In good company

With the introduction of the Companies Act 2006, Northern Ireland is experiencing company law reform on an equal footing with the rest of the UK for the very first time. Richard Gray reports

Along with the rest of the UK, company law in Northern Ireland is currently undergoing a significant overhaul with the introduction in stages of the Companies Act 2006.

However, there is an added twist for Northern Ireland. Since 1929, companies acts of the UK Parliament have not extended to Northern Ireland. The region has instead adopted what some have described as a karaoke approach, whereby Westminster wrote the words and Northern Ireland simply sang along.

Under this approach – both during periods when the old Stormont Parliament was in place and under direct rule – separate legislation was implemented for Northern Ireland, which largely mirrored the legislation for Great Britain, but with a time delay. When direct rule was in force, this took the form of secondary legislation. So, for example, the provisions of the Companies (Northern Ireland) Order 1986, which is currently the cornerstone of the companies legislation, replicate those of the Companies Act 1985 with very minor differences. That is all set to change with the implementation of the 2006 act.

The 2006 act and future legislation to be enacted pursuant to it will extend directly to Northern Ireland. The need for a uniform approach throughout the UK was cited by the Department of Trade & Industry as being a direct response to the consultation feedback, which, in the case of Northern Ireland, equated to just 22 consultees. The result is that companies in Northern Ireland will, for pretty much the first time since Northern Ireland was established, experience the effects of company law reform at the same time as their counterparts in the UK.

The scheme of the 2006 act is such that, as the various sections of the act come into force, the corresponding provisions of the existing Northern Ireland specific legislation are repealed. Ultimately, upon full implementation, both the 2006 act and those provisions of the Companies Act 1985 that remain in force will apply equally to Northern Irish companies to the exclusion of the existing Northern Ireland-specific legislation.

In a similar vein, under the 2006 act, the legislation in force in Great Britain relating to limited-liability partnerships, limited partnerships (under the Limited Partnerships Act 1907), open-ended investment companies and European Economic Interest Groupings in force in Great Britain will extend to Northern Ireland in place of the existing corresponding legislation here. However, the position in relation to insolvency legislation is not covered by the reform. The Insolvency (Northern Ireland) Order 1989 remains the equivalent of the Insolvency Act 1989 and the widespread changes to the insolvency regime, which were made in Great Britain in September 2003 by the Enterprise Act 2003, only came into effect in Northern Ireland in March 2006.

There are relatively few public limited companies incorporated in Northern Ireland – a little more than 300 – few of which are listed either on the Official List or the other markets, with the result that the provisions of the 2006 act that apply to private companies are likely to be of primary interest to company lawyers in Northern Ireland. For example, the provisions of the 2006 act, which for the first time codify the principal duties of directors, will apply in exactly the same terms to Northern Irish companies as they do to those in Great Britain. Previously there was the potential for the courts here, applying common law principles, to adopt a different approach to their English counterparts, although, in practice, landmark decisions of the English courts, whether technically binding or not, would have been followed here.

Another specific area in which the 2006 act will have an impact is in the whole area of private company administration. There has, to date, been a relatively low uptake in Northern Ireland in the current ‘elective’ regime for private companies, but from 1 October this will become the default regime, and, for example, private companies in Northern Ireland will no longer be required to hold an AGM unless their articles require it.

So will this mean an end to the separate register of Northern Irish companies maintained in Belfast? For the time being, there are no concrete proposals to scrap the separate register for Northern Ireland and the separate Companies Registry in Belfast, although this might be taken to be a logical extension of the new legislative approach. It is probably more likely that the position of the Companies Registry here will remain similar to that of the Registry in Edinburgh, and that the registers, while separate, will eventually be capable of being searched online on one search. One practical brake on that integration from a user’s perspective has been the fact that all Companies Registry files in Northern Ireland have, until relatively recently, only been available in hard copy form. Even now only recent years’ records are available in an electronic format.

Despite the clear intention of the UK Parliament to put company law in Northern Ireland on an equal footing with the rest of the UK, it is also interesting to note that company law matters are so-called ‘transferred matters’ under the Northern Ireland Act 1998 (the act of the UK Parliament which gave effect to the constitutional settlement under the Good Friday Agreement) and, therefore, may be the subject of legislation passed by the newly reconvened Northern Ireland Assembly.

As a result the possibility remains that the Assembly in Belfast could in future decide to enact separate Northern Irish companies legislation if it were considered appropriate or desirable, in which case the position might in future diverge. That is, however, to be considered unlikely in the short term, not least because the Assembly is likely to have rather more pressing matters on its agenda for the moment.

Richard Gray is a partner at L’Estrange & Brett