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The Companies Act 2014 introduces a new and streamlined procedure (known as the “Summary Approval Procedure” or “SAP”) to authorise up to seven different types of transactions which would otherwise be prohibited by the Act.

The SAP was, depending on the type of company, be used to validate the following activities:

•the giving of financial assistance by a company for the purpose of the acquisition of its own shares;

•the reduction of share capital;

•the variation of share capital on reorganisations;

•the domestic mergers of certain companies;

•the treatment of pre-acquisition losses as being profits available for distribution by a holding company;

•certain transactions undertaken by a company in favour of a director (or a person connected with a director); and

•a members voluntary winding up.

The seven different types of transactions which can be validated by the Summary Approval Procedure are examined below in further detail:

1.Financial assistance for acquisition of own shares

Section 60 of the Companies Act has now been replaced by section 82 of the Companies Act 2014. Companies are not permitted to give any financial assistance for the purchase of shares in a company or a company’s holding company. The prohibition applies to loans, guarantees or the provision of security.

Section 82(5) of the New Act allows for 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 largely mirror those which existed in the old Companies Acts 1963-2013 and include:

  • the discharge of debts lawfully incurred;
  • the lending of money as part of a company’s ordinary business;
  •  the giving of representations, warranties and indemnities by a company; and
  • the payment by the company of fees, commissions and expenses.

Contravention of s82 will result in the commission of a category 2 offence.

2.Reduction of share capital

Section 84 of the Companies Act 2014 replaces section 72 of the Companies Act 1963. Under the Summary Approval Procedure a company may now reduce its capital without seeking court approval.

Section 84 of the Companies Act 2014 allows a company (unless its constitution specifically prohibits), to reduce its capital in any way by (for example):

  • removing or reducing the liability in respect of any unpaid share capital; or
  • cancelling any paid up company capital which is lost or unrepresented by available assets.

A reduction of capital under this section can now be implemented by employing the Summary Approval Procedure which must be passed by the special resolution and accompanied by an audit 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. Alternatively a special resolution approved by the court can be filed.

3.Variation of capital in reorganisations

Section 91(1) of the Companies Act 2014 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 of these to another company in return for shares or securities being allotted to the members of the company as consideration. As mentioned above SAP must be employed which requires the passing of a special resolution and the production of an auditor’s report.

4.Prohibition of Loans to directors and connected persons

Under the SAP procedure, a company may make loans to directors once a special or ordinary resolution is passed and a declaration prepared by the majority of directors. The declaration must include the following-

  • the circumstances in which the transaction or arrangement is to be entered into;
  • the nature of the transaction or arrangement;
  • the person or persons to or for whom the transaction or arrangement is to be made;
  • the purpose for which the company is entering into the arrangement or transaction;
  • the nature of the benefit which will accrue to the company directly or indirectly from entering into the transaction or arrangement.

The directors must have reasonable grounds for believing that the company will be able to pay or discharge its debts and other liabilities in full as they fall due within a 12 month period from the date of entering into the transaction or arrangement.

The resolution must also be accompanied by an auditor’s report as previously described.


Part 9 of the Companies Act 2014 will allow domestic mergers to be effected by means of the Summary Approval Procedure or by way of a special resolution which is confirmed by a court order. Such mergers, being Mergers by Acquisition, Mergers by Absorption and Mergers by Formation of a New Company were not previously available to Irish private companies.

The provisions under the new Act will be available where all the companies involved are Irish companies (without any EEA Companies) provided none of the merging companies are a PLC.

6.Voluntary windings up

In the majority of cases the Summary Approval Procedure will now be used for the purpose of commencing a members’ liquidation of a company under section 207.

7.Prohibition on pre-acquisition profits or losses being treated in holding company’s financial statements as profits available for distribution

If the Summary Approval Procedure is employed, the prohibition under section 118 of the Companies Act 2014 can be lifted to allow profits and losses to be available for distribution by the holding company for that period and that period only.

For further information on this topic please contact Enda Newton or Brid McCoy of the AMOSS Corporate Department.

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