We anticipate that the Central Bank will make it a condition of authorisation that certain regulated entities register as DACs - watch this space.
Types of private companies under the Companies Act 2014
The Companies Act 2014 introduces two new types of private companies limited by shares to replace the existing single type of private company limited by shares:
- A company limited by shares (CLS)
- A designated activity company (DAC)
Decision time for Directors and Shareholders
Directors and shareholders need to decide if the CLS or the DAC is more suitable for their purposes. We have other articles that discuss the pros and cons of each, so I don’t propose to re-examine those in this note, but I am going to talk about another factor of relevance for regulated private companies: the requirements of the Central Bank of Ireland (Central Bank).
Central Bank requirements in relation to the Companies Act
Credit institutions and insurance undertakings (which are regulated by the Central Bank) cannot be established as a CLS pursuant to Section 18(2) of the Act. Presumably, the requirement that credit institutions and insurance undertakings are to be registered as DACs is a consumer protection measure designed to ensure that such entities are both bound by regulation and the limitations of the capacity set out in their constitutive documents (a ‘belt and braces’ approach).
Other entities regulated by the Central Bank, include the following:
- reinsurance undertakings
- investment firms or a market operators of regulated markets (MIFID firms)
- UCITS management companies
- alternative investment fund managers
Such entities are expected to notify the Central Bank of any changes to their Memorandum and Articles of Association. It would be useful for regulated private companies if they knew what the Central Bank's policy was in relation to becoming a CLS or a DAC as the Central Bank’s view will probably be the major factor in determining whether, as a CLS, they have a simple one document constitutive document or, as a DAC, they retain their Memorandum and Articles of Association.
Watch this Space
Unfortunately, we do not know what the Central Bank’s view is as to whether regulated private companies should elect to become a DAC as they have not yet issued any guidance on what it expects regulated private companies to do (if anything). However, applying the belt and braces approach referred to above, we would be inclined to expect that the Central Bank would make it a condition of authorisation that other regulated entities (i.e. those not subject to Section 18(2) of the Act) would register as DACs.
The Act provides for an eighteen month transition period from the date of its commencement during which the directors and members of an existing company will need to decide whether to re-register as a CLS or a DAC. During this time current private companies will l be treated as DACs.
As we said at the outset - watch this space.