The Companies Act 2014 provided for a period of transition for private companies limited by shares and incorporated under the Companies Acts 1963-2013 (LC) to facilitate their orderly transition from the old law to the new. This transition period will end on 30 November 2016.
Companies wishing to convert in an orderly fashion to the new simplified type of private company limited by shares (LTD) should ensure that the necessary action is taken before the deadline of 30 November 2016.
We recommend that this decision should be taken and implemented as soon as possible.
LCs will cease to exist on 1 December 2016. By that date, LCs will either have converted to an LTD or DAC voluntarily, with a tailored constitution prepared in accordance with the Companies Act 2014, or will have converted to an LTD by default, with less than perfect constitutional documentation, as discussed below.
What if I do nothing?
The failure to make a decision to convert to an LTD by the deadline will mean that an existing LC will be deemed to be an LTD with a one document constitution containing a hodgepodge of the existing provisions in its Memorandum and Articles of Association, which may have a knock on effect on the terms of the relations between the shareholders.
Furthermore, by doing nothing, the directors could be in breach of their duty to ensure that they have complied with the Companies Act 2014 or could be presented with an action for oppression by any shareholders who believe that they have been prejudiced by the new default constitution.
While 30 November 2016 is the statutory deadline, directors should also note that the Companies Registration Office (CRO) needs time to process applications. The CRO has encouraged companies to file their conversion application with the CRO by the end of October at the latest in order to allow time for the conversions to be processed before the 30 November deadline.
An existing LC will only become an LTD upon the issue of the new Certificate of Incorporation on conversion and not the passing of the required resolution.