The Companies Act 2014 (the “Act”) will come into effect on 1 June 2015 and will apply to investment companies and Irish fund service providers such as UCITS management companies, alternative investment fund managers (“AIFMs”), administrators and depositaries.
Irish funds structured as investment companies under Part XIII of the Companies Act, 1990 will be relieved to hear that the Act is largely a restatement of existing company law. Following the expiry of an 18 month transitional period, an investment company will, by operation of law, be deemed to be an investment company to which Part 24 of the Act applies. The Act does not alter the statutory requirement for an investment company to spread investment risk, which continues to apply. In addition, innovative changes such as the ability to pass written resolutions by means of a majority vote of shareholders, or the facility to dispense with the requirement to hold AGMs, do not apply to investment companies.
Investment companies should take the opportunity during the transitional period to review their articles of association. Where relevant, the articles of association of investment companies should be amended to remove any provisions that are inconsistent with the Act. Alternatively, investment companies may need to adopt new articles of association that are aligned to the Act.
UCITS Management Companies, AIFMs, Administrators and Depositaries
The Act requires private companies such as a UCITS management company, an AIFM or possibly an Irish administrator or depositary, before the expiry of the transitional period, to convert to either a company limited by shares (an “LTD”) or a designated activity company (“DAC”). Accordingly, directors and shareholders of such companies should decide on which form of corporate vehicle is best suited for their business. Under the Act, private companies that do not change their legal status will (i) be required to comply with the DAC provisions during the transitional period, and (ii) will automatically be converted to an LTD at the end of the transitional period.
Section 18(2) of the Act restricts credit institutions and insurance undertakings that are regulated by the Central Bank of Ireland (the "Central Bank") from being established as an LTD. It has been queried whether the Central Bank will require other investment firms such as AIFMs or UCITS management companies to be organised as DACs. In our view, AIFMs, UCITS management companies and other firms regulated by the Central Bank should have the choice as to which type of corporate structure best suits their organisational requirements. Needless to say, we are closely monitoring how this matter develops.
The Act will have an important impact on the organisation of AIFMs, UCITS management companies and to a lesser extent on investment companies. Firms should understand the default provisions that apply to them if they do not convert to an LTD or DAC under the Act and undertake a review and assessment of which type of corporate form suits their organisation. We would be delighted to advise you on the type of company you should adopt and assist in the reorganisation of your company.