Creation of Group Structures
& Golden Shares

What is a Group?

Sec 7(2) of the Companies Act 2014 defines what a subsidiary company is, however the Act makes the definition somewhat confusing by referring to a superior and lower company.

Here are nine different circumstances in which a company will be a subsidiary company:

1. A shareholder or member controls the composition of the board of directors of the subsidiary company using a golden share
2. A Company holding more than half in the nominal value of the equity share capital
3. A Company holding more than half of the share carrying voting rights
4. A Company holding a majority of the shareholders’ or members voting rights
5. Being a shareholder or member and controlling alone, under an agreement with other shareholders or members, a majority of the shareholders’ or members’ voting rights
6. Having a right to exercise a dominant influence over the subsidiary by virtue of either the subsidiary’s constitution or a control contract
7. Exercising or having the power to exercise a dominant influence or control over the subsidiary
8. The holding and subsidiary companyies are managed by the holding company on a unified basis
9. A subsidiary of a subsidiary company
10. Tax Law has a separate definition of a group; “Two companies are members of a group if one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company.” For more information click here: http://www.revenue.ie/en/tax/ct/groups.html

Golden Share

A golden share is a share that gives the holder (of that share) the right to control the composition of the board of directors of the company that created the golden share.

Purpose of a Golden Share

A golden share is one of the most common and simpler ways of creating a group structure.It’s typically used to facilitate inter-company lending so that it does not breach the rules regarding loans to directors and connected persons.

A company may be classed as a connected person if one or more of the directors either alone or together own 50% or more of the issued share capital. The creation of a golden share places the company into a group structure and allows the companies to rely on Sec 243 Intra-Group Transaction Exemption. This in turn enables the company lending money to comply with Sec 239 rules regarding giving loans to directors and connected persons.

A golden share does not place the company into a tax group (see above).

Creation of a Golden Share

A golden share may be created by setting up a new share class ( e.g “A” Ordinary Share) with the appropriate rights attached or converting an existing share to a new share class. The golden share is then issued to the company that will be the holding company. It is important that the rights attached to the golden share are prepared correctly to ensure the holder has the right to control the board.

How Can CLS Help

We can assist with drafting the necessary directors minutes, member resolutions, new constitution, CRO forms and updating the statutory register of the company. If you require our assistance please contact one of the team on 059 9186776 or send us an email.

Please Note:

Our CLS Insights aims to bring you practical information and news on Company Law and Company Secretarial. We cover the topics that matter to your business and give practical tips and also the benefit our experiences. Please remember this article is a guide and legal advice should always be obtained. If you have any queries please contact one of the team and we would be happy to help.