Are you a Member or a Shareholder?

A shareholder can be either an individual or a company. The rights of a shareholder vary depending on issues such as the company’s Constitution, Shareholder Agreements, type of shares, etc.

A company’s Constitution will spell out the type of authorised shares and specific rights attaching such as voting rights, dividend payments, etc. Unlike the Constitution which is a public document filed in the Companies Registration Office a Shareholder Agreement is private document. A Shareholders Agreement covers issues such as rights to shares, rights to nominate an individual to the Board of Directors, and funding.

When a company is incorporated Members appoint Directors to manage the company on their behalf. As and when the Directors approve and sign the Financial Statements they are then presented to the Shareholders at an Annual General Meeting. This is when Shareholders have an opportunity to question Directors on how they managed the Company during the year and what their plans are for future development.

If you are a Member / Shareholder make sure your details are accurately reflected in the Statutory Register of Members. Without your current details including your current home address the company has no way of contacting you which is much more likely going to be more of a loss to you then to the them.

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Rectifying Statutory Registers and filings

The onus to ensure Statutory Registers are accurately maintained in a timely manner is a given but what happens if you make a mistake?

Mistakes happen and can usually be rectified. It is important to remember that if you have to rectify Statutory Registers you are more than likely going to have to rectify information already filed in the Companies Registration Office. (CRO).

Depending on what the mistake is and when it occurred you have to consider how to rectify it in a timely manner. For example, suppose you find a mistake today where in 2020 an allotment of 50,000 shares was incorrectly recorded as an allotment of 500 shares what do you do? There are a number of things to consider such as those outlined below.

• Form B5 – form filed in the CRO noting allotment of shares. To amend the figure from 500 to 50,000 prepare and file a Form B42A.
  

• Form B1 – Annual Return filed in the CRO which provides a snapshot of the company on a particular date. Check everything to do with the shares (share class, total number, and members) provided in each Annual Return filed from 2020 to date. If any of the information needs to be amended prepare and file Forms B1B for each of the relevant years.
  

• Financial Statements – check if mistake impacts on financial statements. Financial Statements cannot be amended once they have been approved and signed by the Directors but, you should contact the Accountant/Auditor to notify them of the error so they can advise on what actions may be required when preparing the next set of Financial Statements.

• Board Minute – it would be appropriate for the Directors to note at a Board Meeting that a mistake had been made and all necessary steps had been taken to rectify the situation.

I know the phrase “to err is human to forgive is divine” but there is no divinity when it comes company law. Sweeping a mistake under the carpet never works. Once a mistake has been identified take appropriate advice to ensure it is dealt with promptly and fairly.

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Charities - Register of Beneficial Ownership

Background (Legislative)

All Irish companies are required by legislation (which came into effect in November 2016) to establish and maintain a “Register of Beneficial Owners”. This includes charities and non-profits which are “Companies Limited by Guarantee” (CLGs). This blog is written specifically for charities which are “CLGs”. 

Purpose of Central Register

The purpose of the Central Register is to provide a central register of beneficial ownership of companies and industrial and provident societies. 

Who has access to the Central Register?

The Central Register can be accessed by:

• Criminal Assets Bureau;

• Revenue Commissioners

• Gardai Síochána

• Office of Director of Corporate Enforcement

• General Public (a Beneficial Ownership Report can be requested) 

How to identify Beneficial Owner?

Definition of a beneficial Owner

“any natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in the relevant entity, or through control via other means”.

However, charities who are CLGs, don’t have beneficial owners in the conventional sense. The assets of the charity are held for its charitable purpose and the charity is run for the benefit of its beneficiaries. All CLGs are still legally obliged to submit the prescribed information to the Central Register. They are also required to hold an internal “Register of Beneficial Ownership”. The definition does not take into account that “ownership” or voting rights and so forth are solely for the benefit of the beneficiaries of the charity (it’s charitable purpose) and not in the interests of individual members.

Consequently, your charity needs to interpret this definition to establish how the legislation applies to and which individuals need to be classified.

The legislation determines that an “ownership” of over 25% defines a beneficial owner. Members of a CLG are determined to be the owners as they exercise control over the CLG by way of their right to vote at AGMs.

Three Members or less

Members are likely to qualify as “beneficial owners” if a CLG (charity) has three or less members. This is because each member has more than 25% of the voting rights. In this instance, details of the three members must be submitted to the Central Register and recorded on the company’s Internal Register of Beneficial Ownership.

Four Members or more

Most charities which are CLGs, have four or more members. The charity must diligently review whether there any individual (s) exercise indirect or direct voting rights or control over the charity. Check your Constitution and any other legal agreements in place to clarify membership). If any individual, other than a member or a senior managing official exercises control, they need to be recorded as a “Beneficial Owner”. The charity may not be able to identify a beneficial owner (having checked the Constitution and other agreements), because there are four or more members or control and voting rights are not exercised by other individuals.

In the majority of instances however, CLGs need to file prescribed information on their “Senior Managing Officials” on the Central Register of Beneficial Ownership and on an Internal Register of Beneficial Ownership. 

A Senior Managing Official includes the Directors and the Chief Executive Officer. 

Details to be filed on the Central Register

The prescribed information required for each Managing Official:

Name

Residential Address

Nationality Date of Birth

PPS Number

Nature and extent of the Interest held or control exercised (an opportunity to record the charitable status of the CLG)

Date the individual was added to the Register

Date of cessation on the Register

PPS number entered in the RBO portal must match the name as registered on their PPSN with the Department of Employment and Social Protection. The information is not verified against the Revenue Commissioners records. For example: “Paddy” might be recorded with DEASP as "Pat", Patrick” etc

You can ring DEASP at 1890 927 999 to check the exact name you're registered with DEASP (for PPSN)

In the unlikely event a Managing Official does not have a PPS number, they are required to complete a BEN2 Form (to verify their identity) which must be legally authenticated. Further information on BEN2 is here. 

Maintain up-to-date details on the Central Register

It’s critical to keep the information up-to-date. Any changes to the Beneficial Owners must be recorded on the Central Register and also on the charity’s Internal Register of Beneficial Ownership.

Penalties for non-compliance

Legal entities (charities not exempt) who do not file are guilty of an offence and be liable on summary conviction to a Class A fine of up to €5,000 and on conviction on indictment to a fine of up to €500,000.

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Charities Are your Trustee Details up-to-date with the Charity Regulator?

All charities must ensure that details are up-to-date and accurate with the Register of Charities. Trustees are legally obliged to ensure information on the Register of Charities is accurate.

If you are a charity Trustee, you can check the register very easily, click on this link, enter the name of your charity, click onto the charity name when prompted and click the “People” tab. There you will see the names of Trustees, appointment date and years of service.

Check with your charity, that the contact details recorded for you are correct.. The Charity Regulatory uses the information recorded to communicate essential information, if they don’t have the relevant contact details you are missing out on important guidance and correspondence from them.

In their last ezine, the Charity Regulator requested all Trustees to check and update if necessary. To do this log into your MyAccount and check that the following details are correct:

• Registered postal address

• Email address

• Telephone number

   

  If you’re having any issues, you phone the Charity Regulatory Authority 0818 927999 or email info@charitiesregulator.ie., their phone lines are manned Monday to Friday between 11am-3pm

   

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Virtual AGM’s still allowed in 2023

The Companies (Miscellaneous Provisions) (Covid-19) Act came into being during the Pandemic when restrictions on travel within Ireland, flights into Ireland and inability to attend public gatherings led to fairly substantial practical problems for many companies. The implementation of the Act resolved some of those problems not least being the ability for a company to convene its Annual General Meeting virtually.

In December 2022 the Government announced the extension of some parts of the Act to the end of this year (31.12.2023). In particular, certain company meetings (including Annual General Meetings) can still be held virtually. This will be welcome news to many companies who prefer this format although there is nothing to stop a company holding a physical meeting if they wish to do so.

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Easter Eggs really!

Easter eggs don’t just mean eggs for Easter anymore now social media refers to Easter Eggs to mean an intentional inside joke or hidden message. Hard to equate an intentional joke with company law. Mind you there will always be a rarefied few who consider compliance with company law a joke but that is another kettle of fish. 

Compliance is hard for most people, what to comply with and why, particularly when trying to do so whilst carrying out our “actual” job. Compliance though is part of our “actual” job and should form part of an on-going continuous process in any organisation.

To have compliance enter your company’s lexicon can start from something as simple as an Agenda item for the next Board Meeting.

• Have compliance an Agenda item for discussion at every Board Meeting.

• Agree top five compliance issues or concerns and start knocking them off one by one.

• Consider appointing one person to lead the compliance processes in your company.

• Types of compliance issues could include any of the following.

• Anti-Money laundering legislation – when is the last time a review was undertaken on how your company manages AML?

• Risk Register – does your company have one, when was it last reviewed by the Directors at an actual meeting?

• Beneficial Ownership – a company must maintain an internal statutory register of beneficial ownership whilst ensuring it also files and continues to update filings with the Central Register of Beneficial Ownership.

• Statutory Registers – are they all current and have you cross-checked with statutory filing in the Companies Registration Office.

• Constitution / Shareholder Agreement – when was your Constitution last reviewed, and does it run in tandem with the Shareholder Agreement or, as is often the case, do they have contradicting clauses?

• Policies – what policies are in place, when were they last reviewed? The horrific invasion of Ukraine sparked most companies to review EU Sanctions Policies which has, in turn, focused the attention of Directors, Managers on Staff on Ethics & Sanctions in a manner that could never have been imagined possible before.

Don’t try and do it all at once, make a start, keep up the momentum and then you can go and buy an actual real Easter Egg. I hope you will all have a fabulous Easter with or without an egg!

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Discrepancy Notices – what is going on?

When a company or individual becomes aware of a discrepancy in beneficial ownership details filed with the Central Register of Beneficial Ownership (CRBO) there is an option to file a Discrepancy Report.

History of Discrepancy Notices filed in the CRBO

• In 2020 – just 2

• In 2021 – over 700

• In 2022 – over 600 

What is going on and why such an extraordinary surge?

It looks like the trigger event was the enactment of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 in 2021. This Act transposed EU Money Laundering Directive into Irish law thus bringing Ireland in line with current European AML and countering financing of terrorism (“AML/CFT”) framework.  

Companies are not allowed to be told who has filed the Discrepancy Notices so who is filing and why remains a matter of conjecture. It seems likely though Discrepancy Notices are being filed in a knee jerk reaction to the implementation of the Criminal Justice Act on the basis of “to be sure, to be sure”.

In the event you receive a warning email from the CRBO make sure you respond ASAP to ensure you remain within all relevant deadlines. Do not assume there is a discrepancy. Check the beneficial ownership details as in all likelihood your details are fine. Provided you engage proactively and in a timely manner with the CRBO, with luck, all you will end up with is a story to tell. Surprising, irritating but absolutely fixable!

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Companies Registration Office - Marching On!

March has been an active month for the Companies Registration Office (CRO) as it continues upgrading and improving its online portal.

With over 250,000 companies incorporated in Ireland it is good to see online filing options increase, e.g. changes to Constitution, documentation on mortgages and debentures. The enactment of the Companies (Rescue Process for Small and Micro Companies) Act 2021 (SCARP) has also seen a significant rise as the Act mandates specifically for online filing. Mandating online filing only is an interesting development and one that would not have been popular (or arguably possible) a few years ago.

The CRO portal is due for a further upgrade and once that has been completed it is anticipated the Central Register of Beneficial Ownership will be next. Although separate websites set up under separate legislation they remain indelibly linked in the minds of the public.

The Central Register of Beneficial Ownership is just that – a register providing details of beneficial ownership. It is worth remembering that members listed on Annual Returns filed in the CRO will not necessarily be reflected as beneficial owners. This is particularly evident for a Company Limited by Guarantee (CLG) where filing in the Central Register of Beneficial Ownership for this company type depends on the number of members.

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Fiduciary Duties most often forgotten

Change of address – in our experience this is one of the most neglected areas of compliance. Directors and Company Secretaries are notoriously forgetful when it comes to notifying any change in address.

Location of statutory registers – failure to notify current location of statutory registers, in our experience, primarily occurs where the Company Secretary is an individual and is less likely to occur when the Company Secretary is a corporate body. Perhaps it is a case of out of sight, out of mind!

Appointing a Director – is there a checklist in place when appointing a Director? A common mistake is not checking the Company’s Constitution. A Constitution may contain a clause declaring the minimum and maximum number of directors in the company. The Company may also have a Shareholders Agreement in place which could also include a minimum/maximum number of Directors.   Companies with both a Constitution and Shareholders Agreement need to ensure the minimum/maximum number is the same in both documents.

All of the above can be managed by ensuring the relevant statutory registers are current, changes are filed in the Companies Registration Office and (if applicable) in the Central Register of Beneficial Ownership.

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Politicians are not the only people who have to ensure compliance with lobbying standards in Ireland

As part of the appointment process every Director acknowledges he/she is responsible for securing their company complies with all relevant obligations. Two examples of “relevant obligations” would include compliance with the Lobbying Act 2015.

• Property companies lobbying for changes in planning law, re-zoning of land.

• Charities advocating for changes in law.

The Lobbying Regulation (Amendment) Bill 2020 seeks to reform the Lobbying Act 2015. One of the proposals in the Bill will be the ability for a Designated Public Official to cease communicating with a lobbyist where they are aware that the person or body carrying on lobbying activities has failed to comply with the Act.

Transparency Ireland carried out a review of disclosure practices of 30 of Ireland’s top companies across a range of indicators including Responsible Political Engagement. Whilst a number showed leadership in the area it is fascinating to note that most of the companies did not disclose a policy on responsible political engagement. Indeed, 28 out of the 30 companies reviewed did not publish rules or policies dealing with “revolving doors” (the movement of staff rom the public sector to companies or vice versa).

For greater detail on this topic take a look at www.lobbying.ie and www.transparency.ie

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