The Companies Act 2014 provides for a transition period of eighteen months, which will end on 30 November 2016.
During the Transition Period all private limited companies must convert to a particular company type. Most will wish to convert to either a Company Limited by Shares (LTD) or a Designated Activity Company (DAC).
The LTD company can have just one director and will have a single document Constitution with no requirement to have an objects clause. The LTD can dispense with Annual General Meetings (AGM) irrespective of the number of members.
The DAC company must have objects clauses and the name of the company must end in 'designated activity company' or DAC, so a change of name will be required. Multi member DACs cannot dispense with holding an AGM and must have a minimum of two directors.
Four months have already passed since the Act came into force, which leaves just eleven months to convert to a DAC, and fourteen months to convert to an LTD. Many existing private limited companies have already begun the process of converting to an LTD or a DAC; we recommend that you make the time to deal with this now rather than waiting until nearer the end of the Transition Period.
What should you do?
You will need to choose between the LTD or DAC (or some other company type) in order to ensure you have a company type that best suits your business requirements. If it's helpful, we can advise you on which company type is the best fit for your business, and once you make a decision, we can assist you with the drafting and preparation of a Constitution that meets your needs.
If you choose to do nothing, private limited companies will automatically convert to an LTD at the end of the Transition Period. This may be the wrong option for your company, and you may be left operating with the current memorandum and articles of association which do not serve the company's requirements, and which may conflict with the mandatory provisions of the Act.
Benefits in making an early decision
There are several benefits to converting sooner rather than later. By converting now it shows that the company is pro-active and keen to comply with the requirements of Company Law. Conversion is an opportunity for companies to review their current structures and to see if their constitution still meets their needs. Furthermore, it brings transparency to existing or potential customers, because the new Constitution will be available to the public.
Companies who have not yet made a decision are strongly advised to take action and contact us and we can assist in converting your company to one that is most suited to your needs.