The time has come for Irish companies to prepare for transition into the new regime, the Companies Bill 2012. Our Company Law team have put together answers to a number of Frequently Asked Questions in relation to the Bill.
What is the Companies Bill 2012?
The Companies Bill 2012 (the "Bill"), when enacted, will contain all Irish laws relating to the formation, management, share capital, insolvency and investigation of companies.
I own a private company, how do I know if I need to prepare for these changes?
Every Irish private limited company must prepare for these changes by deciding to register as either a designated activity company ("DAC") or company limited by shares ("CLS") during the transition period.
What is a company limited by shares?
The CLS is a simplified new-form private company limited by shares to which a range of streamlined governance reforms under the Bill will apply, such as the one-document constitution, the ability to have a single director and the power to dispense with the holding of AGMs.
What is a designated activity company?
The DAC is a more familiar corporate form for a private company limited by shares. Its activities are limited by its objects clause, and its constitution comprises a memorandum and articles of association. Not all of the streamlined governance reforms will apply to the DAC.
Should I register my company as a CLS or a DAC?
A company's decision on whether to register as a CLS or DAC will depend on whether or not it is suitable for the provisions and procedures that apply only to the CLS. For example, it will not be possible for certain types of company, such as a licensed bank or a company that has debt securities listed or admitted to trading on a market, to register as a CLS.
The primary difference between a CLS and a DAC is that a DAC remains governed by its objects clause. However, a majority of companies adopt "catch-all" objects in their memorandum so this difference may amount to very little in practice.
For a more detailed explanation, please download this pdf entitled 'Companies Bill 2012: Preparing Private Companies for Transition'.
When is the transition period to re-register my company?
The transition period is a period of 18 months1, which can be extended by the Minister for a further 12 months2, from commencement. During this period the directors and members of an existing private company must elect either to register as a DAC or to register, or be deemed to register, as a new-form CLS.
When does the transition period commence?
This is likely to commence in late 2014 or early 2015 and will be for a period of 18 months.
How do I register my company as a CLS?
A company may choose to register an existing private company by registering a new-form constitution that has been adopted in either of the following ways:
- by special resolution (75% majority) of the members3; or
- by resolution (more than 50%) of the directors4.
The form of a new-form constitution that can be adopted by resolution of the directors is strictly limited by the Bill. The directors may only make the minimum amendments to the company's existing constitution that are required in order to make it conform with the prescribed contents set out in Section 19 of the Bill.
For a further explanation of the process, please download this pdf entitled 'Companies Bill 2012: Preparing Private Companies for Transition'.
How do I register my company as a DAC?
An existing private company may register as a DAC during the transition period in any of the following ways:
- voluntarily, by ordinary resolution5; or
- compulsorily, either:
- on notice by a shareholder holding more than 25% of the total voting rights in the company6;
- by reason of the company's noncompliance with the limitation on offers of securities to the public7; or
- pursuant to a court order on application by certain qualifying members or creditors8.
A copy of the amending resolution together with a copy of the new memorandum and articles of association are required to be filed with the CRO, as well a Form N29. The memorandum and articles of association must remain unchanged, save for the alterations prescribed by law. If a DAC wishes to update its constitution to accommodate the new regime, it must do so in the ordinary way.
The suffix of the company will change from "limited" to "designated activity company" or "dac", or their Irish language equivalents.
What happens if I miss the deadline to reregister my company?
Where a company takes no action, the company will be deemed to have become a CLS on the expiry of the transition period.10 The physical form of the company's constitutional documents (its former memorandum and articles of association) will be unchanged, but in their place it will be deemed to have a new-form constitution that complies with Section 19 of the Bill. This means that its existing memorandum and articles of association will be interpreted as its constitution with the exception of the objects clause and any provision that prevents alteration of the articles. The CRO will issue a certificate of incorporation stating the company to be a CLS.11
It should be noted that where no action is taken, the company may be deemed to have a corporate form and constitution that does not serve the company's requirements. Certain members and creditors who would prefer to see the company re-registered as a DAC may also challenge the company's CLS status in the courts claiming prejudice on the basis of the directors' failure to act.12
Do I have to change my company merchandise/website/logo etc. after reregistering my company?
If you are registering your company as a CLS, you will not have to make any changes in this respect – the suffix "Limited" or "Ltd." will be unchanged.
If you are re-registering your company as a DAC, the company's name will be altered by the substitution of "designated activity company" for "limited". The directors must ensure that the new name is reflected in various ways, for example by:
- obtaining a new company seal;
- altering the company's name as it appears on stationery, on its website and as painted or affixed at its registered office;
- ensuring that any registers of shares or debentures held by the company are written up to reflect the change;
- submitting amendments to any registers, such as property registers in other countries, such as registers of intellectual property; and
- amending share certificates.
1 Section 15, Companies Bill 2012
2 Section 16, Companies Bill 2012
3 Section 60(1), Companies Bill 2012
4 Section 61(2), Companies Bill 2012
5 Section 57(1), Companies Bill 2012
6 Section 57(2), Companies Bill 2012
7 Section 57(3), Companies Bill 2012
8 Section 58(1), Companies Bill 2012
9 Section 64(4), Companies Bill 2012
10 Section 56, Companies Bill 2012
11 Section 62(2), Companies Bill 2012
12 Sections 58 and 63, Companies Bill 2012
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.