Landmark reforms to cut costs for new firms
Published 22/12/2012 | 05:00
It will be easier and cheaper to run a company – Bruton
THOUSANDS of new businesses throughout the country can expect to have their costs slashed after landmark reforms to company law come in.
The Companies Bill 2012, which was published yesterday, will cut costs for the 12,500 firms set up every year by about €6m through a host of reforms aimed at reducing the administrative burden on small companies.
The Government said the changes will make it easier for a new company to incorporate itself, saving about €1,200 in professional fees a year.
The proposals include:
• New private companies limited by shares will only require one director to be in compliance with the law.
• The company will not be required to have a physical annual general meeting.
• A firm can have a "one document constitution" rather than a full set of articles of incorporation. Consequently, a new company will not need to employ a lawyer to draft the articles.
• The "objects" clause in a company's articles will be dropped, allowing more scope for mergers and other corporate moves.
• Offences under company law will be classified under four categories, with the most serious offences carrying a maximum fine of €500,000 and/or 10 years in prison.
• For the first time, SMEs will be able to apply to the Circuit Court for Examinership, cutting the cost involved.
Other changes include allowing any type of company to change into another company type, while each type of company – such as a PLC or unlimited companies – will be covered by separate section in the legislation. The hope is that this will lead to more clarity around what each business can and cannot do under the law.
The bill consolidates the existing 16 companies acts. At 1,429 sections, it is being described as the most substantive bill in the history of the State.
Jobs Minister Richard Bruton said the moves were part of allowing business to grow while unimpeded.
"It will ... reduce red tape and make it easier and cheaper to run a company in Ireland, and will make a real difference to our international competitiveness," he said.
Meanwhile, accountants Hughes Blake released a study showing that nearly a thousand jobs were saved this year by putting a company into examinership.
The Hughes Blake SME Examinership Index claims that 959 jobs were saved by that process, up two thirds on 2011.
The firm estimated the new Companies Bill will cut the legal costs of examinership by about 50pc, "making the process a more accessible and affordable option for SMEs and potentially doubling the number of jobs that could be saved in 2013".
Hughes Blake MD Neil Hughes said the figures were encouraging but more was to come.
"These figures are just the tip of the iceberg and there is no reason why we shouldn't see a dramatic rise in these numbers once the new legislation has been enacted.
"I would conservatively estimate that the number of SME jobs saved could double in 2013".
Unlike receivership, examinership gives a company protection from its creditors and allows the directors to retain control of the firm.
In receivership, a receiver is appointed who will usually have a set period to sell the business before it is closed down.