The Companies Act 2014 (the "Act") was signed into law by the President on 23 December 2014 with expected commencement on 1 June 2015. This new Act consolidates 17 Companies Acts into one single Act, reforming how companies will do business. Its main aim is to make it easier and more cost efficient for companies to operate in Ireland.
On the commencement of the Act, every existing private company limited by shares must, during the transitional period of 18 months, consider its options in relation to re-registering. The options are:
- Converting to a new model private company limited by shares ("LTD").
- Converting to a designated activity company ("DAC").
- Re-registering as another company type.
Making no election will result in the automatic registration of the company as a LTD at the end of the transition period although this may expose the directors to civil sanctions. Therefore Maples would not recommend relying on this default option.
Private company limited by shares
This is the new model company that is intended to replace the existing private limited company with a more simplified format allowing for a one page constitution.
Designated activity company
The DAC is a private company limited by shares or limited by guarantee having a share capital. A DAC will have a constitution comprising a memorandum of association including an objects clause and articles of association. Existing companies may wish to maintain their current memorandum and articles of association and so should therefore convert during the transitional period. Incorporating as a DAC will be attractive where investors wish to ensure that the capacity of the company is circumscribed by a memorandum of association containing limited objects clauses. Certain private companies limited by shares will be required to register as a DAC, e.g. credit institutions, insurance companies and companies issuing listed debt securities.
Key features of LTD and DAC
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Other types of companies
No substantive changes have been made to the current statutory regime regulating other types of companies such as PLCs (including investment fund companies). As a matter of good corporate governance, the constitution of these entities should be reviewed and updated in accordance with the Act however.
Action will however be required in respect of fund management companies regulated by the Central Bank of Ireland (being private companies limited by shares), guidance on which is due to be provided by the Central Bank of Ireland in the near future. It is unclear at the moment whether the Central Bank of Ireland will insist that fund management companies convert to DACs.
Please note that a fund management company specific client update will follow in due course considering DAC conversion in more detail.
Other features of the Act
- Codification of certain director’s duties
- Introduction of a summary approval procedure which permits certain activities and transactions such as the ability to reduce a company’s authorised share capital without having to make an application to the courts
- Director’s compliance statements and audit confirmations in the accounts of certain companies
- Revision of defective accounts
- Updated threshold for audit exemption for medium sized companies
- Two-stage process in respect of registration of charges
- Liquidators must be qualified to act when winding up a company
- Company secretary must have the necessary skills to discharge statutory duties
- Categorisation of offences with respective penalties
Actions to be taken
Directors of private companies must take positive action and consider their options. Accordingly we recommend that you contact Maples for further advice and guidance. Key contact details are set out below