A common problem in the company, the issuance of loans between the company and directors. There are business rules for granting loans and companies should, however, ensure that they comply with the law. In Ireland, most limited liability companies with two or three shareholders. If companies want to expand this, it is usually a new company with the same shareholders. These companies are still in a "group", asthe same shareholders of each company. However, company law a different definition of what a group.
Definition of a group
Section 155 of the Companies Act of 1963 defines a group of two companies, namely, the holding company and the other is a subsidiary. Thus, in a group, the holding company must:
(1) more than 50% of the nominal share capital or
(2) more than 50% ofvoting rights or
(3) is a member and controls the composition of the board of the subsidiary.
Most companies in Ireland by two members or "husband and wife," if companies and are only shareholders of each "group" companies, companies are not liable in a group defined by acts of Companies .
A major advantage of the company of a group is defined by the Companies Acts, except using a groupaccording to the rules on loans between enterprises.
Companies Act § 31, 1990
§ 31 of the Companies Act 1990 prohibits companies from entering into certain transactions that would otherwise be legally linked to the benefit of a director or a party with a director. The scheme was introduced to prevent or auditors of companies abuse their power by diverting corporate assets, either directlyindirectly. A company may:
Make a loan, most loans or guarantees of a director of the Company or its parent or a person connected with a director.
Type a loan connected as a creditor for a director or a person so
Ltd. to provide security or guarantee in relation to a loan associated almost loan or credit transaction with another person for a director or a person so
Connected persons
Section 26 Companies Act 1990 defines an affiliated entity as a person connected with a director when a company if he or she is a close relative of the director, is the relationship with the director acting as trustee of a trust, close relatives "legal person that controls the director. A director of a company held company, to control a body in which he or she alone or together with other director or officer of> Directors or persons connected with the Director or another, are interested in 50% or more of the share capital of the body or the right to exercise or control the exercise of 50% or more of the voting rights at a general meeting of that body . Shadow directors and sole members are considered connected persons.
The persons, directors and related parties
Administration a Co.
Shadow directors Co.
Directors of the Holding Co.
ShadowHold a Directors Co.
The spouse, parent, brother, sister, son of a director or Hold Co. Co.
The partner of a director of a company or its socket contact
Foundation, in which the main beneficiaries of the trust are a director, his spouse, children or legal person that controls
A company controlled by a director or any of its Hold Co. Co.
A company controlled by an entity that is also a director of a contact or its subsidiary taken Co.
The sole member of a man-a limited liability company
Exceptions
So that companies no credit against the rules, there are a number of exemptions that companies can use one. They are:
The loan is less than 10% of assets,
The directors follow a legal process validation
The group exemption
The transaction cost is a valid Administration
The transaction is a normal activityTransaction.
Golden Share
The exception is the group most frequently used exception. It 'was outlined on what defines a group. The purpose of the "golden share" is the holder of the golden share, the power control of the company's Board of Directors of the subsidiary companies and therefore are in a group will be defined in the Companies Acts. The "golden share" is usually an "A" ordinary shares with rights to controlComposition of the Board. This structure allows companies to borrow money from companies without infringing the legislation. A disadvantage of all the companies put in a group, the company is unable to release the requirement that you check your bills.
Establishing a golden share in the capital of the company's gold is special resolutions necessary for the establishment of new class actions and past Association amend its Memorandum and Articles Install the new class and the right to "golden shares".
Consequence of the breach
It 'important to ensure that you are not in violation of these loans. If the provisions of § 31 of the transaction is voidable transaction violated under pressure from the company means that companies can cancel or go back. Every director, shadow director or connected person who is authorized, the operation needed to accountfor all to win> Society and they shall be compensated in any way responsible for any gains the company's loss. The company was dissolved and it is believed that the violation of § 31 companies have contributed to the failure of then the person who benefits from the transaction may be made personally liable for the debts if the company.
Reporting a breach of auditor
A violation of § 31 loan is a reportable offense underCompanies Acts. Company Act of 1990, § 194 provides: "If in the course of their implementation and an examination of company accounts, information came in possession of the auditor of the Company, they form the opinion that there is no reason to believe that society or an officer or agent has committed a criminal act is the section under the Companies Acts (except for an offense under 125 (2)or 127 (12) of the principal Act), the auditor. immediately after forming, the director shares this opinion and provide the director with the reasons why he formed opinion "The ODCE will then decide which ones to take action options. That may also write and directors who breach and / or within criminal proceedings against directors.
In 2008, the ODCE received suspended prison sentenced of a director who was in breachRules on loans. In the current economic environment, the directors may groped violation of the rules on loans to directors and other companies. If these companies are dissolved, the Directors may be held personally liable for debts if they are contrary to the rules below.
All consultants must be aware of the provisions of § 31 and find out when an alleged violation or whether a proposed transaction should be against the rulesthen you should advise managers accordingly.
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