Tag Archives: legal compliance

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Partnerships

July 6, 2011 – 5:17 pm

Like the ‘Sole Proprietorship’, the Partnership is almost totally exposed to third party actions. Legally, a Partnership can often be formed with no written agreement, however, one would be ill advised not to set-out the rights and obligations of the partners. If no such agreement is in existence, standard legal interpretations will generally be imposed unless there is clear evidence that the partners are subject to their own set of criteria, which would be the case for those belonging to a professional institution such as the Law Society. One point that should always be born in mind is that in the case of economic difficulties each partner will be liable not only for his shareholding but for all partnership debts which means that any person with assets should be very careful before going into business with a less well off counterpart as whilst the gains will be equal the potential losses will not!

ADVANTAGES
1. It brings together two or more people who have a personal interest in the welfare of the business enterprise.

2. A partnership is generally seen as more professional than a sole proprietorship

DISADVANTAGES
1. There is always the potential of partnership disagreements.

2. Each partner’s personal assets will often be subject to creditor action, no matter his personal obligations/liabilities under the’ partnership agreement’.

3. Generally, the burden of being a partner falls unfairly on the wealthier individual. In other words, if X and Y become partners but X has twice the assets of Y, then – accepting an equal partnership – X and Y will share equally in the profits but X has twice as much to lose should the partnership fail.

4. The cost of drafting a ‘partnership agreement’ can be prohibitive. As with sole proprietorships, the problem with partnerships is that it is very difficult, if not impossible, to separate partnership business activities from the individual partners.

5. A partnership structure inevitably requires ‘insurance’ cover to be taken out. In most cases this will cost far more than a Standard Irish “Limited Liability” company.

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Business Advice

Companies Act

July 6, 2011 – 5:15 pm

The Irish Companies Act which although similar to the legislation employed in Northern Ireland and the United Kingdom, nevertheless is considered to be more restrictive.

The principal features of Republic of Ireland companies are:
1. Directors must be individuals and not corporate entities.
2. At least one of the named individual directors must be resident in Ireland. There are no other constraints on non-resident or foreign directors.
3. A company secretary can be either an individual or company and may or may not be resident in the State.
4. All companies must have at least one subscriber/shareholder at the time of incorporation although as with the other positions mentioned above initially these will be taken by your company registration agent who upon registration will resign and appoint the permanent officers.
5. The company must have a real and substantive presence in Ireland and not merely a local registered office.
6. The company must at the time of incorporation be very specific about its intended objects and complete a NACE Code.
7. The Companies Registration Office (CRO) does not offer a same day expedited service as available in the UK and many States in the United States. However, In-a-Minute Companies is part of the Fe Phrainn Scheme, which means that company registration should take no more than 10 working days.
8. Irish law demands that all limited companies have an official seal.
9. Any alterations to a company’s structure will normally require the payment of a small government duty.
10. Stamp duty is approximately 1%, which is levied upon issued but not nominal share capital.
11. Shares should ideally be denominated in Euros (€’s) as to denominate shares in Irish Pounds (Ir£’s) will result in such shares having to be cancelled when this currency is no longer legal tender involving potentially significant expense as shares would have to be cancelled and re-issued in the new currency.

To Electronically Register Your Irish Limited Company for €325.00 + VAT including hardcopy documents and a special main objects clause for trades people (worth an extra €25) click below:
www.startingmybusiness.biz/irlltdtrades

Directors’ and Secretary’s responsibilities
Every limited company in the UK must have at least one director and a secretary; these can be either individuals or corporate entities. There are no nationality or age restrictions with the exception of Scotland where the minimum age is 16. Those disqualified by the court and undercharged bankrupts are not eligible.

The position of a director is one of responsibility and not one to be undertaken lightly. Directors must comply with the Companies Act and the general law and they have three primary duties namely to act honestly and in good faith and in the best interests of the company as a whole (fiduciary duty), to exercise such a degree of skill and care, when carrying out their duties as a director, as might reasonably be expected from someone of their ability and experience (duty of skill and care) and a duty to carry out the statutory obligations imposed by the Companies Act and other legislation.

Company secretary’s duty is to ensure company rules (Memorandum and Articles of Association) are followed and official records maintained. They are also responsible for keeping the Registrar of Companies informed of any changes of directors or secretary, filing annual returns and resolutions to change the memorandum and articles. Failure to comply can result in heavy fines or for the company to be struck off the register. Company Secretary also minutes all meetings of the board and shareholders and maintains statutory registers, such as registers of shareholders and directors. Certain registers must be kept at your registered office where they can be inspected by the members of the company and in some cases by the general public.

Irish companies require at least two individuals over the age of 18 to act in the capacity of director with at least one such director being a permanent resident of the country. In simple terms, the directors constitute the decision making body of a company commonly known as the board of directors and are liable at law for a company’s actions. The directors have a duty of care to the shareholder(s) of the company to act in the company’s best interests even where doing so might come into conflict with their own personal interests. The concept of a company being a fully separate legal entity to the directors is accepted in Irish law save where they have acted in a fraudulent and/or reckless manner which could not be deemed reasonable by normal standards – In which case, the corporate “veil” can be lifted fully exposing the individuals behind a company to the full rigors of both civil and criminal law. However, in the vast majority of cases this will not occur provided the board of directors have acted in good faith even if their decisions have negative consequences for the company.

A company secretary occupies similar pivotal position in an Irish company than he/she/it does in a UK company and has direct legal responsibility to maintain company records, file annual returns and/or carry out any other functions that may be elucidated within the Memorandum & Articles of Association. Like a director a Company Secretary has a duty of care to the shareholders/subscribers.

Northern Irish companies require at least one individual over the age of 18 to act in the capacity of director with at least one other person also acting as either the company secretary, shareholder and/or a second company director. In other words, in all cases there must always be at least two legal entities to form a Northern Irish company. In simple terms, the director/s constitute(s) the decision making body of a company commonly known as the board of directors and is/are liable at law for a company’s actions. The director/s have a duty of care to the shareholder(s) of the company to act in the company’s best interests even where doing so might come into conflict with their/one’s own personal interests. The concept of a company being a fully separate legal entity to the directors is accepted in Northern Irish law save where they have acted in a fraudulent and/or reckless manner which could not be deemed reasonable by normal standards – In which case, the corporate “veil” can be lifted fully exposing the individuals behind a company to the full rigors of both civil and criminal law. However, in the vast majority of cases this will not occur provided the board of directors have acted in good faith even if their/one’s decision(s) have negative consequences for the company.

A Company Secretary occupies a pivotal position in a Northern Irish company and has direct legal responsibility to maintain company records, file annual returns and/or carry out any other functions that may be elucidated within the Memorandum & Articles of Association. Like a Director a Company Secretary has a duty of care to the shareholders/subscribers.

LEGISLATION AFFECTING RETAIL TRADE
There are number of laws affecting the retail trade in general. These deal from consumer rights to trading hours and employees’ rights. Depending on what area you trade in (e.g. alcohol and/or tobacco), you may also be legally obliged to get a licence. For more detailed information on retail legistration, please refer to our CD entitled “How to Set Up a Retail Business”

LEGISLATION AFFECTING HOSPITALITY TRADE
There are number of laws affecting the hospitality trade in general. These deal from consumer rights to trading hours and employees’ rights. There is specific legislation relating to different areas of hospitality. For more detailed information on retail legistration, please refer to our CD entitled “How to Open a Hotel or Restaurant”

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Legal Compliance

July 6, 2011 – 5:15 pm

These include keeping Minutes of the Board and both General and Extra Ordinary Annual General Meetings as well as submitting both annual accounts and annual returns to the Registrar of Companies and/or Inland Revenue.

Annual Returns
Under S.363 of the Companies Act 1985, every limited liability company is legally required to submit annual return information on their company to Companies House every year. An annual return can be described as a snapshot of general information about a company’s directors and secretary, registered office address, shareholders and share capital. It must contain the following information:
• the name of the company;
• its registered number;
• the type of company it is, for example, private or public;
• the registered office address of the company;
• the address where certain company registers are kept if not at the registered office;
• the principal business activities of the company;
• the name and address of the company secretary;
• the name, usual residential address, date of birth, nationality and business occupation of all the company’s directors;

If the company has share capital, the annual return must also contain:
• the nominal value of total issued share capital;
• the names and addresses of shareholders and the number and type of shares they hold or transfer from other shareholders

Every company must deliver an annual return to Companies House within 28 days of its made-up date (the date to which the annual return is made-up, usually the date of incorporation or the made-up date of the previous annual return registered at Companies House) at which all the information in an annual return must be correct. Companies House will not register an annual return Form 363a if it shows information that differs from the public record unless you have notified Companies House of the change on the appropriate statutory form. It is important to remember that failing to file the annual return or filing it late is a criminal offence, for which both the company and its officers can be prosecuted.

Companies House will send an annual return to the registered office address of every company about two weeks before the made-up date. This document is pre-printed with company information already held on the public record and most companies use this form to make their annual return. This form is known as the ‘shuttle’ annual return (Form 363s). As an alternative to the shuttle annual return, you can use the annual return Form 363a which does not include any pre-printed company information.

A company with share capital must provide a ‘full list’ of all its members on its first annual return following incorporation and every third annual return after it has provided a full list. The intervening two annual returns need only report changes to shareholder information that have taken place during that year – that is, shares transferred and particulars relating to shareholders who have become members or ceased to be members.

As stated it is the responsibility of the officers of the company to ensure that annual return is completed returned to Companies House within 28 days of its made-up date with the appropriate filing fee of £15. Documents may be delivered to the Registrar by hand (personally or by courier), including outside office hours, bank holidays and weekends to Cardiff, London and Edinburgh or sent by post or by the Hays Document Exchange service (DX). If you send documents, please address them to:

For companies incorporated in England & Wales:
The Registrar of Companies
Companies House
Crown Way
Cardiff CF14 3UZ

DX33050 Cardiff

For companies incorporated in Scotland:
The Registrar of Companies
Companies House
37 Castle Terrace
Edinburgh EH1 2EB

DX ED235 Edinburgh 1

Please note that Companies House will not accept any statutory documents by fax and will only acknowledge receipt of documents if you provide a stamped addressed envelope.

Further information, guidance booklets and statutory forms are available free of charge from Companies House website www.companieshouse.gov.uk or you can telephone 0870 3333636 or write to Stationery Sections in Cardiff or Edinburgh. Forms can also be obtained from accountants, solicitors, legal stationers and company formation agents.

Just like within the UK, all Irish companies must file an annual return by using From B1 once a year. Annual Return must be delivered to the Companies Registration Office (CRO), Parnell House 14 Parnell Square, Dublin 1 within 28 days of the effective annual return date. In most cases audited accounts are to be attached to the annual return and in every case the return must be accompanied by the appropriate filing fee (€30). Should the 28 day filing period expire on a public holiday, Saturday or Sunday or, the 28 day period is extended to the next working day.

There are two ways to determine the correct annual return date. For companies incorporated before 1 March 2002, the annual return date allocated is either the anniversary of the date which is six months after the date of incorporation or if an annual return was filed by the company before 1 March 2002, the anniversary of the effective date of that return. For companies incorporated after or on 1 March 2002, the first annual return date will be six months after the date of incorporation. It is worth noting that accounts are not required to be filed with the first annual return. A company’s annual return date in future years is 12 months from its previous years ARD (unless, of course, the company alters that date).

It is possible to set the annual return date to an earlier date by filing a return made up to a date more than 14 days before the company’s current annual return date. The company’s future annual return dates years will then fall on the anniversary of the date to which the return has been made up. Please note that If the annual return is made up to an earlier date, it still needs to be delivered to the CRO within 28 days of its made up date. If need to be it is also possible to extend the annual return date by filing Form B73 but this can be done only once within a five year period. If your company wishes to extend its current ARD, you need to deliver an annual return to the CRO within 28 days your company’s current return date (no accounts needed), and nominating on Form B73 the new date, which may not be later than six months after the first annual return date. Please note that B73 forms delivered outside the above-mentioned 28-day period will not be accepted by the CRO.

Should you fail to submit your annual returns on time, a late filing penalty of €100 becomes due on the day after the expiry of the filing deadline, with a daily penalty amount of €3 accruing thereafter, up to a maximum penalty of €1,200 per return. On top of this CRO may impose an on-the-spot fine where the company has a record of persistent late filing and/or summary prosecution of the company and/or any officer in default. Fines of up to €1,904.61 can be imposed on a conviction for breach of the annual return filing requirements. It is also worth noting that just like within the UK an Irish company may be struck off the register and dissolved for failure to file an annual return. In this case the assets of the company become vested in the Minister for Finance, and should the business continues to trade, the owners will no longer enjoy the benefit of limited liability and are therefore personally responsible for any debts incurred so long as the company remains dissolved.

Further information, guidance booklets and statutory forms are available free of charge from Companies Registration Office website www.cro.ie or you can telephone (0) 1 804 5200/Lo call 1890 220 226. Forms can also be obtained from accountants, solicitors, legal stationers and company formation agents

Accounting requirements
Every company must prepare accounts/financial statements and keep accounting records. A company’s financial year is determined by its accounting reference date – the date to which it will make up accounts every year – and for newly incorporated companies accounting reference date is the last day of the month in which the anniversary of incorporation falls plus or minus seven days. After incorporation a company has nine months in which to give notice of its accounting reference date. A company’s accounting reference period can be changed by giving notice to Companies House on form 225 but it cannot exceed 18 months.

The Companies Act require companies to keep accounting records to show and explain company transactions and reflect the company’s financial position with reasonable accuracy. The directors are responsible for the preparation of accounts and for ensuring that the balance sheet and profit and loss accounts give a ‘true and fair’ view’ of the company’s financial position and its transactions and also for compliance with the requirements of the Companies Act 1985. Records to be maintained on a day-to-day basis include list of assets and liabilities and details of cash receipts and payments, a statement of stock held at the end of each financial year together with stock taking details and a sufficient description of services and goods purchased.

Accounts must be filed by a private limited company within 10 months of the accounting reference date. New companies with accounting period in excess of 12 months from the date of incorporation have their filing period reduced to 22 months from incorporation. It is worth keeping in mind that the end of given period will end on the same date as the accounting reference date and should there not be a corresponding day in the last day of that month as well as the fact that the directors of the company are liable to fines should there be a delay in filing. Accounts must be in English or if you trade in Wales in Welsh. In latter case an English translation must however be annexed to the accounts sent to the Registrar. Accounts are to be approved by the board of directors and be dated and signed by a director on behalf of the board. A director’s signature is also required to be on the company’s balance sheet.

Companies that have not had any significant accounting transactions (have not traded) during their financial year are classified as dormant. Dormant companies are required to file non-trading accounts with the Registrar of Companies and in accordance with Companies Act s250 to pass a special resolution exempting it from the requirement to appoint auditor. Where a company becomes dormant after trading, if may pass the above-mentioned s250resolution if it has been dormant since the end of previous financial year and provided that there is no other reason why trading account should be submitted (qualifies as a small company and there was no reason to prepare group accounts for that year).

The requirement for an audit for small companies with gross balance sheet assets less than £1.4 million and annual turnover less than £350,000 was abolished in 1994. Full audited accounts are still to be presented to the shareholders but The Registrar of Companies will be satisfied with abbreviated balance sheet. The balance sheet must however include a statement by the directors saying that the company was eligible to take advantage of the exemption.

Irish companies are also required to keep proper books of account which give a true and fair view of the company’s financial affairs. Companies are also required to disclose details of their accounts at the Annual General Meeting and to attach a copy of those accounts to the annual return filed with the CRO. Should a company fail to comply with the above-mentioned, the annual return will not be accepted by the CRO. In addition both the company and every officer of the company who is in default will be liable to a fine not exceeding €1,905.

The accounting requirements vary for different company sizes and types but in general limited companies (public and private limited companies) are required to prepare and file annual accounts in accordance with the Companies (Amendment) Act 1986. Small sized companies can be exempted from the full extent of the requirements relating to annual accounts in respect of any financial year provided that in that year and the financial year immediately preceding that year the company’s balance sheet total does not exceed €1.9m, its turnover does not exceed €3.81m and it has 50 or less employees (please note that only two of the three conditions must be satisfied). The fact that a company is entitled to an exemption on the basis of its size must be certified by its auditors. Small companies may also be exempted from the requirement to have accounts audited.

It is worth noting that the currency of the Republic of Ireland is Euro and that accounts for financial periods ending on or after 1 January 2002 are and will be rejected by CRO unless completed in a currency which is legally effective at the date on which the financial year ends.

For more detailed information, please contact Companies Registration Office website www.cro.ie or you can telephone (0) 1 804 5200/Lo call 1890 220 226 or Revenue Commissioner www.revenue.ie

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