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What is Involved in the Summary Approval Procedure?

Jan 1, 1970
The SAP permits companies to perform transactions or enter into arrangements that may previously have been deemed prejudicial to the interests of the owners or creditors of a company, in a cost effective and efficient way - in this case permitting a company to make a loan or quasi-loan, enter into a credit transaction, or enter into a guarantee or provide any security to directors or persons connected to directors as prohibited under Section 239 of the Act.   The SAP procedure is as follows for this type of transaction:
  1. A declaration containing the information prescribed for each restricted activity as detailed below is made by the directors (the "Declaration"). It is delivered to the Companies Registration Office (CRO) within 21 days of the loan being made (where the prescribed timeframe is not adhered to the loan will be in breach of the Act). An application to court for an order validating the activity may be sought. The court may grant such an order provided the court believes it to be just and equitable to validate the activity.
  2. The members must pass a special resolution not more than 12 months prior to the loan being made, giving the directors authority to make the loan (the "Resolution").
  3.  The Declaration must be made by a majority of the board directors and contain specific information relating to the proposed transaction.
The Declaration can, in practice, be made on the same day as the Resolution is passed.In any event, the declaration must be made at a meeting of the directors held not more than 30 days before the action.   The directors' declaration must set out the;
  • circumstances in which the arrangement is to be entered into.
  • nature of the arrangement.
  • name of the person to or for whom the arrangement is to be made.
  • purpose for entering into the arrangement.
  • nature of the benefit which will accrue to the company from entering into the arrangement; and
  • declarants have made full inquiry into the affairs of the company and that, having done so, they have formed the opinion that the company will be able to pay or discharge its debts and other liabilities in full as they fall due during the period of 12 months after the date of the relevant act.
  The final two criteria are very important for Directors to bear in mind. Directors should be careful as under Section 210 of the Act it provides that where the directors make a Declaration under the SAP without having reasonable grounds to believe that the company will be able to pay or discharge Its debts and other liabilities in full as they fall due during the period of 12 months after the date of the relevant act, then there may be severe personal liability implications. The court may, on the application of the Director of Corporate Enforcement, a liquidator, creditor, member, or contributor of the company, declare that the directors shall be personally responsible without any limitation of liability for all the debts of the company. Where a company is wound up within 12 months of the Declaration, there is a rebuttable presumption that the directors did not have such reasonable grounds, Before the introduction of the SAP process, personal liability for all or some of the company's debts only applied to an individual who benefits from an arrangement (i,e, a loan, quasi-loan or credit transaction) in circumstances where:
  1. The company is being wound up and is unable to pay its debts; and
  2. The court considers that the arrangement has contributed materially to the company's inability to pay its debts or has substantially impeded the orderly winding up of the company.
  The use of the SAP to legalise a director’s loan arrangement will expose all the directors to unlimited personal liability for the debts of the company. Prior to utilising the SAP to legalise an activity, the directors should carefully consider the fact that they could be exposing themselves to unlimited liability. We would recommend that the independent professional advice be obtained before undertaking any action.  


Careful consideration is needed and consultation with the appropriate professional advisors should also be obtained (tax, accounting, or your legal advisors etc.,) prior to formalising a loan to a director or person connected to a director. With our services you have a professional and dedicated service with local knowledge and international experience from a contactable team to assist your company.   For an initial meeting or discussion, please contact: Aidan Scollard FCA Partner and Registered Auditor - Roberts Nathan Email Office + 353 1 876 4550 Mobile +353 86 25 23 026     The content of this blog is intended to convey general information and educational advice. It should not be relied upon as professional advice. We have done our best to ensure that the information provided by Roberts Nathan is accurate and up-to-date but unintended errors or misprints may occur. If you wish to obtain business advice or taxation advice please do not hesitate to get in contact with a member of our team.    

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