In Conversation with Tom Courtney, CLRG
Author: Daisy Downes
The proposed new Companies Bill, which replaces the Companies Acts 1963-2005, represents the most significant development in Irish company law for many years. Dr Thomas Courtney, Chairman of the Company Law Review Group (CLRG), is confident that the simplification and modernisation measures contained in the Bill will be broadly welcomed. He talked to Accountancy Ireland about the forthcoming changes.
[Accountancy Ireland] The Company Law Review Group was established on a statutory footing by the Company Law Enforcement Act 2001 - what do you think have been its successes and failures so far?
[Tom Courtney] Our first report, published in 2001, was a seminal report, which contained the blueprint for the new legislation; it was a unanimous report despite the diversity of the opinion and constituencies represented on the CLRG. It is critical that such far-reaching recommendations enjoyed broad support. The CLRG’s first real success was that all 195 recommendations were adopted unanimously.
I would also rate as a significant success the CLRG’s provision of a widely-supported solution to the problem posed by the Directors’ Compliance Statement provisions. CLRG’s greatest success is, I believe, yet to come. The consolidation and reform Bill which will replace the Companies Acts 1963 to 2005 will be the most significant development ever in Irish company law. This will be a great credit to the membership of the CLRG, a great many of whom put in an enormous commitment of personal time to work in the interests of Ireland Inc.
[AI] The CLRG's main focus in recent times has been finalizing the scheme of the forthcoming consolidated companies Bill - what are the significant changes companies and their directors will see in this new Bill?
[Tom Courtney] The new Bill will put the private company limited by shares at the very centre of Irish company law. The Bill will have two main divisions. These are referred to in the Heads of Bill as ‘pillars’.
Pillar A will contain the law applicable to the private company limited by shares, will contain 14 Parts (circa 850 sections of law or 2/3rds of the Bill). Every company law provision which a user or advisor to a private company needs to know will be contained in Pillar A.
Pillar B will contain the law applicable to every other company type: the PLC, a new type of private company called a Designated Activity Company or DAC, guarantee companies, unlimited companies, unregistered companies, external companies and investment companies. The law applicable to these companies will be by reference to Pillar A, but with carve-outs and additions.
We are confident that the users of company law and their advisors will welcome the significant simplifications and reforms for private companies. These include the abolition of the doctrine of ultra vires, allowing one director, codifying directors’ duties, replacing the memorandum and articles with a one-document constitution by recasting standard Table A provisions as statutory defaults, providing for majority written resolutions and introducing a de minimis exception for the obligation to disclose interests in shares.
[AI] The CLRG model involves representatives from both the State sector and private sector. Do you think such a model has been successful and is it one that would lend itself to replication in other areas eg financial services, taxation legislation?
[Tom Courtney] I think the CLRG model has been singularly successful and it was interesting to see the Tánaiste and Minister for Justice Mr Michael McDowell holding it out as the optimum model for law reform in his proposals for a new criminal law reform group. More recently the Minister for Finance, Mr Brian Cowen has announced the establishment of an expert advisory group on financial services law which also follows the CLRG model.
When it comes to reforming distinct areas of law, I believe the best practice will emerge from a collaborative approach by users, regulators and advisors. Review groups comprised of experts such as CLRG provide the most appropriate forum in the quest for best practice.
[AI] Ireland has seen a deluge of corporate regulation in recent years - the establishment of Office of the Director of Corporate Enforcement, the Irish Auditing & Accounting?Supervisory Authority, the Financial Regulator; we are also seeing further measures in this area from the EU while many large corporates are also impacted by Sarbanes Oxley. Do you think Ireland has got the balance right? Is there an ongoing role for the CLRG in monitoring future legislative developments impacting on our companies?
[Tom Courtney] We must focus our efforts on matters within our own control and Sarbanes Oxley is outside of our control. Turning to what is within our control, I think Ireland must constantly strive to find and implement the right balance to ensure our econo-legal ‘wallpaper’ remains attractive to foreign direct investment (FDI) and supportive of indigenous business. This is a continuous process, not a once-off initiative, and I believe CLRG is well positioned to help in that process. EU initiatives too can be transposed in different ways and the optimal approach for Ireland always needs to be identified. While Ireland should always try to lead on simplifications and facilitative reforms, it should always follow in relation to increased regulation. All regulatory initiatives need to be closely scrutinized to ensure that the mischief they seek to prevent is a real mischief and that the measures are proportionate to that end. Properly informed regulatory impact assessment is a very important tool in achieving better regulation.
[Tom Courtney] The Directors’ Compliance Statement is an example in point and there was a certain naivety in thinking that a country of our size could punch so much above its weight in raising the bar for corporate compliance without the result that FDI would vote with their dollars and exit. Ireland was going to be unique amongst developed countries in seeking to impose such a costly compliance verification procedure; uniquely stringent is something to which I believe we should not aspire. There are other examples too and I believe there may still be a debate on the proposed imposition on PLCs of audit committees which has also not yet been commenced.
[AI] What do you see as the timetable for the new Companies Bill?
[Tom Courtney] The Secretary to the CLRG, Mr Eugene Forde and I are due to meet Minister Michael Ahern to apprise him of the progress CLRG has made. It is likely that Minister Ahern and Minister Michael Martin (both of whom have been tremendously supportive to the CLRG)) will bring the Heads of Bill to Government in early 2007 and that it will then go to the parliamentary draftsman to be converted into a Bill. Although the election in 2007 will terminate the legislative programme I am confident that there is all-party support for the CLRG’s proposals and that the new Government will be keen to publish the Bill in late 2007.
[AI] Do you feel that there has been sufficient reaction / response from stakeholders on the new Bill? Would you like to see more?
[TomCourtney] CLRG has consistently published the progress of the Heads of the new Bill on its website but I am realistic enough to recognize that it is only when the train is about to reach the platform that people get off their seats. With Ministerial approval, we intend to publish the Heads of Bill in printed form in early 2007 and I am hopeful that this will make the proposals more accessible to more people.
[AI] What will be next for the CLRG? What further issues will be on its agenda/ work programme in the coming two or three years?
[Tom Courtney] While the Minister can and does refer matters to the CLRG for consideration, we are also proactive in determining what the issues are that need to be considered. We are at the moment putting together a list of suggested topics which can form the basis of our deliberations from January 2007.