Summary of the General Scheme of Companies Bill 2024

The General Scheme of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024 ("the Bill") is draft legislation that was published on 15 March 2024 and has been prioritised by the government.

The Bill aims to amend the Companies Act 2014 ("the 2014 Act") in various aspects of company law such as corporate governance, enforcement and administration of company law, and insolvency.

Main proposals

• Virtual General Meetings to be permanently allowed by law: The most notable change is the permanent legalisation of virtual general meetings, which were temporarily allowed during the Covid-19 pandemic and extended to 31 December 2024. This will make it easier for companies and shareholders to fulfil their statutory duties and participate in decision-making without a physical presence. Technology must allow for participation in the meeting and a mechanism for casting votes either before or during the meeting. The notice for a virtual or hybrid meeting must give details of the platform to be used, how to access it, how to vote and how to participate in the meeting.
• Irish companies to be given a grace period for late filings: The Bill proposes to relax the penalty for late filing of annual returns and financial statements by companies, which currently leads to the loss of audit exemption for two financial years. The Bill will allow companies to retain audit exemption if they file an annual return late only once in five years. Failure to file the annual return on time for second time within a period of five consecutive years will result in the loss of audit exemption for two financial years. A late filing penalty will still be payable. This will benefit small and micro companies who face high costs and difficulties due to the existing requirements.
• New reasons for involuntary strike-off of non-compliant companies: The Bill also introduces new grounds for involuntary strike-off of companies. These include failure to notify the Companies Registration Office (CRO) of a change in registered office address, the absence of a recorded company secretary at the CRO, and failure to provide beneficial ownership information to the Central Register of Beneficial Ownership as notified by the Registrar of Beneficial Ownership. These grounds supplement the existing reasons for involuntary strike-off outlined in the 2014 Act, such as failure to file annual returns or comply with certain filings with the Revenue Commissioners. Involuntary strike-off can have significant implications for companies and their officers, underscoring the importance of adherence to statutory obligations.

Other important proposed amendments

The Bill proposes over 80 amendments to the 2014 Act, introducing significant changes in company law and compliance. Some other key proposals include allowing companies to execute documents under seal in counterpart across multiple locations, thereby streamlining the execution process. The Bill also mandates that proxy forms for general meetings must be deposited with the company 48 hours in advance, excluding weekends and public holidays, providing more time for administrators to collate votes. Furthermore, Summary Approval Procedure (SAP) declarations will only be accepted in prescribed forms, enhancing processing efficiency at the Companies Registration Office (CRO). Additionally, companies may voluntarily provide statistics on the gender balance of their directors in annual returns. The Corporate Enforcement Authority (CEA) will receive expanded powers for investigating breaches of company law and new criminal offenses are proposed relating to obstruction, interference, or intimidation of CEA officers or staff. Click here to read more.

Thousands of companies at risk of being involuntarily struck off the register for non-compliance

Since October 2023, more than 10,000 Irish companies have been strike-off listed and hundreds have been involuntarily dissolved for failing to file annual returns and financial statements with the Companies Registration Office (CRO). Following a pause during the COVID-19 pandemic, the CRO resumed its enforcement actions against non-compliant companies, potentially putting more companies at risk unless preventative measures are taken.  Failure to file these statutory documents can lead to strike-off proceedings initiated by the CRO, starting with reminder letters and escalating to publication in the CRO Gazette if filings aren't updated within 28 days. The consequences of involuntary strike off are severe, including the cessation of the company's legal existence, asset vesting in the State, frozen bank accounts, potential liability for officers and members, fines, and reputational damage.

The CRO paused its enforcement campaign following issues with the process earlier this year and has not yet indicated when it expects to recommence involuntary strike-offs. However, directors and officers of non-compliant companies should address their non-filing issues sooner rather than later to avoid serious repercussions once the enforcement campaign restarts.

Size criteria for Irish companies set to increase as a result of changes to the EU Accounting Directive

On 24 December 2023, the EU Delegated Directive (2023/2775/EU) ("the Directive") came into effect. This Directive makes amendment to the EU Accounting Directive.

The European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 have been signed into law and will come into effect on 1 July 2024. The increased thresholds will apply to financial years commencing 1 January 2024. Companies can also elect to apply the increased thresholds from 1 January 2023.

The increased thresholds are:

• Micro company: a balance sheet not greater that €450,000 with a net turnover of €900,000 and 10 employees
• Small company: a balance sheet not greater than €7.5m with a net turnover of €15m and 50 employees
• Small group: aggregate amount of turnover does not exceed €15m net (or €18m gross), aggregate balance sheet total of the group does not exceed €7.5m net (or €9m gross)
• Medium company: a balance sheet not greater than €25m with a net turnover of €50m and 250 employees
• Medium group: aggregate amount of turnover does not exceed €50m net (or €60m gross), aggregate balance sheet total of the group does not exceed €25m net (or €30m gross)
• Large company: one that does not qualify as micro, small or medium in accordance with the above

All other qualifying conditions remain the same.

These changes will potentially allow a larger number of companies to avail of the various exemptions available under the Companies Act 2014, e.g. audit exemption/abridged accounts exemption, thereby reducing some of the compliance burden on smaller companies.

These changes may also potentially remove some companies from the requirement to comply with the Corporate Sustainability Reporting Directive, as they will no longer be classified as large under the revised thresholds.

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If you have any queries in relation to this or any other aspect of your company secretarial requirements, please do not hesitate to contact our company secretarial department or any of your normal contacts in the firm.