The Companies Act 2014: What You Need to Know

The Irish Minister for Jobs, Enterprise and Innovation, Mr Richard Bruton signed the commencement order providing that the Companies Act 2014 (the “Act”) (subject to certain exceptions) will commence with effect from 1 June 2015. This means that from 1 June 2015, company law in Ireland will be consolidated and modernised and as a result business in Ireland will be made easier for companies. Companies should consider what impact the Act will have on them and what actions (if any) need to be taken. 

To help you understand what actions you may need to take after 1 June 2015 we highlight below:

  1. actions to be taken by private companies limited by shares;
  2. actions to be taken by public limited companies (“PLCs”), companies limited by guarantee (“CLGs”)  and unlimited companies (“UCs”); and
  3. other key changes under the Act which may require action by you.

1.Actions to be taken by private companies limited by shares

The main changes under the Act are in connection with the private company limited by shares.  There will be two new forms of private company, (1) a private company limited by shares (“LTD”); and (2) a designated activity company (“DAC”).  Existing private limited companies will have to decide on which new entity type they wish to become. There is an 18 month transition period which ends on 30 November 2016 during which companies will have time to re-register as the most suitable company type for them.

What company type should you choose?

The LTD is a simplified new-form company limited by shares to which a range of streamlined governance reforms will apply.  We have set out in the table below notable and distinguishing features between a LTD and a DAC. All companies will be treated as DACs during the 18 month transition period and will not be able to enjoy the benefits of being a LTD unless they choose to re-register as a LTD before the end of the transition period. 

What should you do from 1 June 2015?

You are not legally obliged to do anything immediately.  If, however, you do not take particular steps within the transition period certain adverse consequences may arise. 

What happens if I do not take any action?

Where existing private companies do not take any action to either re-register as a DAC or re-register as a LTD within the transition period  they will automatically be converted to a LTD by the Companies Registration Office (“CRO”) when the 18 month deadline has passed on 30 November 2016.  Whilst this may sound preferable, there are disadvantages to being re-registered in this way, such as:

  • the LTD may not be a suitable company type for each company and as such directors of such companies could be deemed to be in breach of their duties to ensure the legislation has been complied with by the relevant company; and
  • shareholders could also seek redress through the courts under the Act where they consider their rights have been prejudiced on the basis of the directors’ failure to act. 

By allowing automatic re-registration to a LTD, a company may be left operating with a version of its current memorandum & articles of association which is not suitable and which contains provisions which conflict with mandatory rules under the Act. Interpreting this document may prove cumbersome and time consuming and external stakeholders, potential investors and lenders will find it confusing. 

Consider whether any third party consents’ are required prior to taking action

All companies should consider whether any third party consents are required under contractual obligations (ie under any bank lending documentation or shareholders’ agreements, etc) before they re-register or before they are automatically re-registered at the end of the transition period.

Notable features and differences between LTD and DAC under the Act.

Click here to view table.

2.Actions to be taken by PLCs, CLGs  and UCs

PLCs, CLGs and UCs do not have to make any specific filings in the CRO during the 18 month transition period.  The CLG and the UC will be subject to the new name changes set out in the table below. A CLG or UC may choose to change its name during the transition period by filing the relevant form in the CRO or, following the expiration of the transition period, the CRO will issue a new certificate of incorporation for a CLG and a UC containing the new company name for the relevant company type. The effected companies will need to ensure their websites, stationery and company seal, etc. are updated accordingly and issue new share certificates. 

Consider whether any amendments need to be made to the existing memorandum and articles of association. Otherwise there is a risk that the existing memorandum and articles of association may still refer to provisions which no longer apply and some provisions may conflict with mandatory rules under the Act.

Notable features of PLCs, CLGs and UCs

As can be seen from the table below, the key features relating to PLCs, CLGs and UCs are largely the same under the new Act save for a few exceptions.

Click here to view table.

3.Other key changes under the Act which may require action by you

Compliance Statements

All PLCs (excluding investment companies) and all LTDs, DACs and CLGs having both:

  • a balance sheet total of in excess of €12.5 million; and
  • a turnover of in excess of €25 million

must include a compliance statement or explain why they do not have one in the directors’ report that accompanies the annual audited accounts in respect of every financial year beginning on or after 1 June 2015.

Any companies which trigger this requirement should review their policies to ensure that the company have adequate policies and structures in place for a financial year commencing on or after 1 June 2015. 

Statutory Audit Committee

Any large company or group of companies, which fall within both of the criteria set out below in both its/their most recent financial year and the immediately preceding one:

  • its/their balance sheet total for the year exceeds €25 million; and
  • its/their turnover for the year exceeds €50 million

will trigger the requirement for its directors to either form an audit committee or explain in the statutory directors’ report why they have not formed one in respect of every financial year commencing on or after 1 June 2015.  The audit committee must have at least one independent non-executive director who has competence in accounting or auditing.

Loans and quasi loans between the company and directors/connected persons

The Act introduces new evidential provisions for loans and other similar transactions between a company and its directors, the directors of its holding company or a connected person with either.  These provisions are company-friendly and from 1 June 2015, directors and connected persons are advised to fully document the terms on which the loans are made or received.

Where it is claimed that a company has made a loan or a similar transaction in favour of a director or connected person and where the terms of the loan are not in writing or are ambiguous, it will be presumed, until the contrary is proven, that the loan is repayable on demand and bears interest at the appropriate rate.  

Secondly, where it is claimed that a director or connected person has made a loan or a similar transaction in favour of the company and where the terms are not in writing, it will be presumed, until the contrary is proven,  that no loan was in fact made (ie it was a gift).  However, where it is shown that the loan exists but the terms are ambiguous it will be presumed, until the contrary is proven, that the loan or similar transaction is interest free, unsecured and subordinated to the debts of other creditors.

Any loans or similar transactions between companies and a director or connected person should be documented in writing to avoid inadvertently being subject to any of the above terms.

Other key innovations under the Act which may have an impact

Under the Act it is possible for companies to carry out certain transactions which are currently restricted, prohibitively expensive or unavailable under our existing laws. Some of the innovations under the Act which may facilitate companies or groups of companies carrying out transactions, group simplifications and reorganisations include:

  • changes to the distribution rules to enable transfers at book value;
  • a liberalisation of the financial assistance rules that excludes particular actions from the statutory prohibitions;
  • a new streamlined whitewash procedure for allowing companies enter into many prohibited transactions called the summary approval procedure. It will permit companies to carry out certain restricted transactions under the Act which are not currently achievable in certain circumstances, e.g. the giving of loans to directors and connected persons, reduce its share capital, unlock pre-acquisition profits, etc; and
  • domestic mergers and divisions of any kind of company.


We recommend all companies consider the impact of the Act on them and identify what any actions need to be taken.