The Companies Bill 2012 has now been passed by both houses of the Oireachtas. Assuming it is signed by the President of Ireland before the end of this month, it will become the Companies Act 2014 (the Act). It is expected that most of the provisions of the new Act will come into effect on 1 June 2015, although this date is subject to change.
The new Act introduces reforms in company law in Ireland, which are summarised by A&L Goodbody in the material available through this link.
The purpose of this note is to focus on the impact of the Act on companies operating in the Irish investment funds industry.
Private companies incorporated under Irish company law such as UCITS Management Companies and AIFMs (as well as some other service providers) will need to decide whether to convert to one of two new types of company (Company Limited by Shares (CLS) or Designated Activity Company (DAC)) or another company type. It is anticipated that most will re-register as a DAC, which is the closest of the new company types to an existing private company. A DAC must have an objects clause and its name must end with "designated activity company". In addition and unlike a CLS, a DAC must have an authorised share capital and at least 2 directors.
The shareholders in such a private company will have to pass a resolution to convert within the 15 month period following the entry into force of the new Act. The Memorandum and Articles of Association of the company will also need to be reviewed and converted into a new single "constitution" document although, other than making reference to the fact that the company is a DAC, the constitution does not otherwise need to change as a result of the new Act. If within 18 months, an existing private company has not re-registered, it will be deemed to be a CLS. By doing nothing the directors could be in breach of their duty to ensure that the new legislation is complied with and accordingly we would not recommend this approach.
Some changes will arise for investment companies structured as public limited companies too, but funds industry participants will be relieved to hear that the new Act amounts to more or less a restatement of existing company law as it applies to such companies. Some changes will arise but public limited companies will not need to convert as a result of the Act. It is likely that investment companies structured as public limited companies will adopt new articles of association to align themselves with the new regime.
An aspect of the new Act that applies to all Irish companies is the introduction of a codification of the principal fiduciary duties of the directors of an Irish company, whether private or public.