Companies Act 2014 - How It Affects you!
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
|It may have just one director (but it must have a separate secretary if it has only one director). Corporate directors are not permitted.||It must have at least two directors. Corporate directors are not permitted.|
|It can have between 1 and 149 members||It can have between 1 and 149 members|
|It does not need to hold an AGM||It does need to hold an AGM where the company has two or more members|
|It has a one-document constitution in place of a memorandum and articles of association||It has a constitution document which comprises a memorandum and articles of association|
|It will not have an objects clause and has unlimited capacity free from the constraints of the ultra vires doctrine. However, under the Act it cannot carry on the activity of a credit institution or an insurance undertaking. Further, existing private companies limited by shares that have issued debentures or other forms of debts securities that are listed must convert to a DAC||The memorandum of association contained within the constitution must have an objects clause and the ultra vires doctrine has been modified but still applies as between the Company and its Shareholders|
|It can claim eligibility for audit exemption and dormant company audit exemption||It can claim eligibility for audit exemption and dormant company audit exemption|
|It has limited liability and has a share capital but need not state its authorised share capital||It has limited liability and has a share capital or is a private company limited by guarantee|
|It can pass majority written resolutions (special and ordinary)||Unless the constitution otherwise states it can pass unanimous or majority written resolutions|
|It may not offer securities to the "public"||May issue listed debentures or debt securities not falling within the restriction of offer of securities to the "public"|
|Name must end in "Limited" or "Teoranta"||Name must end in "Designated Activity Company or "Cuideachta Ghníomha?ochta Ainmnithe"|
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 these management companies convert to DACs.
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.