The Companies Act 2014 (the “Act”) came into effect one year ago today on 1 June 2015. One major change under the Act is the requirement for all private limited companies to convert to a new company type. The deadline for this is fast approaching.
The two new company types are:
- a company limited by shares (an “LTD”), the standard model company – or
- a Designated Activity Company (a “DAC”), best suited for joint venture companies or companies established for specific purposes.
There are strict deadlines on converting:
- To convert to an LTD you have until 30 November 2016.
- To convert to a DAC you have until 31 August 2016.
To convert, companies will need shareholder and director sign-off. Given the holiday period over the summer, and the time it can take to collate signatures, we are advising our clients to take action now to make sure the deadlines are not missed to avoid a breach of company law.
Failure to convert before the above deadlines will lead to your company automatically converting to an LTD. This is not recommended as:
- it means that a company’s existing memorandum and articles will contain references to the old companies acts;
- it will lead to inconsistencies with many mandatory provisions of the new Act; and
- it can lead to interpretation issues or disputes. Companies may also miss the opportunity to convert to a DAC.
Philip Lee is advising clients to consider this matter now and to convert their companies in good time.
Our corporate team are available to assist you with conversion.
Listen to Eoghan Doyle summarise the complexities of the Act by answering the 10 key questions asked by businesses:
Click here to watch video.