The ability of private companies limited by shares incorporated
prior to 1 June 2015 to convert to a Designated Activity Company by
way of ordinary resolution expired on 31 August 2016. The passing
of this deadline serves as a gentle reminder that the 18 month
transposition period, ending 30 November 2016, is fast
The Companies Act 2014 (the "Act")
allowed companies a transition period, from 1 June 2015 to 30
November 2016, during which they could elect to re-register as a
Designated Activity Company ("DAC"). On
1 December 2016, any existing private company that has not taken
the appropriate steps to re-register as a DAC will automatically
convert to a private company limited by shares
A company which does not intend on becoming an LTD on 1 December
will need to do the following to re-register as a DAC:
pass a special resolution approving
file the necessary paperwork with the
Companies Registration Office ("CRO")
well in advance of the 30 November 2016 deadline.
Why re-register as a DAC?
certain types of companies must
register as a DAC, eg credit institutions or companies that have or
wish to have debentures admitted to trading or listed on a
certain types of companies are more
suited towards being a DAC, eg joint ventures or companies that are
incorporated for a single purpose;
directors may be in breach of their
duties by not ensuring the Act has been complied with, in
circumstances where the company should be re-registered as a
shareholders could seek redress in
circumstances where they feel their rights have been prejudiced by
the company's failure to re-register in accordance with the
although a company which takes no
action prior to 30 November 2016 will automatically convert to an
LTD on 1 December 2016, its constitution, ie its memorandum and
articles of association, will look exactly the same. The
constitution will not make reference to, or take account of, the
change in the law governing the automatically converted LTD or the
conversion of the LTD. This may make the constitutional
documentation of the company difficult and time consuming to
For a more detailed analysis of the distinction between a DAC
and an LTD, please
Practical advice for those considering re-registering as a
The CRO anticipates that it will be inundated with
re-registration applications approaching 30 November 2016 and it
will not guarantee that all applications will be processed in
advance of 1 December 2016. Where directors of a company are of the
view that a company should re-register as a DAC and have not yet
taken steps to re-register as a DAC, it is recommended that the
application to re-register is filed with the CRO well in advance of
30 November 2016.
As part of the re-registration process, the company must adopt
an amended form of memorandum and articles of association, called a
constitution. All companies preparing for re-registration
review any shareholders'
agreements in place in respect of the company to determine if any
additional shareholder approvals (in excess of the 75% approval
required for a special resolution) are required to amend the
consider if the company has any
contractual obligation to obtain third party consent to amending
the constitution, ie under bank funding documents,
to ensure that the new constitution is duly approved as part of
the re-registration process.
Other Considerations for an LTD
Taking no action will result in a company automatically
converting to an LTD on 1 December 2016. Although an LTD may be the
correct and most suitable company type, the constitution of an LTD
that automatically converts due to inaction will make reference to
the old company law legislation. From a corporate governance
perspective, we recommend that companies should be proactive and
update their constitutions to bring them in line with the Act. This
will make the constitution easier to interpret and avoid
Certain types of private companies limited by shares are
required to re-register as a DAC and other such companies, by
virtue of what they do, are more suited to becoming a DAC than an
LTD. A company will automatically become an LTD if no action is
taken by 1 December 2016. Directors should consider whether it is
necessary or prudent to re-register as a DAC. In order to ensure an
application to re-register as a DAC is processed, the application
should be filed as soon as possible to avoid missing the 30
November 2016 deadline.
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.
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