A company is formed by the filing of papers in the Companies Registration Office. The formation documents are filed together with the draft constitution signed by the initial incorporators or promoters. The CRO issues a Certificate of Incorporation. This is proof of the company’s existence.
The process has been largely paper-based. There are now options for electronic filing, although paper signatures are still required in most cases. Applications to incorporate companies can be submitted under any one of three schemes.
With the ordinary scheme, formation normally takes 15 working days. The Fé Phráinn scheme normally takes ten working days. The Online A1 scheme normally takes five working days
Documents are processed in chronological order and are subject to checks. Documents returned for correction are processed according to the date of re-submission to the CRO.
The CRO operates the Fé Phráinn company and the A1 Electronic schemes which streamline the incorporation of companies required for immediate commercial use by company promoters. Company formation agents and professional service firms are commonly scheme members.
Under the older Fe Phrainn scheme, the CRO guarantees to participants that they will be provided with a certificate of incorporation within ten working days of the relevant documents having been completed correctly and lodged with the CRO. The scheme applies to private companies limited by shares, unlimited companies and companies limited by guarantee.
The company promoters submit a draft constitution to the CRO for approval. When approved, the draft is printed by the applicant, to CRO specifications, and it becomes the standard text against which all future applications will be examined. A copy of the printed version of the memorandum and articles is retained by the CRO for comparison against applications received from participants. This is to ensure that the contents remain unaltered from one application to the next.
Application for the registration of companies which are lodged under the scheme do not require the usual intensive level of attention at the incorporation stage. They have, in effect, been checked previously which enables the issue of certificates of incorporation within ten working days. As the purpose of the scheme is to facilitate company promoters who require speedy incorporations, no amendments may be made to the approved text without the express prior approval of the CRO.
The online A1 scheme is an electronic company incorporation scheme designed to facilitate those presenters who require speedy company incorporation. The papers are lodged, principally using an electronic interface, emulating the current CRO form designs.
It may in practice be difficult for inexperienced members of the public to form a company quickly. The CRO will require errors to be corrected. In practice, many companies are formed by formation agents. Formation agents specialise in the formation of companies. Formation agents form companies to order and will have preapproved formats which will expedite incorporation.
Historically, formation agents maintained a stock of “off the shelf” companies. Shelf companies are formed by the formation agents using its own nominees and holding it “on the shelf” for purchase. The agent’s employees may be the incorporators and subscribers to the memorandum of association and might be the initial directors and shareholders in some cases. When the formation is completed or when a pre-formed “shelf” company Is purchased, the original nominee directors and shareholders resign and are replaced by the buyer’s representatives.
The use of “off the shelf” companies has been eroded by the limitation on the number of directorships and by a marked increase in companies law compliance obligations. In practice, most formation agents form the company to order, without the use of nominee directors or subscribers.
Incorporation: 2014 Act I
A company may be formed for any lawful purpose by persons subscribing their names to a constitution and complying with the provisions of the Act as to registration. The certificate of incorporation proves the existence of the company. It shows the date of commencement of its existence.
A private company limited by shares (an LTD) may commence trading immediately upon formation. A public company may not commence trading until the CRO issues a certificate which confirms that the minimum capital has been paid and that certain other requirement have been complied with.
The number of members of a private company (an LTD) shall not exceed 149. The purported registration of members in excess of the limit is deemed void. The following persons are disregarded in that calculation:
- persons in the employment of the company;
- persons who, having been formerly in the employment, who while in that employment, and after that continued to be, a member of the company.
Where two or more persons hold shares jointly, they are treated as a single member.
Incorporation: 2014 Act II
The liability of a member is limited to the amount, if any, unpaid on the shares registered in his name at that time.A company shall not be formed unless it appears to the Registrar of Companies (CRO) that the company, when registered, will carry out an activity in the State. A limited company may not carry out the activity of a credit institution or insurance undertaking. They are the subject of separate requirements under the Companies Act and must register as another type of company.
The company’s share capital clause is to set out the amount of authorised share capital and the division of the capital into shares of fixed amounts. Alternatively, it may set out that the share capital shall stand divided into shares of a fixed amount specified in the constitution.
The authorised capital need not be specified as such any longer, under the 2014 Act. It is enough to state that the share capital is divided into shares of a particular amount, generally €1.00
There is no Table A in the 2014 Act with default articles, unlike the case with earlier Companies Acts. If the company adopts additional regulations, the constitution is to set them out.
The constitution of an LTD is to be in accordance with the form specified in Schedule 1 of the Act. It may be amended from time to time by special resolution. Upon amendment to the constitution affecting any of the above matters or affecting the share capital, the constitution must be re-stated as the position stands in consequence of that amendment.
The constitution is to be divided into numbered paragraphs, signed by the subscribers in the presence of at least one witness and authenticated in the manner set out in the Act. The constitution shall specify the number of shares taken by each subscriber to the constitution.
Incorporation; 2014 Act III
The constitution of an LTD no longer set outs an objects clause. The legislation expressly confirms that an LTD is to have full and unlimited capacity to undertake any business or activity or enter any transaction for any purpose. It is to have full rights and powers for such purposes. Accordingly, the “ultra vires” (outside powers) rules do not apply to private limited companies (LTDs) under the 2014 Act.
The supplemental regulations are not set out in the legislation. Instead, the statutory default positions, in particular in respect of many of the mechanics of the company’s operation, are set out in the Act. The effect is that many provisions which were formerly commonly adopted as standard articles are largely reflected in the new standard default provision in the Act.
Many procedural matters and the mechanics of the running of the company are now set out in the Act. They apply subject to any contrary or amended provision in the company’s constitution. This makes it easier to determine what default provisions (which are now set out in the Act) have been omitted. Most such provisions may be amended to much the same extent as was the case when they were provided for in the Articles. Some may not be amended.
There are many significant freedom and options in the 2014 Act, as to what supplemental regulations may provide. These may become reflected in additional standard regulations. Common amendments may, for example, involve the removal or variation of the default provisions position in relation to shareholder’s pre-emption rights and the acquisition of the company’s own shares.
The company’s constitution continues to constitute a contract between the shareholders with each other and with the company. This extends both to the provisions of the constitution and provisions of the Act relating to the governance of the company. Accordingly, it covers the operational matters now provided for in the Act, which were formerly provided for by standard articles.
Form of Constitution
The company’s constitution shall state
- its name;
- that it is a private company limited by shares registered under the Part 2 of the Companies Act 2014;
- that the liability of its members is limited;
- the amount of the share capital and the division of that capital into shares of fixed amounts specified in the constitution, or without stating such amount, that the share capital shall, at the time of registration, stand divided into shares of a fixed amount specified in the constitution;
- the number of shares taken by each subscriber;
- if the company adopts supplemental regulations, those regulations.
The constitution shall be in a form set out in the Schedule to the 2014 Act or as near as circumstances permit. It shall be divided into paragraphs consecutively. It shall be signed by each subscriber in the presence of at least one witness who shall attest the signatures of the subscribers. It shall be authenticated in the manner provided in the legislation.
On registration of the constitution, the CRO shall certify in writing that the company is incorporated and shall issue a certificate of incorporation. From the date of incorporation, the subscribers to the constitution, together with such other persons as may become members, shall be a body corporate with the name contained in the constitution, having perpetual succession and a common seal.
A certificate of incorporation is conclusive evidence that the requirements of the legislation in respect of formation have been complied with. The persons named in the statement as the director and secretaries (or deputy secretaries etc.) are deemed to be the first directors and secretaries etc. A person shall not be deemed director or secretary or assistant secretary if he is disqualified from being so appointed.
Members are entitled to a copy of the constitution on request. The first copy requested is free of charge. Later copies may be subject to a €5.00 charge. Failure to comply is a Category 4 offence by the company and an officer in default.
Declarations on Incorporation I
A statement in the prescribed form must be delivered on incorporation, setting out
- the name of each of the persons who are to be the first directors of the company;
- the name of the person who is, or of each of the persons who are, to be the first secretary or joint secretaries of the company;
- the name of the person (if any) who is, or of each of the persons (if any) who are to be the first assistant or deputy secretary or secretaries of the company;
- the address of the company’s registered office;
- the place (whether in the State or not) where the central administration of the company will normally be carried on; and
- any other particulars that may be prescribed.
When there is no EEA director, a bond is required to be delivered, unless there is a sufficient connection with a trade in the State.
The particulars in relation to directors, secretaries and any deputy secretary shall be kept in the respective registers required to be kept under the legislation.
The statement must contain the following particulars of any activity, to be carried out in the State by the company;
- the general nature of the activity;
- the division, group and class in the published classification system of activities. to which the activity belongs;
- if it appears to that person that the activity does not belong to any such division, group and class, a precise description of the activity;
- the place or places in the State where it is proposed to carry on the activity.
Declarations on Incorporation II
If the purpose or one of the purposes for which the company is being formed is the carrying on of two or more activities in the State, the particulars in respect of the matters referred to above shall be those that relate to whichever of those activities the person making the statement considers to be the principal activity for which the company is being formed to carry on in the State
The statement is to be signed by each subscriber to the constitution and authenticated in the manner provided in the legislation. It is to be accompanied by the consent of each person, acting as director or secretary. Alternatively, it may be authenticated (electronically) under the legislation.
If a person named in the statement as a director is disqualified under the law of another State from being appointed a director or secretary of a body corporate, that person must file a statement setting out the jurisdiction of disqualification, the date and period for which he is disqualified.
A declaration is required to the effect that all the requirements for registration have been complied with. It is to set out the purposes for which the company is being formed and the intended activity. It is to declare that the particulars in the required statements are correct. The declaration may be made by persons named in the statement as a director, secretary or by a solicitor engaged in the formation of a company.
Publication in Gazette
The Registrar of Companies publishes in the CRO Gazette, notice of the delivery to it or of the issue of the following documents:
- certificate of incorporation;
- constitution of the company;
- documents amending the constitution;
- amended text of its constitution;
- return in relation to the register of directors;
- returns of persons authorised to bind a company;
- financial statement and annual returns;
- notice of change of situation of its registered office;
- a copy of winding up order;
- a copy of an order of dissolution on winding up;
- return by a liquidator of final meeting;
- notice of appointment of a liquidator.
Publication is to take place within 10 days of delivery. The Gazette is now maintained in electronic form by the Registrar.
Documents may be filed in Irish or English. A translation of such document may be delivered in an official language of the European Union. It must be certified, in a manner approved by the CRO, to be correct. If there is a discrepancy between the document delivered and a translation, the translation may not be relied on by the company against a third party. A third party may rely on that translation against the company; unless the company proves that the third party had knowledge of the translated document.
A company may authorise a person, as an electronic filing agent to sign documents electronically that are required to be delivered to the Registrar; and to deliver those by electronic means, so signed. It is the joint responsibility of the company and the electronic filing agent to manage and control the filings.
The electronic filing agent is not deemed an office or servant of the company. The authorisation may be revoked. Revocation must be notified and is not effective until notified to the CRO. The fact that the revocation may be a breach of contract with the agent, does not affect its validity, as such.
A promoter is one who undertakes to form a company for a purpose and takes the necessary steps to do so. In the case of a private limited company, the promoters may offer shares to a limited category of persons only. They are restricted from issuing shares to the public generally.
Promoters, in common with directors, are in a fiduciary position in relation to the company. This arises from their position of control. The imposition of fiduciary obligations seeks to ensure that promoters do not exploit their position, to the detriment of the company and investors.
The classic example of a breach of fiduciary duties by a promoter arises where he fails to disclose a secret profit made on the transfer of assets to the new company. Because of the fiduciary relationship, promoters must, at a minimum, make prior disclosure of profits made, or to be made, at the company’s expense.
At common law, a company could not enter a contract before it was formed. This followed from the general principle that an agent may not act on behalf of a non-existent principal. In order to facilitate pre-incorporation contracts, the Companies Act allows certain pre-incorporation contracts to be ratified by the company after formation so that it thereby becomes bound by them.
The fiduciary duties of promotes apply, irrespective of whether or not money is being raised from the public. The duties are owed to the company itself. It may recover improper benefits taken by the promoter, irrespective of the shareholder’s position. The issue may arise on a later liquidation.
The fiduciary duties are of less practical importance where a “one-man” company is involved and there are no investors. Historically, fiduciary duties were of central importance where monies were being raised from third parties. They are now supplemented by more detailed modern legislation.
If the promoter breaches his fiduciary duties to the company, he must account for any secret or other profit made. Contracts between the director and the company may be rescinded. Damages may be claimed by the company.
Apart from fiduciary duties evolved by the courts, the Companies Act makes promoters liable for the consequences of misstatements made by them in the context of promotion. Persons who suffer loss by reason of an untrue statement in a prospectus or the omission of any information required by prospectus law may recover compensation from certain persons involved in the issue. This is not limited to promoters but extends to various parties who approve or sign the prospectus or are deemed to do so.
In the case of quoted companies, there exists a large body of law dealing with investor protection. This supplements the common law and equitable principles evolved by the courts in earlier decades and limits the extent to which promoters may benefit from investors in the company, at least without detailed disclosure. It provides civil and criminal sanctions.
Pre-2014 Act Formation
In order to form a company under the pre-2014 legislation, certain documentation was required to be filed with the Registrar of Companies (CRO). The documents to be filed included;
- the Memorandum and Articles of Association;
- a statutory declaration confirming compliance with the registration requirements;
- a statement in a prescribed form regarding the original directors and the secretary, together with details of their address, date of birth, occupation, and the residence;
- details of the proposed registered office.
A statutory fee was payable to the CRO. Formerly, capital duty was paid on the formation of a company. This was at the rate of 1% of issued capital, so that it was nominal unless significant capital was issued. Capital duty was abolished in 2005.
The required statement had to be signed by or on behalf of the subscribers. The consent of persons to act as director and as secretary was required to be filed. Upon incorporation of the company, the persons set out in the statement as directors and secretary, assumed their office.
Since 1999, companies have been required to show that they will carry on an activity in the State. This legislation was introduced to counter the incorporation of companies with little connection to the State. The activity to be undertaken and the place where it is to be carried on must be specified.
When a company was incorporated, certain details were published by the company in the Official Gazette. They have been published electronically for almost two decades. In practice, the CRO itself published and continues to publish the requisite information.
The Memorandum of Association was the more fundamental document. If was required to be filed on incorporation. Amendments must also be filed and published. It contains the more fundamental provisions. Certain clauses were obligatory in the Memorandum. The Articles of Association were (and remain) subordinate to the Memorandum of Association. However, if there is ambiguity in the Memorandum, the Articles may be used to clarify the meaning.
The Memorandum and Articles of Association are public documents. They could be physically inspected in the CRO. Most company information has now been scanned by the CRO and is available online.
Sources and References
Companies Act 2014 Part2 Chapter 2(Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.4 Courtney
Keane on Company Law 5th Ed. (2016) Ch.4 Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Palmer’s Company Law