Existing private companies limited by shares (an “EPC”) may take action to re-register as a company type recognised under the Companies Act 2014 (the “Act”) before the end of the transition period on 30 November 2016. EPCs may re-register as either:

  • a private company limited by shares (an “LTD”); or
  • a designated activity company (a “DAC”),

being the two new private limited company forms provided for under the Act. The DAC closely resembles the characteristics of an EPC whereas the LTD enjoys the benefits of most of the innovations intended to simplify the administration of companies under the Act. We have set out in a little more detail below some of the notable differences between an LTD and a DAC. It is likely that the majority of EPCs that take action to re-register will choose to re-register as an LTD.

It is an obligation of the directors of each EPC that has not re-registered as a DAC or another company type to prepare a new-form constitution before the end of the transition period. However, if an EPC takes no action during the transition, then following the expiry of the transition period, it will automatically be re-registered by default as an LTD.

What action do you need to take?

To re-register as a DAC

The most straightforward way for an EPC to re-register as a DAC is to pass an ordinary resolution to re-register by 31 August 2016 and then file it in the Companies Registration Office (“CRO”) - no filing fee will be applicable. Where an EPC takes advantage of this option, it will continue with its original constitution amended to change the name of the EPC to reflect its new status as a DAC. Our recommendation is for such companies also to pass a special resolution to amend the constitution, such as to update company law references to the new Act. Carrying out this extra step affords a good opportunity for companies to review and amend their constitution.

To re-register as an LTD

An EPC wishing to re-register as an LTD may do so either by the directors filing a new form constitution during the transition period, to which a highly restricted range of amendments are possible, or by adopting a new constitution by passing a special resolution at any time.

It is important to note that it is currently taking a number of weeks for the CRO to process applications for re-registration. It is anticipated that the CRO will receive an increased number of applications towards the end of the transition period which may cause delays in processing.

Consequences of not taking any action

An EPC will be automatically re-registered as an LTD if it has taken no action to re-register by 30 November 2016. A number of issues arise from this, including:

  • The EPC will be left operating with its current articles of association which may not be suitable, which contain provisions that are difficult to interpret or conflict with the Act.
  • The directors will be in default of a statutory duty – even if there is no offence specified for breach of the duty, the directors may still be liable to adverse comment, such as in a liquidation.
  • Shareholders could seek redress through the courts where they consider their rights to have been prejudiced by the directors’ failure to act.

Considering the above, the question arises as to whether to re-register as an LTD or a DAC.

LTD v DAC

Some of the notable features and differences between an LTD and a DAC under the Act are set out in the table below:

LTD

DAC

Company Name

It must end with Limited/LTD or the Irish equivalent

It must end with Designated Activity Company/DAC or Irish equivalent

Company Type

Private company limited by shares

Private company either: (a) limited by shares; or (b) limited by guarantee, having a share capital

Share Capital

Will have an issued share capital but does not have to have an authorised share capital

Must have both an authorised and issued share capital

Memorandum & Articles of Association

A single page document called a “constitution” will replace the current memorandum & articles of association

The memorandum & articles of association will remain but will be referred to as a constitution

Objects Clause

The objects clause will be removed and the LTD will have the same capacity as a natural person

The objects clause will be retained, therefore the “ultra vires” concept will still apply however, third parties dealing with a DAC in good faith will not be prejudiced if the company exceeds its capacity as stated in its objects clause

Directors

Can have a single director (but it must have a separate secretary)

Must have a minimum of two directors

Annual General Meeting (“AGM”)

Can dispense with holding an AGM entirely irrespective of the number of shareholders

Can only dispense with holding an AGM if it is a single member company

Listing of Securities

Cannot list, or have admitted to trading, any securities

May list and have admitted to trading certain securities

Written Resolutions

May pass majority written resolutions

May pass majority written resolutions unless the constitution provides otherwise

Incidental Obligations

n/a

Due to the name change must obtain a new company seal, update company letterhead and related stationery and signage, update company website, notify stakeholders (e.g. bank outside shareholders), issue new share certificates

Activities carried on by the company

Cannot carry on the activity of a credit institution or insurance undertaking

Can carry on the activity of a credit institution or insurance undertaking

If no action is taken before the end of the transition period, the EPC will be re-registered by default as an LTD. EPCs should take note of the dates by which they can re-register and consider the options in light of the deadlines and the transition period ending on 30 November 2016. This is a good opportunity for EPCs to review and update their constitutions to incorporate the relevant provisions of the Act and to make the constitutions easier for the board of directors, company secretary and shareholders to interpret in the future.