4 Things every Company Director should know…
During the day at work I regularly come across a new release from Revenue, a new paper published by the CRO, an important fact released in new legislation etc… all of which I think “My clients need to know this” or “That’s something that company directors should be made aware of”. As a part of my role as financial adviser and “Right Hand Man” to many business owners and CEOs, I am delighted to be able to use this blog to do just that…! Here are 4 info pieces that have recently crossed my desk that I feel that you should be aware of. If you have any queries on any of them, please don’t hesitate to give me a call…
1. CONVERTING YOUR COMPANY UNDER THE COMPANIES ACT 2014
The Companies Act 2014 came into effect on 1 June 2015 and it sets out the new types of companies that are to be permitted in future. Most companies in existence prior to the introduction of the Act would be ideally classed as Private Companies Limited by Shares (“LTD”). However, the change to the new type of company was not an automatic one and the CRO introduced a transition period of 18 months running to 30 November 2016. During this period, companies wishing to convert should go through a conversion process involving special resolutions and the adoption of a new Constitution to replace the Memorandum and Articles of Association.
Some the key advantages of opting to be a Private Companies Limited by Shares are that the company in future would need just one director; it would also not be restricted by its constitution from engaging in any new activities; and an formal AGM would not need to be held.
A company that does not go through the conversion process will automatically default to a Private Companies Limited by Shares on 1 December 2016. This might be satisfactory for some directors and shareholders of companies. However, I think that it would more efficient to purposefully convert so that that everybody is very clear in future about how the company can be run.
Typically, the cost of the conversion process is in the region of € 400 including VAT and it can take up to two months to be finalised.
You can learn a lot more about this matter by clicking on the link to the CRO publication dealing with Frequently Asked Questions.
2. PUBLICATION OF DIRECTORS REMUNERATION AS A MATTER OF PUBLIC RECORD
It should be noted that, as part of the financial information that is filed by companies making an Annual Return in the Companies Office, the amount of total remuneration (salaries and fees) paid to directors must be included in the notes to the abridged accounts.
This can be regarded as very sensitive information particularly for small companies with maybe just one or two directors.
This requirement was introduced as part of the Companies Act 2014. There is a draft Companies (Accounting) Bill that will probably be published during 2016 and one of its objectives is to introduce a new form of company that would be exempt from publishing its directors’ remuneration. Micro Companies would be those with turnover of less than € 700,000 and with a balance sheet size of less than € 350,000 or less than 10 employees.
3. TAX RELIEF FOR NEW START-UP COMPANIES
The legislation around relief from Corporation Tax for start-up companies was introduced originally in 2008 and it has been modified on more than one occasion since then. Broadly speaking, there is a link between the creation of employment by the start-up and the relief available. Basically, subject to certain conditions and limits, the corporation tax payable by the new company is reduced by the amount of employer’s PRSI paid over by a company in the period. In addition, unutilised relief can be carried forward to future years.
Revenue published an ebrief document in recent months. You can obtain a copy of this by contacting Kevin O’Callaghan & Co.
4. LOANS BY A COMPANY TO A DIRECTOR
While it has been the case for a long number of years that a company cannot make a loan to one of its directors where the value of the loan is greater than 10% of the net assets of the company, a key issue to be remembered is that the any shortfall between the rate of interest on the loan and 13.5% is treated as a benefit-in-kind. So, PAYE, PRSI and USC must be applied through the company’s payroll system.
To avoid any ambiguity in relation to the advance to the director, the terms of the loan should be in writing. This importance of such written terms would apply equally to loans by the directors to the company.