The Summary Approval Procedure is covered in Chapter 7 of Part 4 of the Companies Act 2014. The procedure permits certain restricted activities that would otherwise be prohibited. It is a means by which companies can engage in restricted activities by ensuring that the persons those restrictions are designed to protect, consent to the action.
The restricted activities are
The Summary Approval Procedure means the procedure where a resolution (special) is passed conferring authority, passed not more than 12 months prior to the commencement of the activity and the company delivers to the Registrar a copy of the declaration as required under section 202. The company must deliver the declaration not later than 21 days after the date on which the activity is commenced. Certain of the restricted activities have extra requirements and the nature of the declaration differs according to the restricted activity being dealt with.
Civil sanction is available to a liquidator, creditor or member of a company or to the CEA where a declaration was made without reasonable grounds for doing so under section 210 of the Companies Act 2014 and a director, who has signed the declaration may be held personally responsible without limited liability for all and any of the debts and liabilities of the company.
Not all company types may use the Summary Approval Procedure - there are restrictions on the use of procedures by Public Limited Companies. Certain Company types must pass special resolutions rather than ordinary resolutions to effect certain procedures.
Financial assistance for the acquisition of Shares
Section 82 Companies Act 2014. It is not lawful for a company to give any financial assistance for the purchase of shares in the company or in the company’s holding company (if applicable). The prohibition applies whether the assistance is given directly or indirectly or is by means of a loan or guarantee, the provision of security or otherwise (previously section 31 of the Companies Act 1990).
There are exceptions and section 82(5) allows the financial assistance where the company’s principal purpose in giving the assistance is not for the purpose of the acquisition or where it is incidental in relation to some larger purpose and the assistance is given in good faith. Section 82(6) lists the exceptions to the prohibition which include:
It is a category 2 offence for contravention of section 82.
The Summary Approval Procedure is set out in section 202 and 203 of the Companies Act 2014 notice of the meeting has enclosed a copy of the declaration and other documents where required.
A copy of the declaration must be attached to the notice of the meeting not earlier than 30 days before the date of the meeting to pass the special resolution or if the resolution is being passed in writing not earlier than 30 days before the signature of the last person to sign. The declaration is completed by the directors or a majority of the directors, in relation to a transaction under section 82 or 239 (prohibition of loans to directors, connected persons) and the declaration must state
The declaration must be submitted to the Registrar of Companies not later than 21 days after the date on which the carrying on the restricted activity concerned is commenced.
If the declaration is not submitted within the time limit, the failure to do so invalidates the carrying on of the activity. Under section 203(4) Companies Act 2014, the High Court has the power to validate the Summary Approval Procedure which was done incorrectly.
Reduction in Company Capital or variation of Company Capital on Re-organisation
Section 84 of the Companies Act 2014 replaces section 72 of the Companies Act 1963 and allows a company to reduce its capital without the need for court intervention as it provides a secondary method to be used under the Summary Approval Procedure.
Section 84 of the Companies Act 2014 allows for a company, unless a company’s constitution prohibits, to reduce its capital in any way and therefore:
Company capital, under section 64 of the Companies Act 2014, refers to the aggregate value, expressed as a currency amount, of the consideration received by the company in respect of the allotment of shares of the company and that part of the company’s undenominated capital constituted by the transfer of sums referred to in sections 106(4) and 108(3).
Section 91(1) is a new provision which enables a company to vary its capital on re-organisation. A company can enter into a transaction to dispose of assets, undertakings or liabilities or a combination to another body corporate in return for shares or securities being allotted to the members of the company as consideration (or to its holding company).
The Summary Approval Procedure is set out in sections 202 and 204 of the Companies Act 2014 notice of the meeting has enclosed a copy of the declaration and other documents where required.
A copy of the declaration must be attached to the notice of the meeting not earlier than 30 days before the date of the meeting to pass the special resolution or if the resolution is being passed in writing not earlier than 30 days before the signature of the last person to sign. The declaration is completed by the directors or a majority of the directors, in relation to a transaction under section 84 or 91. The declaration must state:
The declaration must be submitted to the Registrar of Companies not later than 21 days after the date on which the carrying on the restricted activity concerned is commenced. The declaration has no effect unless accompanied by a report. The report forms part of the document and must include a statement by a person who is qualified to be appointed, or continue to be, the statutory auditor of the company. The statement must be as to whether, in the opinion of that person, the declaration is not unreasonable.
If the declaration is not submitted within the time limit, the failure to do so invalidates the carrying on of the activity. Under section 204(2) Companies Act 2014, the High Court has the power to validate the Summary Approval Procedure which was completed incorrectly.
Application to the Court
The other method for the reduction of the share capital is by an application to the High Court for confirming order. The company must cause notice of the passing of the resolution to be advertised at least once in 2 daily newspapers circulating in the district where the registered office or principal place of business is situated and all creditors, resident outside the State, must be informed by ordinary post.
Creditors have the right to object where they can credibly demonstrate that the reduction would put the satisfaction of their debt at risk. The court order must be sent to the CRO for registration thereafter.
Private and Public Unlimited Companies may reduce their company capital using section 1252 Companies Act 2014. A special resolution must be passed.
Members Voluntary Winding Up
The Summary Approval Procedure (SAP) is used in relation to the members liquidation of a company under section 207.
Form E1 is used as the declaration of solvency. The other option for the drafting of the declaration is under section 580 of the Companies Act 2014 but this section only refers to companies which have a Fixed Duration set in its constitution for the company to exist. 99% of companies will complete the declaration under section 207 and the SAP. In either case, a statement by the independent person (person who is or is qualified to be the auditor of the company) that the declaration of solvency is not unreasonable is required.
The independent person is the auditor of the company or someone who is qualified to be the auditor of the company. A declaration pursuant to section 204/205/207 of the Act of 2014 shall have no effect for the purposes of the Act of 2014 unless it is:
(i) accompanied by a report that contains, at least, relevant information in accordance with the headings set out below, and
(ii) drawn up by a person who is qualified at the time of making the report to be appointed, or continue to be, the statutory auditor of the company.
The report shall be addressed to the declarant company and shall contain, at least, the following information:
I. Introductory paragraph identifying the directors’ declaration and accompanying documents to which the report relates;
II. Statement on the responsibilities of directors;
III. Statement on the responsibilities of statutory auditor;
IV. Scope of work performed by statutory auditor;
V. Other relevant facts (if any) that the statutory auditor has relied on in reaching his/her opinion that the declaration is not unreasonable;
VI. The opinion of the statutory auditor that the declaration pursuant to section 204/205/207 is not unreasonable; and
VII. Date and signature of statutory auditor, who having compiled the report, has formed the opinion that the declaration pursuant to section 204/205/207 is not unreasonable.
None of the merging companies under Part 9 of the Companies Act 2014 can be a Public Limited Company and one of the companies must be an LTD company (private company limited by shares, registered under Part 2 of the Companies Act 2014) (See section 2 and 462 Companies Act 2014 for definition).
There are several means of achieving a merger. It can be done by means of the Summary Approval Procedure set out in Part 4 of the Act or by the means of merger available under Part 9. Acquisition can be separately employed under Chapter 1 of Part 9 of the Act. Under the Part 9 merger procedure, Form DM1 is submitted together with the Common Draft Terms. Court permission then required. Following the merger, the transferor companies are dissolved without entering liquidation.
Merger can be by acquisition, absorption or formation of a new company and can be made under Part 9 of the Act.
Procedure: Summary Approval Procedure
The CRO must receive the following documents from each of the companies involved. Please note that it is a requirement of the Act that separate declarations/resolutions are made by EACH individual company in the process. One form will not cover all the companies involved in the process.
The declaration must include the following:
The declaration must be submitted not later than 21 days after the event. Upon receipt of both the declaration and the resolution, the registration of the merger can be effected. It needs to be made clear which company or companies is/are to be merged.
Copyright 2023 Public Office Address: Companies Registration Office, Bloom House, Gloucester Place Lower, Dublin 1. Phone: +(353 1) 8045200
Powered By Inventise