Registration as a Private Limited Company in Ireland - Case Study Example

REGISTRATION AS A PRIVATE LIMITED COMPANY IN IRELAND ADVANTAGES These are the advantages of registration as a Private Limited Company in Ireland. Limited Liability The major advantage of Private Limited Company in Ireland is that it has limited liability. It means a company is a separate legal entity and personal assets are not mixed with those of the business. A private limited company is a separate corporate body and the money involved in it cannot be intermingled with personal assets. Moreover, the owners or the stakeholders will only be liable to the extent of the share in the company and not a penny more. However, the owners will only be liable if they incur liability on behalf of the company after its liquidation. This encourages investors and this factor has also contributed to the growth of business sector throughout the world for large scale productions and distribution (Cartwright, 2008). Business Standing As far as business standing in Ireland is concern, a sole proprietor is not strong financially comparing to a private limited company. Investors even seek such corporate bodies to lend money because they have published financial statements. If we compare Private Company with Sole Proprietor, we have more member than that of the Sole Proprietor; this means that we have better credit standing as well as better funding of the capital. It also enhances the stability in business. In Ireland, companies also enjoy the ability to increase funding through Seed Capital Scheme and also under the Business Expansion Scheme. Accountability Directors of the company are accountable to the owners and the administration of the company with regards to the company and statutory books and management as it is stated in the articles of association. This enhances the formality in the role of the director. Control and management over a limited company are exercised by the board of directors, who in turn delegate many of their functions to other managers. Directors are selected by the members of the company and are also removable on valid grounds. Thus, there is a system of check and balance in the organization, which gives it a democratic character and at the same time promotes unity of direction. Low corporate taxes Irish companies enjoys the lowest corporate taxes i.e. a universal rate of 12.5% on trading profits while some companies which meet certain requirements are taxed at 0%. This is one of the major advantages enjoyed by the companies situated in Ireland (Company Formations in Ireland). In addition to this, Irish companies also enjoy an extensive network of double taxation treaties. It means the imposition of the tax on the same income in two different countries. It can be evaded due to such treaties. Irish companies also enjoy a new incentive i.e. an exemption in the corporate taxes up to €40,000 for the first three years for the new companies. Protection of Limited Company Name It is another advantage enjoyed by the limited companies that any other company cannot get registered by the same name as another limited company. DISADVANTAGES Following are the disadvantages of registration as a private limited company in Ireland. Complexity The formation of a company involves very complex procedures. The setting up cost is also very high i.e. €300-€500 as compared to sole proprietor and partnership businesses. While the other types of businesses such as Partnership and Sole Proprietor can be brought into existence without reference to government. This sometimes discourages investors. At the time of liquidation, there are even more complex formalities and procedures than the setting up of a company. Government Restrictions and Reports All corporations are subject to the approval of the government, which imposes certain restrictions and exercises some controls over them. They have to pay the registration fee to the government. They must submit the annual financial statements to the CRO. It also imposes certain taxes on this form of business. (Ezine Articles, 2009) The corporation also faces charter restrictions imposed by the government. It means, once the memorandum of association is registered with the registrar cannot be altered without prior permission of the members, civil court of law and the registrar of the companies. Such changes also require a long and tedious procedure involving excessive time, labor, paper work and cost. Lack of Privacy The shares of Private Limited Company in Ireland are not available for the public but still the information regarding the company can be made public. The books of the company and even the information regarding the directors, including their names and personal information, are made available on request. The statements are also sent to the registrar, bankers and stock exchanges of the country. Due to this wide and extensive distribution of business information, secrecy is impossible. And it can be very useful for the rival companies. However, in sole proprietor and partnership, maintenance of secrecy is no problem. Capital rising The company shares cannot be sold in the open market unless there is an agreement that makes it difficult in increasing capital when compared to a public listed company. In other words we can also say that investors are discouraged to invest in private companies. Sometimes it is also said that such companies has frozen investment. It means whatever once invested in the business cannot be withdrawn. However, in public listed company shares can be transferred without any complex legal formalities. Profit sharing Some private companies are highly profitable. However, this factor also contributes to another advantage because in some private companies the number of members can limit up to 50 which means the profit should be distributed to all the fifty members and it should distributed evenly. This makes the members show lack of interest in the company as well. Sometimes they are indifferent as to the general welfare, growth and progress of the company. SELLER SHALL HAVE TITLE TO THE GOODS The very first implied condition in EVERY contract of sale of goods is that the seller, in an actual sale, has a right to sell the goods and, in agreement to sell he will have it when property is to pass. Incase the defective title is proven; the buyer is entitled to reject the goods. However, this implied condition may be negative by an express term, as in court sales, where only such rights as the judgment-debtor has are sold. Court officer selling in execution debtor’s goods gives no implied undertaking as to title. It is further explained in the following cases: Rowland v. Divall (1923) In this case the claimant purchased a motor car from the defendant. He used it for several months. Later it became known to the plaintiff that the defendant was not the true owner of the car and as a result of this he was compelled to give in the car to the true owner of the car. Therefore, the plaintiff sued the defendant on the grounds that there was no consideration at all at the inception of the contract and he should get the purchase money he paid for the car. It was held that a buyer of a motor car who was deprived of the same owing to the seller’s want of title was entitled to recover the full price from the seller even though he had used the car for some months, as the consideration had totally failed. (Commercial Law - Cases) Niblett v. Confectioner’s Materials Co. In this case the plaintiff was sold 3000 tins of condensed milk C.I.F. from New York to London. On their arrival in London, it was found that 1000 tins were labeled ‘Nissly Brand.’ Nestle Co proved that this was an infringement of its trade mark. The plaintiff had to remove all the labels. The tins were in consequence sold at loss. The plaintiff sued the defendant on the ground of breach of condition of title to the goods and also claimed compensation for the same. It was held that as the defendants had no right to sell the goods and there has been an infringement of another company’s trade mark, they were bound to pay damages for the loss suffered by the plaintiff. Patten v Thomas Motors Pty Ltd [19665] It may further be noted that where the seller having no title to the goods at the time of the sale, subsequently acquires the title to the goods, by paying off the true owner of the goods, before the buyer seeks to repudiate the contract, that title feeds the defective titles of both the original and the subsequent buyers and it will be then too late for the buyer to repudiate the contract. In Patten v Thomas Motors, a hirer under a hire purchase agreement had a car and he sold it to a car dealer. The car dealer sold it to another third party and so on. Later it comes into the hands of the defendant; he sold it to the plaintiff. It was observed that all the transactions were in good faith except the very first one. The plaintiff used the car for two years. Later it was seized by the finance company holding a bill of sale over the car. Moreover, Persch was also provided finance by the finance company taking the bill as a security. She used it to pay the original hire purchase agreement. Later Patten, the plaintiff sued the defendant for breach of warranty as to title. It was held that Persch acquired good title to the car and even the subsequent buyers. Therefore, the plaintiff could not succeed because there was no defect title as it was cured. (Turley) THE GOODS SHALL BE OF MERCHANTABLE QUALITY This condition is implied only where the sale is by description. We have already seen that there is an implied condition in such cases that the goods should correspond with the description. The subsection also states that the goods should be of merchantable quality. But for making this condition applicable, not only the sale must be by description, but there are additional requirements to be fulfilled as well: 1. The seller should be a dealer in the goods of that description, whether he be the manufacturer or not; and 2. The buyer must not have any opportunity of examining the goods or there must be some latent defect which would not be apparent on reasonable examination of the same. There is no implied condition of merchantability as regards to defect when the buyer was given a chance of examining the goods but he avoids it, or he has examined the goods. The phrase ‘merchantable quality’ means that the goods are of such quality and they are in such condition that a reasonable man with ordinary prudence, under the circumstances, buys those goods, whether he buys them for his own use or to sell again. Grant v Australian Knitting Mills Ltd. In this case, the plaintiff contracted for a particular garment of some external origin. It was supplied to the plaintiff but subject to a defect in goods. It contained some chemical which was harmful to the skin and it was negligently left in the process of manufacture. The plaintiff sued for damages on the ground that the goods were not of merchantable quality. It was held that because of such a defect the garments were not of merchantable quality and the buyer was entitled to reject the goods. (GRANT v AUSTRALIAN KNITTING MILLS LIMITED) Thornett v Beers The plaintiff wanted to purchase some glue. The glue was stored in the seller’s warehouse in barrels. Every facility was given to the plaintiff for its inspection but he did not avail it. Later the glue was found to be defective which would have been found out if the plaintiff had inspected the contents of barrels. Later, it was held that there was no breach of any implied condition as to merchantability and as such the plaintiff was not entitled to any relief. Works Cited Cartwright, T. (2008, September 28). A private Limited Company advantages. Commercial Law - Cases. (n.d.). Retrieved from ROWLAND v. DIVALL: http://www.vanuatu.usp.ac.fj/Courses/LA313_Commercial_Law/Cases/Rowland_v_Divall.html Company Formations in Ireland. (n.d.). Retrieved from Euro Company Formations: http://www.eurocompanyformations.com/CompanyFormation/JurisdictionsServed/CompanyFormationinIreland/tabid/86/Default.aspx Ezine Articles. (2009, November 08). Retrieved from Setting Up a Company in Ireland - What You Need to Know : http://ezinearticles.com/?Setting-Up-a-Company-in-Ireland---What-You-Need-to-Know&id=3228954 GRANT v AUSTRALIAN KNITTING MILLS LIMITED. (n.d.). Retrieved from Commercial Law - Cases: http://www.vanuatu.usp.ac.fj/Courses/LA313_Commercial_Law/Cases/Grant_v_Australian_Knitting_Mills.html Turley, I. Principles of Commercial Law. Cavendish Publishing (Australia). Read More