For some larger companies and groups, it makes good
business sense to avoid having to publicly file their
This involves adopting a corporate structure that sees the business
move from limited company status to unlimited company
status.Alan Browningdiscusses the issues
For a number of years now, we have seen many sectors of industry
adopt a corporate structure that enables them to avoid the
obligation to publicly file accounts. Many of the larger
Irish-owned and multinational groups adopt such a corporate
structure for reasons of confidentiality.
In order to put such a structure in place, it would be necessary
to ensure that the existing company, a limited company, converts to
unlimited status. The Companies (Amendment) Act 1986 required
private limited companies to file their accounts with the Companies
Registration Office (CRO) but it did not apply this requirement to
unlimited companies. However, the introduction of the European
Communities (Accounts) Regulations 1993 changed this by requiring
certain unlimited companies and partnerships to file accounts. The
Regulations require an unlimited company to file accounts with the
CRO where an unlimited company's shareholders are limited
companies or their immediate shareholders are unlimited but their
shareholders are limited companies.
Converting a limited company to unlimited status which has
individuals as members will avoid having to file accounts. However,
this could expose the owners of the company to personal liability
for the debts of the company were it to enter insolvent
liquidation. It is therefore important that any non-disclosure
structure also effectively ring-fences the potential liabilities
associated with unlimited companies.
We have put various structures of this nature in place by
incorporating a new limited company which acquires the shares from
the owners of the existing limited liability company. In turn, we
put in place two non-EU-incorporated companies, one being a limited
liability company and the other being unlimited, between the new
holding company and the original limited liability company. The
non-EU limited company would own the non-EU unlimited company, and
both in turn would own the original limited liability company.
By having a non-EU limited liability company holding an interest
in the original limited liability company, it ring-fences the
unlimited liability and stops it from reaching the individual
members when both the original limited liability company and the
new holding company are converted to unlimited status.
Although the structure enables both the new holding company and
the original limited liability company to avoid filing accounts,
both must still file a special auditors' report. Section
128(6B) of the Companies Act 1963 (as amended) requires an
auditors' report to be annexed to the annual return by certain
companies that are otherwise exempt from filing accounts with their
We have significant experience in putting non-disclosure
structures in place and if you are considering this as an option,
we would be delighted to discuss this with you.
LK Shields Solicitors is one of the leading law firms in
Ireland. Founded in 1988, today we number some 23 Partners, 70+ fee
earners and 130 staff. Our principal areas of practice include
corporate, litigation and dispute resolution, commercial property,
intellectual property and technology, financial services,
employment, pensions and employee benefits.
An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
Determining the limits of the capacity to have rights and
obligations of a joint-stock or limited liability company
("Company") is very crucial since it directly affects the
validity of a transaction that a Company performs
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