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					                                                            THEATRE FORUM

                                  STARTING A PERFORMING ARTS COMPANY

While the term “theatre company” is often colloquially used to describe any
organisation that produces plays and other stage productions, such an
organisation may not necessarily be a company in the strict legal sense of
that word. Some performing arts companies may simply comprise a
grouping of individuals without any particular formal connection. It is fair
to say however that most professional performing arts companies will need
to consider carefully the legal form they use for conducting their day-to-day
business operations.


1.           Choice of Corporate Structure

A number of advantages can be gained from formalising the legal structure
of your company prior to commencing business. For example, one key
advantage that results from being incorporated as a limited company is that
of limited liability. This is because the company is a separate legal entity
from its owners, who enjoy the protection of what is known as “the veil of
incorporation” in regard to its activities. However there are various other
possible trading forms, some of which are briefly described below:

            private company limited by shares: members’ liability to contribute
             to the assets of the company is limited to the amount (if any) unpaid
             on the shares for which they have subscribed.

            company limited by guarantee: members’ liability is limited to the
             amount of their guarantee to contribute to the company’s assets
             (normally a nominal sum).

             public limited company: members’ liability is limited to the amount
              unpaid on shares held by them.

             unlimited company: no limit on the liability of members.

            sole trader.

            partnership.

            trust.

            co-operative society.

Some of the forms mentioned above are looked at in more detail below,
starting with the most basic form.




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1.1 Sole Trader: The term “sole trader” describes an individual who
    operates on his own rather than a body corporate, and typically all of
    the property, profits, losses and risks of the enterprise vest in him/her.
    There is no distinction between the capital used in the business and the
    personal funds of the individual in determining his/her assets and
    liabilities, and the sole trader will be taxed on the profits of the
    business at personal income tax rates. He or she will also be personally
    liable for all of the organisation’s debts.

        There are no formal registration requirements to operate as a sole
        trader other than those applicable to businesses generally, such as the
        requirement to register for tax and (if applicable) for VAT (see 8.5
        below). If the sole trader operates using a name other than his or her
        own, then details of the business name (which may not include the word
        “limited”) must be filed on the business names register at the
        Companies Registration Office. A sole trader may also employ other
        staff (very likely in the case of a theatre company), in which case it
        would be necessary to register the business for PAYE (see 8.5 below).

1.2 Partnership: A group of individuals may carry on business in the form of
    a general partnership. The existence of a general partnership is a
    question of law and of fact, and no formalities (such as registration)
    need to be observed in order to establish one. A partnership may be
    formed by way of an express contract, such as a deed of partnership, or
    may simply exist on the basis of an implied contract. In other words,
    one can be in a partnership and not necessarily be aware of that fact.

        Although a partnership is not a legal entity separate from its members,
        proceedings may be brought by and against the firm in its name. Each
        partner is liable jointly for all of the debts and obligations of the
        partnership incurred while he/she is a partner and, in the absence of
        agreement to the contrary, all of the partners are entitled to equal
        shares of the profits and capital of the business. Consequently, if a
        Theatre Forum member proposes to operate as a partnership it is most
        advisable that the contractual terms of the partnership be set out in a
        formal partnership deed or agreement.

1.3 Private company limited by shares: This is the most common form of
    incorporated body, conferring limited liability on its members and
    enabling the efficient capitalisation of the organisation. It also confers
    certain tax and cash flow advantages. For more on the incorporation of
    such a company, see 2 below.

1.4 Private company limited by guarantee: This is similar in many
    respects to a private company limited by shares, save that each
    member’s liability is limited to the amount of his/her guarantee to
    contribute to the company’s assets and a winding-up. Such a company
    is not funded by the issue of shares and consequently tends to be more
    suitable for use by not-for-profit organisations (such as Theatre Forum
    itself).


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Generally speaking, the most suitable structure for an Irish theatre company
is the private company limited either by shares or by guarantee (and the
most common form of company in Ireland is the private company limited by
shares). Such a structure affords separate personality at law, allowing the
company to own property and sue in its own name and, more importantly,
limiting the liability of the members to contribute to the company’s debts
on a winding-up. Members’ personal assets cannot, therefore, be seized to
satisfy company liabilities.

2. Company Incorporation

For a company to be registered as a private company certain requirements
must be fulfilled. For example the company must have a minimum of two
(2) and maximum of fifty (50) ordinary members. In order to incorporate the
company certain documentation must be submitted to the Companies
Registration Office (“the CRO”). The CRO is the central repository of public
statutory information on Irish companies and is one of the entities charged
with the task of ensuring that companies adhere to corporate compliance
requirements.

The required information which must be submitted to the CRO is provided
for in the standard form company incorporation document issued by the
CRO, Form A1. This includes, amongst other things; the company name, its
registered address, particulars of its directors (at least one of whom must
be resident in the State) and the secretary. The proposed memorandum and
articles of association of the company must also be submitted with the
completed Form A1, together with the prescribed registration fee of €60.

Provided all requirements have been complied with, the Registrar of
Companies will issue a Certificate of Incorporation. Further information can
be obtained at www.cro.ie

3. Constitution of the Company

The memorandum and articles of association form the constitution of the
company, governing its relationship externally with third parties and
internally with its own members and setting out the rules and regulations
applicable to both.

The memorandum of association contains compulsory clauses such as the
name clause, the objects clause (setting out the objectives of the
company), the liability clause and the capital clause (fixing the share capital
of the company).

The articles of association consist of the internal regulations of the company
governing relations between the company and its members and between the
members themselves. They deal with such matters as share capital, the
powers of directors and regulations for board meetings and for members’
general meetings.


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4. Management

The board of directors is the governing body of the company authorised to
manage the day-to-day business of the company on behalf of the members.
Every Irish company is required to have a minimum of two directors.

The duties and obligations of directors are substantial, and are laid down
both by statute and by case law. Principally, a company director owes a
duty to the company to act in good faith in the interests of the company as
a whole. In addition the directors have certain statutory responsibilities
relating to the filing of annual returns and other matters. Failure to comply
with those obligations can result in prosecution.

Every company is obliged to have a company secretary who is charged with
the day-to-day administration of the company, especially those company
law compliance matters overseen by the Registrar of Companies. Outside
these parameters, the company secretary has no power to bind the company
by contract or otherwise unless expressly authorised by the board of
directors.

5. Shares and Voting

The share is the unit of capital in a company limited by shares. A share
confers upon its holder an interest in the company, the right to a dividend
and the right to attend and vote at company meetings, unless provided
otherwise in the terms of issue of the share (e.g. a subscription and/or
shareholders agreement) or by the articles of association of the company.
Where applicable, every shareholder is entitled to vote on any questions to
be decided at general meeting of the company.

Companies are generally free to create and provide in their articles for
different types and classes of shares, the rights and obligations attached to
which can vary. However the most common type of shares is known as
“ordinary shares”. Ordinary shares normally carry full voting rights but
usually rank behind preference shares when it comes to such matters as
receiving dividends and the return of capital on a winding up. Most
companies involved in producing plays and stage shows will not need to
create any special classes of share.

The term “share capital” means the capital of the company denominated in
shares (as opposed to loan capital, for example). The “authorised share
capital” is the aggregate amount of share capital which the company is
authorised by its memorandum and articles of association to issue. The
“issued share capital” is the amount of authorised share capital which has
been subscribed for and allotted. A company’s “paid up” share capital is
the amount paid up by shareholders on the issued share capital.

6. Company Name and Registered Office



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Each company’s memorandum of association must state its name. If it is
limited by shares or by guarantee, its name must end with the word
“Limited” or its Irish equivalent “Teoranta”, which may be abbreviated to
“Ltd” or “Teo” respectively. Consent may be refused for the use of a
particular name but generally speaking, provided the name is not already in
use, the founders of the company should be free to choose the name that
suits them.

Each company is required to have a registered office in the State, whose
address must be submitted as part of the application for incorporation. The
registered office need not necessarily be a company’s place of business.
This requirement enables the CRO and other state authorities to
communicate with the company and also enables the service of court
processes and other documents on the company. Any change in the address
of a company’s registered office must be notified to the CRO.

7. Insolvency and Winding-up

Where a company encounters trading difficulties, companies legislation in
Ireland affords several informal mechanisms for the resolution of such
difficulties without necessitating the use of the “ultimate solution” of
legally dissolving the company through liquidation.

Receivership: Where a creditor holds security over a company’s assets (for
example, a mortgage over its premises) that creditor may appoint a
receiver/manager over the assets in question in order to realise the sums
necessary to repay the amount due. Because the creditor holds a charge
over the assets in question, it is entitled to preferred treatment in relation
to those assets, meaning that preferred creditors (such as the Revenue
Commissioners in respect of unpaid taxes) and ordinary trade creditors have
to wait in line for repayment. Receivership is often a precursor to a
company entering liquidation.

Informal schemes of arrangement: Such an arrangement is a scheme
drawn up by the company to provide a way of paying its debts and avoid
winding up (i.e. liquidation) proceedings. Section 201 of the Companies
Act, 1963 enables the High Court to sanction such arrangements provided
they are supported by majority (in number) of creditors and members, in
each case representing not less than 75% in value of the relevant shares or
amounts owed.

Examinership: The concept of examinership was introduced to Irish law by
the Companies (Amendment) Act, 1990. This enables the Court to grant a
company protection from its creditors (including secured creditors) while
efforts are made to secure its survival. Where an application is granted the
next step is the appointment of an examiner, whose duty is to assess
whether the company is viable and, if so, to propose a scheme of
arrangement whereby creditors will be obliged to accept less than the
amounts owed to them. The examiner then presents his report to the Court
which determines whether or not it should be confirmed. Generally the


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Court will not grant an order for the appointment of the examiner unless it
is demonstrated that new funding (whether by way of share capital or
otherwise) will be made available to the company to keep it in business.

Liquidation: This can take several forms, ranging from a member’s
voluntary winding up (where the shareholders of a solvent company decide
that it should no longer continue in existence and resolve to liquidate it) to
a compulsory liquidation (where creditors apply to the court for a winding-
up order and the appointment of a liquidator over an insolvent company).

It should be borne in mind that if a company is unable to pay its debts as
they fall due it is likely to be deemed insolvent and in such circumstances
its directors should cease trading so as to avoid personal recourse being
sought against them.

In such circumstances, whether or not the company proceeds to liquidation
will often be a matter for its creditors; at present there is little incentive
for the directors of an insolvent company to commence the winding-up
process as it automatically exposes them to the possibility of a restriction
order under Section 150 of the Companies Act, 1990 or a disqualification
order under Section 60 of the same act, either restricting the directors
concerned from acting as directors of other companies or disqualifying them
altogether. Also, while a liquidation is the only means of winding up the
affairs of such a company in an orderly manner, where insufficient assets
remain to pay the liquidation costs this course of action is often not adopted
and instead the company is allowed to become dormant.

Further information on the subject of unliquidated insolvent companies, and
indeed on the duties and powers of directors, shareholders and creditors
can be obtained from the website of the Office of the Director of Corporate
Enforcement, at www.odce.ie.

8.           Other Important Considerations

The foregoing summarises a number of the important legal considerations
relating to the establishment of the company itself. In addition the
following areas may be relevant to a start-up company:

8.1          Trade Marks and Logos: If the company wishes to develop a
             distinctive name and look it may wish to register its name and/or
             logo (or that of its shows) as trade marks. Provided that the trade
             mark is sufficiently distinctive and non-descriptive it should be
             capable of registration. The national trade marks register is at the
             Patents Office in Dublin, and it is also possible to register a
             “Community Trade Mark” which, once registered, affords EU-wide
             protection. Outside the EU registration is on a national basis only,
             meaning that it is necessary to register separately in each jurisdiction
             to enjoy global protection (in practice registration would normally be
             effected in the US and other major markets only).



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8.2          Charitable Status: Certain theatre companies may be eligible to
             apply to the Revenue Commissioners for charitable status, if they are
             engaged in the advancement of education and/or other works of a
             charitable nature beneficial to the community. This status confers a
             range of tax benefits on the organisation in question. The primary
             benefit is exemption from income/corporation tax on various types of
             income, including rents from properties, interest, dividends and
             annuities provided that those sums are applied to charitable
             purposes. It also affords relief in respect of capital gains and deposit
             income retention tax (provided again that the sums in question are
             applied to charitable purposes) as well as from stamp duty and gift
             tax.

             The requirements and procedure for and benefits of applying for
             charitable status are set out in various Revenue publications, copies
             of which are available from Theatre Forum or can be downloaded
             from      the      Revenue        Commissioners’     website       at
             http://www.revenue.ie/.

8.3          Opening a Bank Account: In order to comply with money laundering
             regulations, where a company proposes to open a bank account its
             directors will be required to provide specified identification
             documents to the bank in question, as well as its original certificate
             of incorporation and a copy of its articles of association.

8.4          Employment of Staff: If the company proposes to engage staff,
             whether full-time or part-time, permanent or temporary, it will need
             to have regard to employment law (see Theatre Forum’s Guide for
             Employers).

8.5          Tax Registration: Each trading company will need to register for
             corporation tax and, if applicable, for PAYE and VAT. To register for
             tax, Revenue Form TR1 should be completed and submitted to the
             Revenue Commissioners; to register for PAYE the appropriate form is
             known as PREM Reg.

             In order to register for VAT, the appropriate form is either STR (for
             sole traders turning over less than €127,000); TR1 (for all other sole
             traders, partnerships and other unincorporated bodies); or TR2 (for
             companies). All of these forms are freely available from the Revenue
             Commissioners, and can be downloaded from their website at
             http://www.revenue.ie/. Where necessary, specialist tax or
             accounting advice should be sought in relation to registration and
             accounting for taxes.

This summary is intended to provide some basic assistance to members in
relation to the establishment of their businesses, and is not a statement of
the law in any particular area. Specialist advice should be obtained
wherever appropriate.



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