The Companies Act 2014 became operative on 1 June 2015. The Act consolidates and modernises Irish company law and is expected to make it easier for companies to do business in and through Ireland. The principal changes under the Act relate to the private company limited by shares, which is the most common type of company in Ireland. Going forward, there are two types of private company, which replace the previous single form. These are: (i) a private company limited by shares (“LTD”); and (ii) a designated activity company (“DAC”). These are explained in more detail below. Under the Act, all existing private companies are required to convert to either an LTD or a DAC. The Act is the largest substantive statute in the history of the State.
There is an 18 month transition period running to 30 November 2016 during which existing private companies must convert to either an LTD or a DAC. Private companies which have taken no action by the end of this transition period automatically convert to an LTD. Existing private companies can opt out of the default company scheme and re-register as a DAC by simply passing a shareholder resolution. Other company types, such as PLCs, unlimited companies and guarantee companies, will not need to convert although there will be some changes to the rules applicable to them.
The Act provides for two new types of private company and recognises the continued existence of the other company types. Under the new system, a company of any type may be incorporated with a single member.
The LTD is the new model form of private company limited by shares. It has the same unlimited legal capacity as an individual. It may have just one director but, in that case, must have a separate company secretary. It can adopt written procedures instead of holding an annual general meeting of shareholders (AGM). It has a one-document constitution (replacing its current M&A) and its internal regulations are set out in simplified form in that constitution. Its name will not change after conversion and it can continue to use the suffix “Limited” or “Ltd”.
While technically a new type of company, the DAC is similar in many ways to the private company formed under the old Companies Acts. A key distinction between a DAC and an LTD is the continued existence of an objects clause in the DAC constitution. A DAC may be a suitable vehicle where an objects clause is needed (e.g. to restrict the corporate capacity of a joint-venture vehicle) or for companies listing debt securities on a stock exchange. A DAC requires two directors. It must convene an AGM unless it is a single member company, in which case this requirement can be dispensed with. Its name must end with “designated activity company” or “DAC” (or the Irish equivalent) which will mean changes to company stationery, websites, seals and registrations.
Deadlines for conversion
All existing private companies limited by shares (ie. Companies incorporated under the previous Companies Acts) have the option of converting to one of the new company types during a transition period which ends on 30th NOVEMBER 2016.
Such private limited by shares companies that have not applied to the CRO to be converted during the transition period will be automatically converted to an LTD by the legislation on 1st December 2016.
Companies wishing to be converted to a DAC must, under the Act, pass an ordinary resolution to convert by 31st AUGUST 2016 and should follow up by filing a Form N2 and amended Constitution with the CRO as soon as possible thereafter.
Companies wishing to convert to a LTD and adopt a new Constitution should do so as soon as possible as the CRO cannot guarantee that applications received at the very end of the transition period will be processed before 30 November.
For any further information on this please contact us at Blackthorn Capital.