Ireland Companies Act 2014
Signed into law on 23 December 2014, the 2014 Companies Act commenced on 01 June 2015. Drafted with the aim of consolidating the previous Acts into one single statute, it is by far the most comprehensive piece of legislation in the State’s history at over 1,100 pages long and includes some very significant reforms. Designed to simplify the administrative burden and ensure good corporate governance, it will introduce new company models thus affecting every company already registered in the State.
All existing private limited companies will be required to convert to a new company type. They cannot continue in their current form and it will be necessary for each company to determine what type of new structure suits its purpose and to make the necessary statutory changes.
There is an 18 month transition period from 01 June 2015 (the date Act is commenced) for existing companies to migrate. All CRO forms are changing and the old ones will be obsolete from 01 June 2015.
Model Private Company (Ltd) or CLS
- Name ends Limited or Ltd
- Minimum one Director & one (separate) Secretary
- 1-149 members (prev 99)
- One document constitution
- No objects clause as unlimited capacity
- No need for authorised share capital
- May dispense with AGM or hold in writing
- Not entitled to list securities (debt or equity) for sale to the public
- May avail of audit exemptions
- Suitable for more straightforward structures
Designated Activity Company (DAC)
- Name ends Designated Activity Company or DAC
- Minimum two Directors & one Secretary
- 1-149 members (prev 99)
- Memorandum & Articles of Association
- Must have objects clause as limited capacity
- Must have authorised share capital
- May dispense with AGM (if Single Member)
- Not entitled to list equity securities for sale to the
public but may list qualifying debt securities
- More restricted audit exemptions
- Obligatory for some institutions
Other main company types
- Public Limited Company (PLC)
- Public Unlimited Company (share cap) (PUC)
- Public Unlimited Company (no cap) (PULC)
- Unlimited Company (ULC)
- Company Limited by Guarantee (CLG)
What needs to happen after 01 June 2015?
Companies should either (i) opt in to the new regime as a new CLS/Ltd within 18 months (ii) opt out by re-registering as a DAC (or other type) within 15 months. It should be noted that while the company chooses to do nothing during the transition period it will automatically be deemed a DAC and therefore subject to those provisions of the Act. At the end of the transition period (18 months) if there has been no transition then the company will be deemed to have become a new Ltd with a single document constitution (subject to the new Act and any required exclusions or prohibited alterations). New constitutions will need to be properly passed and filed at CRO who will issue a new certificate of incorporation.
Key features (General)
- Directors’ fiduciary duties codified for the first time
- Must register overseas disqualifications
- Four tier classifications of offences for breaches of the Act
- Directors over 18 & to ensure Co. Secretary has requisite skills/qualifications
- Directors’ compliance statements required
- Abolition of Table A – provisions now included (unless constitution states otherwise)
- Enhanced Audit exemptions & alignments of group accounting
- Directors’ compliance statements required in some instances
- New mergers and division regime simplifying group reorganisations
- Option to register persons authorised to bind the company at CRO
- Ultra Vires will cease or is otherwise relaxed (easier for 3rd party transactions)
- Summary Approval Procedures (e.g. for financial assistance, cap. reductions, wind up)
Directors’ obligations during transition period
During the transition period if the company does not otherwise adopt a new constitution by special resolution or does not re-register as a DAC the directors will be obliged to prepare a new-format constitution and circulate to the members. This constitution must comply with the requirements of the new Act and conform to the provisions of its existing Memorandum and Articles of Association (provided that it excludes the objects clause and does not alter any other provisions). In effect this constitution will otherwise need to be identical in all other respects to the previous constitution.
What if you do nothing?
If a company eventually defaults to the new Ltd after 18 months as stated above it is possible that it may not be appropriate depending on its requirements or the nature of its business activities. If any shareholder believes that they have been prejudiced by the result of any inaction by the directors they can apply to the court for relief. Pursuant to the Act shareholders with 15%+ shares or creditors holding 15%+ debentures can apply to the court for an order requiring the company to re-register as a DAC.
Where can we help?
At More Group we can provide peace of mind by helping you assess which company type will be more suitable for you and prepare all the required paperwork, including a new or revised constitution containing supplementary regulations, in order to complete the transition to the new entity.
While we’re at it we’ll throw in a full statutory health check for free! We’ll also provide a useful checklist of action points you need to consider elsewhere in your business in order to make this as smooth a process as possible. If you elect to use a single director company we can also provide a company secretary.