Office of Director of Corporate Enforcement (ODCE) and seeks to improve the transparency of certain loans made by banks and companies to their directors. It also makes important amendments to rules governing the requirement for companies incorporated in the State to have Irish resident directors. A summary of the Act is provided below.
Inspection of company records
Enforcement powers of the ODCE are extended. The right to access third party information relating to a company under investigation is clarified. The ODCE powers of entry and search of premises under the Companies Act 1990 are strengthened and the power to remove paper and electronic information is clearly set out.
Transactions with directors
Under current company law, a distinction is drawn between the disclosure obligations of companies in general and those of banks. Companies are required, under Section 42 of the Companies Act 1990, to disclose details of certain transactions (including loans) with directors and connected persons in their annual accounts. Licensed banks, on the other hand, are only obliged to disclose aggregated data on such loans where amounts were still outstanding at the end of the financial year. The Act removes this differentiation by providing that in future loans made to the directors of companies that are licensed banks will be treated in the same way as any other company. The Act also makes it clear that these disclosure requirements are in addition to any other rules imposed or to be imposed by the Financial Regulator.
Legal professional privilege
The Act proposes a significant change to Section 23 of the Companies Act 1990. At present, the provisions of the Act protect a person from having to disclose information that, in the opinion of the court, the person would be entitled to refuse to disclose on grounds of legal professional privilege. The new provisions will permit the seizure of information (whether privileged or not) on a sealed basis and provide that either the ODCE or any person affected may apply to court for a determination of matters relating to privilege. The amendments also provide for the introduction of a mechanism where the court can be assisted by the appointment of an experienced independent person with suitable legal qualification to examine the information and prepare a report with a view to assisting or facilitating the court in making its determination.
There have been concerns expressed by the European Commission that the current companies’ code is not compatible with the EC Treaty. Currently, all Irish companies must have at least one Irish resident director. If there is no Irish resident director, the company must obtain a bond in the prescribed form to the value of €25,394.76. This will not be required if the company has a certificate in place from Revenue to confirm that it has a real or continuous link with one or more activities being carried out in the State. The new Act sets out provisions by placing a requirement to have at least one director who is resident in a member state of the European Economic Area (EEA). This important change will have the knock-on effect of removing the requirement on the part of many Irish companies to put in place and maintain bonds to secure compliance with the law in this regard and will accordingly reduce the costs of doing business in Ireland for many EEA companies.