Commercial & Corporate Law - Setanta Solicitors

Shareholders’ Agreements

kevin — Tue, 12 Aug 2025 16:56:19 +0000

What is a Shareholders Agreement?

Companies are owned by shareholders. Shareholders have a percentage of the issued shares. The shareholders vote in proportion to their shareholding. In business it is common to have more than one shareholder. However, if the shareholders disagree it is very important to have a shareholders agreement to reduce any disputes. It is advisable to set this up early (in or around the incorporation of the company) when the parties are optimistic and will be in a relaxed position to agree the terms of business between them.

A Shareholders’ agreement is a contract which creates rights and obligations for shareholders beyond the basic rights in company law or in a company’s constitution and it is designed to safeguard the rights and interests of the shareholders within a company.

This agreement is legally binding and applies only to the parties involved, creating a formal contractual relationship between them. The parties to a shareholders’ agreement may be all a company’s shareholders. The company itself is often joined as a party to the agreement.

Multiple Shareholders Agreements

A company can have more than one Shareholders’ agreement in place at the same time. In such circumstances, the agreements should not conflict with each other.

The content of a shareholders’ agreement changes considerably depending on the nature of the company. A shareholders’ agreement for a venture capital backed start-up company is very different to a shareholders’ agreement for a joint venture company.

What is the difference between a Shareholders’ Agreement and company by-laws?

A Shareholder Agreement is a private contract among the shareholders of a company and its content can be kept confidential. On the other hand, the Company Constitution is a public document that outlines the broader internal rules and regulations of a company and applies to everyone associated with the company. Unlike company by-laws, which are mandatory under the law, the Shareholders’ Agreement is an optional agreement entered into between some or all of the shareholders in a company.

Aim of a Shareholders’ Agreement?

The goal of a Shareholders’ Agreement is to provide a framework for decision-making, protect minority shareholders, regulate the transfer of shares, and ensure the smooth operation of the company.

When to create a Shareholders’ Agreement?

The Shareholders can enter into this Agreement at any time before or after the commencement of the Company.

What can be the duration of a Shareholders’ Agreement?

There is no fixed duration for the Shareholder Agreement. The duration can be fixed under the Shareholder Agreement such as for a fixed period, conditional termination, or upon closure of the company.

Who can enter into a Shareholder Agreement?

Any individual above the age of 18 years or legal entity who is also a shareholder in the company the Shareholder Agreement is related to.

Is it mandatory to have a Shareholder Agreement?

No, it is not mandatory. However, it provides clarity on the roles, responsibilities, and expectations of shareholders and helps prevent disputes in future.

What to include in a Shareholders’ Agreement?

Common rights and obligations in shareholders’ agreements include:

Shareholder investment and Director Loans
Salaries for the Shareholders if any
Provision for Dividends
Incapacity/ Probate / Legacy Clauses
the issue and transfer of shares,
the composition of the board of directors,
minority investor blocking rights,
restrictive covenants and
dispute resolution mechanisms.

A number of other clauses can also be entered into the Shareholders’ Agreement, such as:

A “First Refusal” clause:

This means that Shareholders are not allowed to sell their shares to an outsider without first offering them to the other parties involved in this Agreement.

A Drag-Along clause:

This gives majority Shareholders (a pre-determined percentage of Shareholders) who wish to sell their shares to an unrelated third-party, the right to force the remaining shareholders to sell their shares on the same terms.

A Tag-Along Rights clause:

This provides “co-sale rights” to the Shareholders. Generally, this clause is used to protect the minority shareholders of the Company. Thus, if majority shareholders sell their stake, it gives the minority shareholder the right to join the transaction and sell their minority stake in the Company.

An anti-dilution provision:

This helps protect the shareholders of a company by maintaining the size of their ownership stake in the company when new shares are issued. Without an anti-dilution clause, existing shareholders may experience a decrease in their ownership percentage and a decrease in the value of their shares.

Is it necessary to have witnesses for a Shareholders’ Agreement?

No, it is not mandatory under the law. However, having two witnesses above the age of 18 years will add to the credibility of the Shareholders’ Agreement and help in resolving the disputes in future.

Can a Shareholders’ Agreement be terminated?

Yes, a Shareholder Agreement can be terminated. The Shareholder Agreement is mainly terminated on the following grounds:

Mutual agreement between parties.
A material breach of the agreement by one or more shareholders
Dissolution of the company
Unforeseen circumstances where the agreement cannot be continued (force majeure event).

If you have any issue as to how current Media law affects you or your company, or how future changes will, please do not hesitate to contact Setanta Solicitors (info@setantasolicitors.ie).

Note: This blog post is for information purposes only and does not constitute legal advice.

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Duties of Irish Company Directors and Company Secretaries

kevin — Wed, 07 Jun 2023 08:42:16 +0000

Who are Irish company officers?

Irish company officers are the Directors of the Company and the Company Secretary.

The officers in a company have obligations under of the Companies Acts.

Those obligations are different for Directors and Secretaries.

Directors

Director’s Duties

The Director’s duties are owed under both statute and common law. The key duties of Directors are confined within Part 5 of the Companies Act 2014 (as amended). The Directors are entrusted with the duty, power and responsibility of managing the affairs of the company.

They owe a fiduciary duty to the company. This duty involves acting in:

Good faith;
Honestly and responsibly;
And in accordance with the company’s constitution.

Qualification for Appointment as a Director

Cannot be under the age of eighteen (18); (Section 131)
Cannot be a body corporate; (Section 130)
Cannot be an undischarged bankrupt; (Section 132)
Cannot be a Director of more than 25 companies unless they are exempt; (Section 142)
Cannot be disqualified. (Chapter 4 Part 14 Companies Act 2014)

A minimum of two Directors and one Company Secretary for all companies except Private Limited Companies by Shares as they can have one Director, if so desired.

Disqualification of a Director

Directors can be restricted or disqualified from acting as an officer to a company by the High Court or a Director may undertake to accept restriction or disqualification by the Corporate Enforcement Authority.

The Companies Act 2014 (as amended) states that in order for a restricted Director to act in relation to a company, the allotted share capital of nominal value must not be less than €500,000 in the case of a public limited company or public unlimited company. In the case of any other company type it must not be less than €100,000.

Restrictions can last for 5 years. There can be different periods set for disqualification, but the normal period of disqualification would be 5 years also. Restriction can be made in relation to an insolvent company unless the Court is satisfied that the person acted responsibly and honestly in relation to the conduct of the affairs of the company or has co-operated with the liquidator in relation to the conduct of the winding up of the company or if it is just and equitable in the eyes of the court that the restriction is not made.

Director’s Liability

In circumstances if a director breaches their fiduciary duty to the company they can be liable to account to the company for any gain which they make, directly or indirectly, from the breach of duty. They can also be required to indemnify the company for any loss or damage resulting from their breach of duty. A Director who authorises restricted activity i.e. loan, credit transactions etc. can also be liable to account or to jointly and severally indemnify along with any other persons who authorised such transactions.

Where relief is sought in civil proceedings if the Court is satisfied that the Director has acted honestly and reasonably and having regard to the circumstances of the case ought fairly to be excused for the wrong concerned.

It will be presumed that the Director enabled the default by the company if they were aware basic facts concerning the default. To rebut this presumption it must be shown that the defendant took all reasonable steps to prevent it, or it was beyond the defendant’s control to prevent the default.

Company Secretary

Qualifications of a Company Secretary

The Directors must, under Section 129 of the Companies Act, ensure that the person appointed to such a position has the skills and knowledge to discharge their statutory and legal duty and such duties delegated by the Directors.

The Directors must take all reasonable steps to ensure that the Company Secretary is able to carry out the function of their role. They should:

They should have held such position three years out of the five years preceding their appointment; or
Is a member of a body for the time being recognised by the Minister for Business, Enterprise & Innovation; or
Is a person by virtue of their holding or having held any other position or by being a member of any other body appears to the Directors to be capable of discharging their duties.

Company Secretary Duties

The main duties of a Company Secretary are administrative rather than managerial, they are the principal legal administrative and compliance officer within the company and have no decision-making power. It is worth noting that a Company Secretary can be one of the Directors in the company and can be a body corporate (i.e. accounting or solicitor firms)

The specific duties of a company secretary are:

Filing Documentation at the CRO;
Maintaining the statutory registers and minute books i.e. Register of Members, Directors and Secretaries, Director’s and Secretaires interests in Shares and Debentures;
Convening annual and emergency general meetings of members laying down the necessary notice requirements.
Ensuring that statutory forms are completed and filed on time in the CRO;
Delivering to the CRO copies of resolutions passed by the company;
Supplying a copy of the company’s financial statements to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings (21 clear day notice requirement);
Keeping, arranging and entering minutes of Directors’ meeting and general meetings;
Ensuring that those entitled to do so may inspect company records;
Safekeeping, custody and use of the company seal;
Ensuring that company complies with its obligation to publish its name (paint/affix name outside of every business office);
Ensuring that particulars relating to Directors are shown on all business letters of the company.

Company Secretary Liability

As a Company Secretary is an officer of the company they can be criminalised for default by a company. Any officer of the company who is in default shall also be liable to a fine or a penalty. They will be presumed to have enabled the default by the company if they were aware basic facts concerning the default, in order to rebut this presumption, it must be shown that the defendant took all reasonable steps to prevent, or it was beyond the defendant’s control to prevent the default.

Conclusion

Company officers are Directors and Company Secretary. Their roles are divided but are crucial. Directors manage the day-to-day running of the company and Company Secretary roles are administrative. Both officers play a crucial role within a company and uphold their responsibilities.

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The Legal Difference between a Partnership and a Company

kevin — Mon, 29 May 2023 14:45:13 +0000

What is a Partnership?

A partnership is an agreement between individuals who form a business together with a view to making profit, without having formed a company. In the absence of a written Partnership Agreement, the agreement itself will be governed by the Partnership Act 1890 (“the Act”). The definition of partnership is provided under Section 1 of the Act.

It is a default form of business organization where in circumstances a group of individuals are conducting business, and do not form or register a company. They will be deemed to have become partners.

There are three forms of partnerships:

General Partnership – this is a similar version of a partnership and holds the basic make up and responsibilities of when a business is formed by multiple owners.
Limited Partnership – this includes both general and limited partners, there always must be one. There are different types of partners who have different levels of liability and responsibilities in the business, although they all pay tax on their respective shares. A limited partner contributes to the establishment of the business, and they are only liable for the amount they initially invest. They are unable to withdraw their initial investment.
Limited Liability Partnership (LLP) – this is in circumstances where all of the partners in the business hold limited liability. None of the partners bear responsibility for the business’s debts beyond their initial investment and pay taxes on the income from their profits. A partner under the LLP is therefore both an owner and a decision-maker in the business and has limited liability.

What is a Company?

A company is an artificial legal entity having a separate legal identity formed by shareholders and their ownership is dictated by the level of shares owned. The officers of the company have a responsibility to the shareholders. The formation and regulation of a company is governed under the Companies Act 2014 (as amended).

There are many types of companies:

1. Private Limited Company (LTD)

There are two types, one is limited by shares (Ltd.) and the other is limited by guarantees. (CLG)

A company limited by shares has shareholders and a director or directors. The company must issue a statement of capital, which provides information on its shares including:
- the total number;
- the value of each share;
- and the names and addresses of all the shareholders.

Shares under this type of company can only trade their shares privately and the shareholders can’t sell their shares on the stock exchange.

A limited by guarantees company means that the business is typically not run for profit, is legally separate from those who run it, keeps it own finances, invest its profits back into the company and has guarantors. These types of companies have no shareholders and instead have members. Every member guarantees the company’s debts up to an agreed upon amount. These are typically Non-Governmental Organizations, charities and clubs.

2. Designated Activity Company (DAC)

A designated activity company is a company which has a specific object clause to indicate the type of activity it operates. It must have a minimum of two directors and can have shareholders. Its operations are confined to the specific objects it is incorporated for.

3. Public Limited Company (PLC)

As opposed to an LTD, a PLC can sell its shares on the stock exchange. All the shareholders have limited liability and they are only responsible for the amount they invest in the company. There are qualification and pre-registration requirements in order to be deemed to be a PLC.

Key Differences between partnership and a company?

1. Liability

Where a partnership has been formed the partners will be deemed to have unlimited liability for the business’s obligations i.e. debts, tax, expenses. Partners therefore have significant exposure to litigation where the affairs of the business are not managed efficiently.

There are two sections of the Act that must have consideration placed upon them. These are:

Section 9 of the Act provides “Every partner in a firm is liable jointly with the other partners, and in Scotland severally also, for all debts and obligations of the firm incurred while he is a partner….”.
Section 12 of the Act provides that “Every partner is liable jointly with his co-partners and also severally for everything for which the firm while he is a partner therein becomes liable under either of the two last preceding sections.”

The Partnership Act 1907 provides for an alternative form of partnership which limits a partner’s liability based on their share capital contribution.

Whilst there are liability concerns when a partnership is formed, no such concerns arise in relation to the formation of a company. A company’s shareholders have limited liability meaning the company’s members are not ultimately liable for the debts of the business.

Certain other types of partnership have recently been allowed to have limited liability such as solicitors and doctors and they use the moniker “LLP” to denote limited liability.

2. Taxation and Company Registration Office Filing difference

Under a partnership a partner’s tax liability is only based on their income derived from the business and is governed under the Tax Consolidation Act 1997. The tax computation is derived from the profit and loss of the business and the partner is deemed to be artificially conducting a separate trade, each individually. Income tax is applied. Income tax rates in Ireland are 20% up to thresholds and 40% thereafter. Normally partnership returns are filed by one nominated partner known as the assessable partner.

A company’s income is taxed as corporation tax based on the profits and loss of the enterprise. The default corporation tax rate is 25%. This can reduced to 12.5% if it is a trading company. Non trading companies are companies which do not trade but may hold assets or investments.

The filing obligations under company law and tax law are very strictly regulated and there are significant penalties where filing have not been done on time. These require a company to be up to date with its accounting obligations and disclose and file relevant returns in a timely fashion.

Partners pay higher tax than companies, but they may enjoy significant privacy advantages over companies as there is no obligation to publicly file their accounts.

Conclusion

When a business is being formed, important consideration must be placed on the desires of the operators of the business.

Companies enjoy a lower tax rate and limited liability. However, where money is paid to the shareholders via dividends, income tax can arise.

Partners do not by default enjoy limited liability and pay a higher headline tax rate. However, they have more privacy than companies and do not have to pay corporation tax but pay income tax on their profits. There is no second charge to tax to take money out of the operation as there is in a company.

It is important at the outset of your business to obtain the relevant legal and tax and accounting advice and we are available to assist in this regard.

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Practical Guide to Setting up a Business in Ireland

kevin — Tue, 24 Jan 2023 16:15:46 +0000

Ireland is the only native English-speaking country in Europe and attracts foreign investment for the advantageous tax rates and highly skilled workforce.

The most important advantage of setting up an Irish company is limited liability.

There are a number of practical considerations that are required to be addressed before incorporation.

Business Name

It is important to choose the right name. Searches should be run in the companies office and against trademark and intellectual property registers to ensure that you are not infringing on established intellectual property rights. It is advisable to prepare a list of a few names so you are not overly committed to one.

Website and Intellectual Property design

A website design and presence are important. Normally a well-produced professional logo can influence the web design and look and feel.

Ownership / Structure

It is important to have clear ownership and responsibilities and to prepare even at inception for an exit strategy. Do you want to build a business to sell it or take on investment or grow it.

Shareholders Agreements

If there is more than one owner it is important to know what happens if someone gets sick or dies, or record what money goes in and out of the company and how earnings are treated and disputes are resolved. It is important to do this at the start of the company before you get too busy later on and a dispute arises.

Registered Office of the Company

It is important that all legal documents can arrive to the company and you need a stable address that serves as the registered office that is not your home address as it will be publicly available.

Staffing Levels

The correct roles and responsibilities and a cogent well thought out business plan will advise on a clear timeline of staffing needs. You will need robust employment policies and procedures and contracts in place.

Company Secretary and Seal

The company secretary is responsible to maintaining the company books and ensuring that the company is following legal obligations.

Choosing the right accountant and advisors

Tax and accounting advice is crucial for any start up. Getting this wrong can result in a viable business failing.

Getting tax advice early

Irelands trading rate of 12.5% carries obligations around substance in Ireland. There are accelerated research tax credits available and a knowledge box and patents structure as well as other detailed tax reliefs that can be available. Getting the correct tax advice early can mitigate tax audit risk and maximize corporate structures.

Setanta Solicitors can assist in all company incorporations and making introductions to professional advisors. Please contact us to schedule a no obligation consultation at info@setantasolicitors.ie or 01 215 0168

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Company and Commercial Legal Services

kevin — Thu, 19 May 2022 17:20:00 +0000

Company and Commercial Legal Services at Setanta Solicitors

With the consequences of Brexit being felt for many UK companies and inflation hitting a 9% 40 year high, we are seeing a plethora of UK companies seeking to incorporate in Ireland.

Setanta Solicitors can assist you with company incorporations. The considerations that companies should address are usually;

The name and identity of the company. This should include a consideration of Intellectual Property such as trademarks.
The premises from which the company intends to operate from. We can make introductions in this regard if required.
Shareholders Agreements for the founding members which set out the money in, the ongoing division of responsibilities and the salary and drawings of the owners.
Employment contracts and employment infrastructure, policies and procedures.
Business Contracts, templates, terms and conditions, website set up.

We can also assist you with your growth stages including company growth and tax efficient company structures.

The benefit of having a company is of course the creation of a separate legal entity which is a legal person in its own right that can hold property, assets, and provides limited liability to the owners so that any enterprise is confined by way of risk mitigation to that enterprise only.

If you are a self employed trader considering incorporating then we would be happy to discuss the mechanics, timing and costs of moving your business into a corporate structure.

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