The government is proposing a raft of changes to company law in the biggest shake-up in a decade. The General Scheme of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024 (‘the Bill’) was recently published by the Department of Enterprise, Trade and Employment, outlining amendments to the Companies Act 2014 the government wants to make.
The general thrust of the proposals is to give Irish businesses greater clarity and flexibility in a shifting regulatory environment. The Bill covers areas such as corporate governance, statutory auditing and reporting, insolvency and restructuring, and mergers and acquisitions (M&A).
In a series of blogs, we’ll delve into the details of the proposed changes, starting with M&A. Here’s how the M&A landscape will look if the Bill passes in its present form.
Multiple mergers
Under the current regulations, M&A procedures can only involve one company at a time, with approval for each takeover dealt with as a separate transaction. In situations where parent companies with a number of wholly owned subsidiaries are bought out, this creates a significant burden. The acquirer must in effect go through the M&A process for each subsidiary.
The Bill proposes to change the law on this and allow wholly owned subsidiaries to be transferred automatically with their parent company in a single transaction.
More flexibility for DACs
A Designated Activity Company (DAC) was a new type of legal structure for businesses introduced by the Companies Act 2014. DACs are similar to limited liability companies, with the key differences being that DACs restrict the areas of business they can legally operate in as part of their constitution, and the fact that shareholders can exercise full control over a DAC.
When it comes to M&A, DACs have to date only been allowed to be involved in takeovers with private limited companies, and the resulting entity has to also be a private company limited by shares. The Bill proposes to relax those rules, so DACs can merge with and buy out other DACs, and remain trading as DACs afterwards.
Approvals for Schemes of Arrangement
A Scheme of Arrangement is a statutory mechanism for the takeover of a public company. Under current law, approval for a scheme of arrangement must be obtained at a meeting of shareholders and creditors, with a ‘special ‘majority’ of 75% of shareholders present or by proxy required.
However, a large proportion of publicly traded shares are held in Central Securities Depositories (CSDs). When it comes to shareholder votes, the current definition of how a majority can be reached fails to account for these shares. The Bill proposes to amend this by allowing for a ‘super quorum’ which includes consideration of shares in CSDs in the count.
With changes afoot in the M&A landscape, it’s important to get the very best advice available, whether you’re looking at launching a takeover yourself or your business is subject to interest. For details of our full range of transaction advisory services, including M&A consultancy, valuations and due diligence, contact our Corporate Finance team today.
