Company formation problem

richmond32

My company have made a horlicks of setting up a new holding company, instead of issuing new share capital of €100 it was formed with a share capital of €250k, and the shareholders are not willing to stump up the consideration at that level. We are getting conflicting advise from our accountants, one of the big 4, who keep moving the goalposts in relation to finding a solution.

At the same time, we set up a new trading company for a new venture and did the same thing again. We were badly advised..

Does anyone know of any company secretarial companies who would specialise in sorting out the mess, the accountants say we cannot strike off as it will have assets of over €150 when capitalised, and I have been told that we need to do so to 5% of the issued capital ie €12,375 odd by 2 for the two companies. We would need to do a voluntary liquidation, which would cost thousands.

Neither company has traded, has any asset or liabilities, would the CRO assist or will they just say get professional advise? All of this is hurting my head....

Kearney Curran might be able to help you

pedroeibar1

richmond32 wrote: »

My company have made a horlicks of setting up a new holding company, instead of issuing new share capital of €100 it was formed with a share capital of €250k, and the shareholders are not willing to stump up the consideration at that level. We are getting conflicting advise from our accountants, one of the big 4, who keep moving the goalposts in relation to finding a solution.

At the same time, we set up a new trading company for a new venture and did the same thing again. We were badly advised..

Does anyone know of any company secretarial companies who would specialise in sorting out the mess, the accountants say we cannot strike off as it will have assets of over €150 when capitalised, and I have been told that we need to do so to 5% of the issued capital ie €12,375 odd by 2 for the two companies. We would need to do a voluntary liquidation, which would cost thousands.

Neither company has traded, has any asset or liabilities, would the CRO assist or will they just say get professional advise? All of this is hurting my head....

Much of what you wrote does not compute. Just because the nominal capital is 250k does not mean it has to be paid up or even issued (for cash or a consideration other than cash). Those rules do apply in some EU countries – e.g. France, but not in Ireland.

There is no hope for any of us if you are getting conflicting advice from one of the Big Four. In your position I would speak to your audit manager (I assume that is why you are using a Big 4 firm) and tell him you are mightily pi$$ed off with what is going on and you want this resolved, NOW.

You need proper professional advice, and you need to have an idea yourself, so do a bit of research. The companies have not traded, so there are no creditors, therefore a members voluntary winding-up should not be complicated.

It is almost June 1, so the new companies act is nearly upon us, possibly would make your task easier, so have a read of it, particularly Section 731

All the big law firms have company secretarial subsidiaries - I did some work with Goodbody's one once, a Ms. Marsha Coughlan, another choice to add to el Rifle's above.

richmond32

CRO have replied saying the problem can be resolved after th new act comes in in June, by completing form B42a.

Not very impressed with our big four advise if this proves to be true....

Graham

richmond32 wrote: »

Not very impressed with our big four advise if this proves to be true....

Doesn't 'big 4' generally mean you're being charged almost 4 figures a day for the most recent member of their graduate program?

pedroeibar1

That B42a form might be fine if you want to reduce the capital structure, but is that all you want to do?

capefear

richmond32 wrote: »

CRO have replied saying the problem can be resolved after th new act comes in in June, by completing form B42a.

Not very impressed with our big four advise if this proves to be true....

I was looking into this last week for another client and I taught that was the easy answer to, so I emailed the cro and this was there reply, see below.

Unfortunately the B42A cannot be used in this instance. When a company makes a mistake on its incorporation documents (A1) these cannot be changed or amended.

If I get an update for the client I'll let you know.

richmond32

pedroeibar1 wrote: »

That B42a form might be fine if you want to reduce the capital structure, but is that all you want to do?

Yes, the memo and arts says that there are 165,000 shares at Eur 1.50 each, we were informed that were need to fully pay up this amount, which sounds wrong to me. Then there was talk of only only paying up 5%, but the advice has been as clear as mud. Bear in mind that we set up two companies in this manner.

We want to have the same shareholder % but should have done it with Eur 100 as the capital. My company secretarial knowledge is very poor, we are hoping in June to reduce the capital from the Eur 247,500 to Eur 100. Note that there have been no transactions in either company to date.one is a holding company to go above the current company and the other is to be a trading company in a related sphere.

Thanks for the help folks, the B42a sounds too simple to be true I think....

richmond32

capefear wrote: »

I was looking into this last week for another client and I taught that was the easy answer to, so I emailed the cro and this was there reply, see below.

Unfortunately the B42A cannot be used in this instance. When a company makes a mistake on its incorporation documents (A1) these cannot be changed or amended.

If I get an update for the client I'll let you know.

My question to the CRO below, is it too simple that this is correct....certainly my understanding that the new act is designed to remove a lot of the difficulties from the acts from 1963-2013. There was no equivalent form before the B42a in the current legislation.

We have set up a new holding company and separate new trading company and have made an error during the company formations.

We should have formed both companies with a share capital of €100 each, split between the current shareholders in the same ratio as the original company but in error set them up with a share capital of €247,500. My understanding is that now the shareholders would require to purchase the shares to the value of €247,500 in both these companies, they do not have the funds to do this.

They have not traded and have no assets or liabilities. Is there any simple way to cancel these formations, no consideration has been paid to date?

We would be available to meet or discuss at any stage a solution to our problem. We would have no objection to starting the process to form two new companies again if required.


CRO response below, from a Higher Executive Officer in CRO Dublin.

When the new act is introduced it will be possible to correct this error on a B42 A form . Please review this draft form on the CRO's website and do not hesitate to contact me if you have further queries.

pedroeibar1

Decent & helpful response from the CRO.

As I said above, I strongly suspect there is “stuff” missing from the information provided. (I’m not being negative or looking for answers, just pointing out what seems odd to me.)

The amount of share capital is odd – why the specific amount of €247,500 ??? Why not a round 250k? or more usually 100k?

There will be a transfer of shares, so there are important tax considerations. Have these been considered?

What about the other shareholders? If there are any, you need to consider if there are pre-emption rights. Stamp duty at 1% is payable on the shares transfer.

I don’t understand where the need to pay up part of the unissued share capital comes from.

Contrary to what is posted by another above, under existing law a limited company may cancel its authorised but unissued share capital without restriction as this does not change its financial position. (Not your case, but should the company wish to reduce its issued share capital it may do that also, but only if some other conditions are met.)

If all you want to do is reduce the capital amount (not the issued capital) IMO the B42 looks good under the new Act. You could also ask if this could take place at the same time as the new entities are switching over in conformity with their required designation under the new Act.

What is going on here is too important for advice from a Boards discussion, I repeat you should talk to a very senior person in your Big 4 – email them what has been provided to you, say you are both unclear and unhappy with the service and request an meeting. If that does not go well, change to another Firm. I deal with all the Big 4 on a regular basis and apart from the cost I've never had an issue on professional advice, so I am surprised. If you do change, I would look at accountants rather than a law firm unless the law firm was also giving you tax advice (the lack of mention of that to date would scare me.)
Best of luck with it.

Im also wondering why this share capital must be paid up. I just opened a new company in Ireland and didn't have to pay up any of the share capital. Unless there is some rule that if you change the share capital amount it has to be paid up. Did you speak to Kearney Curran about fixing it? They do this stuff all day long!

dbran

Hi Guys

Am I missing something here????

Why dont you just voluntarily strike the companies off (VSO).

The company has never traded and has no assets or liabilities.

The fact that the company has issued share capital of 250k is totally irrelevant since October 2011 when in fact the CRO removed this as a requirement for VSO. The only requirement is the asset and liability requirement which the company falls within.

The company has no assets and liabilities. Or more specifically the issued share capital is a credit balance and the amount owed on the issued shares is a debit balance. Both added together equal to zero. So the company can go for VSO because the amount of its assets does not exceed €150 and also the amount of its liabilities does not exceed €150. That is to say it is not insolvant and it does not have an amount of assets which when the company is struck off will be in limbo and are not owned by anything.

https://www.cro.ie/About-CRO/Whats-New/News-Archives/2011/mid/792/dnnprintmode/true?SkinSrc=%5BG%5DSkins/_default/No%20Skin&ContainerSrc=%5BG%5DContainers/_default/No%20Container


Best Regards


dbran