Pre-2014 Act Constitution I
Companies incorporated under pre-2014 Act legislation continue to have their original memorandum and articles of association as their basic governing rules, as modified by the 2014 Act mandatory rules, unless and until a new constitution is adopted. Therefore, for the foreseeable future, the memorandum and articles of most companies (being companies formed before 1st June 2015) will continue to contain the constitutional rules.
The memorandum of association of a pre-2014 Act was required to be in the form set out in the Schedule to the Companies Act, 1963 or as near to it, as circumstances admitted. There were a number of different types of memorandum set out in the Schedule to the Act. The vast majority of companies were private companies limited by shares and adopted the format for this type of company.
Companies were free to adopt stand-alone memorandum and articles of association containing all the company rules. Most commonly the entire text of the memorandum was set out together with the text of the articles which referred to and incorporated the relevant schedule to the 1963 Act usually, Table A. Part II of Table A was usually adopted by private limited companies. The printed articles typically set out amendments to the model Table A and set out substitute wording where appropriate.
Pre-2014 Act Constituton II
The memorandum and articles of association are deemed part of the constitution of an LTD which was formerly a private company formed before the 2014 Act. Other types of company’s constitution continue to be comprised of a memorandum of association and articles of association. Accordingly, the memorandum and articles remain the default governing rules, subject to the Act, until amended or substituted by an amended or new constitution.
The memorandum and articles of association contain the company rules. Subject to certain overriding matters set out in companies law, shareholders were and remain free to make provision in the way that best suits their needs.
The memorandum and articles of association (and other company returns) are public documents. They can be inspected in the CRO or purchased on online at cro.ie. Prescribed fees are charged.
The memorandum of association is usually the shorter document and contains the more fundamental rules. If there is an inconsistency, the memorandum will prevail over the articles. It is possible to put rules and restrictions in the memorandum of association which overrule the articles of association and can be less easily changed. Shareholders forming a company sometimes “entrench” fundamental rules about the company in the memorandum of association. This may be used to some extent, to protect minority shareholders.
Basic Memorandum Provisions I
The memorandum of association of a limited liability was required to provide for the following:
- the company name;
- objects or purpose clause;
- limited liability clause;
- capital clause; and
- association clause.
The memorandum of association was required to be printed and signed by the subscribers. The Memorandum of a private company could be signed by one person. It was more commonly signed by two persons. The memorandum of association of a public company was required to be subscribed and signed by seven persons.
The provisions in relation to company names were similar to those which apply under the 2014 Act. See the section on company names.
Basic Memorandum Provisions II
Companies formed under the Companies Act 1963 were required to have objects. They could act validly, only in accordance with their objects. The 2014 Act now provides that a limited company (LTD), the default form of the company can do anything that a person with full capacity can do. Most private companies incorporated under the earlier legislation have become LTDs, without objects under the default conversion rules.
The memorandum was required to specify the amount of the nominal capital, the number of shares into which it was to be divided and the nominal value of the shares.
The memorandum was required to contain an association clause confirming that the parties desired to be formed into a company and agree to become shareholders. A limited liability company was required to have an express clause stating that the liability of the members is limited. This was not implied.
The names and addresses of the subscribers and the number of shares taken by each were set out at the end of the memorandum. They signed the memorandum. Their signatures were witnessed.
Pre-2014 Act Memorandum I
A special resolution could be passed to amend the memorandum, subject to the rights of 15% of the shareholders to apply to the court to object within 21 days. The power to amend could be expressly precluded by the terms of the memorandum. The memorandum could provide an alternative procedure for amendment. An equivalent procedure now applies under the 2014 Act for the amendment of the constitution of which the memorandum is now deemed part.
Before 2005, capital duty (at the rate of 1%) applied on the allotment of shares. Because of capital duty, capital contributions were sometimes made to companies. They were treated not as loans, but as contributions and additions to capital, thereby adding cash and capital to its balance sheet.
The memorandum of association could contain other clauses which were not compulsory. They could provide for the entrenchment of shareholders’ rights. Non-obligatory clauses could be made unalterable under the Companies Act, 1963, by the appropriate provision.
Pre-2014 Act Memorandum II
A company could (and still may) change its liability clause by increasing the liability of the members to the company. It may be made unlimited. However, members were not and are not bound by an alteration after they become members, without their consent. Members of a limited liability may not be compelled to undertake greater liability without their specific consent.
There are provisions for alteration by increase or decrease in the company capital. Special provisions applied and apply under the 2014 Act. See the separate sections on share capital in this regard.
When the Ireland joined the Euro, the nominal value of shares was deemed to be re-denominated from Irish Pounds at a set conversion rate. Accordingly, one Irish Pound (Punt) became equal to 1.269738 Euro. A procedure existed for the redenomination of share capital before a certain date.
A further re-nominalisation procedure existed until a certain date in order to allow the rounding off of inconvenient nominal capital sums. Under the transitional arrangements, an ordinary resolution was sufficient facilitated. Thereafter, the ordinary procedures for amendment applied.
Pre-2014 Act Articles
The articles of association provide for the internal regulation and management of a company incorporated under the pre-2014 Companies Act. It is deemed part of the constitution of an LTDs which has been created by the conversion of a private company under the default 2014 Act provisions.Other types of company’s constitution are to be deemed comprised of a memorandum of association and articles of association. IIn the case of LTDs and other companies, the articles remain the default governing rules, subject to the 2014 Act, until amended or substituted by an amended or new constitution.
The articles typically deal with the internal mechanics of the company, such as the appointment of directors, directors’ powers, the holding of director’s meetings, shareholder’s meetings and the transfer of shares. They might also set out in greater detail, the rights attached to a particular class of shares identified in the memorandum of association.
Private companies could adopt the standard Articles in the Schedules to the Companies Act. More commonly, the standard form articles, with certain amendments, reflecting changes in legislation and good practice, were adopted by company formation agents.
Types of Articles I
Table A to the Companies Act, 1963 was the model set of articles for a private company limited by shares, which had not registered its own articles. If the company did register articles, Table A applied (and continues to apply) to a pre-2014 Act LTD which has not adopted a new constitution, except in so far as modified or excluded and as further modified by the 2014 Act’s mandatory provisions.
Table C provided for standard articles for companies limited by guarantee. Table D applied to companies by guarantee having a share capital. Table E applied to unlimited liability companies.
The articles were required to be in accordance with the statutory tables or as near to them as may be. As with the memorandum of association, the articles were required to be printed. They were to be divided into paragraphs. They had to be signed by the subscribers to the memorandum. Their signatures were required to be witnessed. Where a company’s memorandum of association was in Irish, the appropriate Irish language version of Table A applied.
Types of Articles II
The model articles for a private company were set out in Table A Part I as modified by certain provisions in Part II. Part I of Table A applied by default to public limited companies in the absence of other provision. The Part II modifications reflect the difference between a public and a private company. They include provisions regarding the (restriction of) transfer of shares, notice to members, quorums, directors voting on contracts. Some of the more onerous restrictions were disapplied in the case of a private limited company.
Public companies are required to maintain freedom for their members to transfer shares. Private companies were required to have restrictions on transfer. Model articles provided that directors may exercise at their discretion and without assigning a reason, decline to register any transfer of shares whatsoever.In the case of private companies, more refined provision was commonly made. There might be a right of pre-emption for the shareholders. In this case, the Articles were amended to provide that the shares must be offered around pro rata.
Private companies usually adopted model articles Regulation 6, which provided that instead of a members’ resolution in a shareholder’s meeting, there might be a unanimous written resolution. In the case of a single member, company meetings were not required. One person who is present in person or by proxy is a quorum.
The model articles required that the directors were to resign on a staggered basis at AGM. This was an anomaly in the context of a private company and was generally deleted. Standard Regulation 79 limited the powers of the directors to borrow without the consent of the members at the general meeting, to the nominal value of the share capital. This was almost invariably deleted, given that it would be a practical bar to borrowing by the directors.
Model articles were commonly modified so as to make more modern provision for directors’ meetings such as by remote telecommunication or electronically.
The model Articles indemnified directors and the secretary against proceedings in relation to acts while in office. This was generally extended to cover costs and expenses arising out of the discharge and exercise of their duties.
References and Sources
Companies Act 2014 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Courtney
Keane on Company Law 5th Ed. (2016) 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