The Companies Act 2014 has introduced a universal process to authorise seven different restricted activities that would otherwise be prohibited. The Summary Approval Procedure (“SAP”) is set out in Section 202 – 211 provides companies can engage in restricted activities once the members have approved the transaction and the declaration is made by the directors

The SAP is similar to the old Whitewash Procedures that was commonly used when giving financial assistance in Section 60 of Companies Act 1963. Banks appear to be requiring the SAP to be used more commonly than under the old Companies Act.

The directors need to be fully aware of the liability they are taking on after the transaction as they may be held personally liable for the debts in full of the company if the company if the company becomes insolvent.

Restricted Activities

The following are the seven restricted activities:-

  • Sec 82 – Financial assistance for acquisition of own shares
  • Sec 84 – Reduction of company capital
  • Sec 91 – Variation of capital in reorganisations
  • Sec 118 – Treatment of pre-acquisition profits or losses
  • Sec 239 – Loans etc to directors & others
  • Sec 464 – Mergers
  • Sec 579 – Members voluntary winding up

Scope of SAP:

The following companies can utilise the SAP:-

  • Company Limited by Shares
  • Designated Activity Company
  • Company Limited by Guarantee
  • Unlimited Company

SAP Requires:

  • Directors make a declaration of solvency at a board meeting held no earlier than 30 days before the passing of the necessary shareholder resolutions
  • Directors declaration is sent to the members with notice of the EGM or the written resolution
  • The members approval by special resolution giving the directors authority to carry out the restricted activity
  • In the case of a merger, a resolution of each of the merging companies which has been passed unanimously by their shareholders is required
  • These resolutions must be passed not more than 12 months before the commencement of the particular activity in question; and
  • Report of independent person may be required in four of the seven transactions stating the directors opinion is not unreasonable (see table)

Moratorium on certain restricted activities being carried on
Unless more than 90% of the members of each class of issued shares vote in favour of the special resolution, the company must wait 30 days from the passing of the special resolution before proceeding with the restricted activity. This is to allow an application to be made to court.

Directors Declaration
The form of the Directors Declaration is provided for in Sec’s 203 to 207 of the Act. The declaration must be filed with CRO within 21 days after the date on which the carrying on of the restricted activity.

The declaration should be signed by a majority of the directors

  • Circumstances of transaction or arrangement
  • Nature of benefit that will accrue to the company
  • Company will be able to pay or discharge its debts or liabilities in full as they fall due during the period 12 months after the relevant act

Directors Liability
Where a director of a company makes a declaration without having reasonable grounds for the opinion as to the solvency of the company, the court on application by a liquidator or the ODCE, may declare that the director shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company or successor company

How Can CLS Help

We can assist in drafting all the necessary Summary Approval Procedure documentation or have any queries, 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.

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