The time has come for Irish companies to prepare for transition into the new regime under the Companies Act 2014 (the "Act"). The Act was signed into law in December 2014 and it is expected that it will come into effect on 1 June 2015. Our Company Law team have put together answers to a number of Frequently Asked Questions in relation to the Act.
What is the Companies Act 2014?
The Companies Act 2014 contains all the 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 (LTD) during the transition period.
What is a company limited by shares (LTD)?
The LTD is a simplified new-form private company limited by shares to which a range of streamlined governance reforms under the Act 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 (DAC)?
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 LTD or a DAC?
A company's decision on whether to register as a LTD or DAC will depend on whether or not it is suitable for the provisions and procedures that apply only to the LTD. 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 LTD.
The primary difference between a LTD 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 the pdf entitled 'Companies Act 2014: Preparing Private Companies for Transition' to the right.
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 period, no longer than 12 months)2 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 LTD.
When does the transition period commence?
This is likely to commence on 1 June 2015.
How do I register my company as a LTD?
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:
i. by special resolution (75% majority) of the members3;
ii. 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 Act. 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 Act.
For a further explanation of the process, please download entitled 'Companies Act 2014: Preparing Private Companies for Transition' to the right.
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:
i. voluntarily, by ordinary resolution5; or
ii. compulsorily, either:
a. on notice by a shareholder holding more than 25% of the total voting rights in the company6;
b. by reason of the company's non-compliance with the limitation on offers of securities to the public7; or
c. 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 and a "statement of compliance" 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 re-register my company?
Where a company takes no action, the company will be deemed to have become a LTD on the expiry of the transition period10. 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 Act. 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 LTD.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 LTD 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 re-registering my company?
If you are registering your company as a LTD, 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:
i. obtaining a new company seal;
ii. altering the company's name as it appears on stationery, on its website and as painted or affixed at its registered office;
iii. ensuring that any registers of shares or debentures held by the company are written up to reflect the change;
iv. submitting amendments to any registers, such as property registers in other countries, such as registers of intellectual property; and
v. amending share certificates.
Footnotes
1.Section 15, Companies Act 2014
2.Section 16, Companies Act 2014
3.Section 59(1), Companies Act 2014
4.Section 60(2), Companies Act 2014
5.Section 56(1), Companies Act 2014
6.Section 56(2), Companies Act 2014
7.Section 56(3), Companies Act 2014
8.Section 57(1), Companies Act 2014
9.Section 63(4), Companies Act 2014
10.Section 55, Companies Act 2014
11.Section 61(2), Companies Act 2014
12.Sections 57 and 62, Companies Act 2014
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.
