Companies Act 2014

Requirements for Limited Companies to Convert to New Company Type

The Companies Act 2014 introduces a “conversion” process for all private companies limited by shares to convert to one of two new company types, the LTD or DAC model.

The main changes are:

Private Limited Company (LTD):

• is allowed to have one director but must have a separate secretary
• can pass majority written resolutions
• does not need to hold an AGM in certain circumstances
• has a simple one-document constitution to replace the Memorandum and Articles of Association (M&A)
• does not have any stated objects limiting its activity i.e. it can engage in any allowed activity.
• the name of the company must end with the suffix “Limited” or “Teoranta” unless it is exempted

The Designated Activity Company (DAC):

• is a private company limited by shares OR by shares and guarantee
• must have at least two directors
• can pass majority written resolutions (where its constitution allows)
• is required to hold an AGM where there are 2 or more members
• has a two-document constitution – an M&A which has stated objects
• the name of the company must end with the suffix “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” unless exempted

It is recommended that private companies limited by shares now convert to one of the two new company types. The company passes a special resolution to amend its M & A (or in the case of an LTD, adopts a new one-document constitution) and submits these documents together with appropriate Form N1 (LTD) or Form N2 (DAC) to the Companies Registration Office (CRO). These documents can be filed free of charge with the CRO and the forms are available from the CRO website.

There is a Transition Period to allow companies to convert. The relevant dates are 31st August 2016 for conversion to a DAC and 30th November 2016 for conversion to an LTD. Companies that do not convert to an LTD company type will be treated as a DAC until end of Transition Period. If the company does not convert, it does not have to change its name during the Transition Period, and, at the end of the Transition Period, it will be converted by law, to the LTD model and a new electronic certificate of incorporation will be issued by CRO.

Although private companies will convert automatically after the expiry of the Transition Period, it should be noted that, if a company does not engage in the conversion process, a member of the company holding not less than 15% of nominal value of the company’s issued share capital or a creditor holding not less than 15% of the company’s debentures which restrict alterations to the company’s objects may apply to the High Court for an Order directing that the company re-register as a DAC. Whilst there is no specific penalty or offence for directors that fail to prepare and register a new form of constitution, directors have a statutory obligation to ensure that the company complies with the new Act.

A disadvantage of not making the conversion to the new company type (and choosing a constitution that is tailored to your company’s requirements) is that the deemed constitution imposed by the Act may lack clarity and be confusing. For example, the deemed constitution may for this reason to be unacceptable to the company’s lenders.

Requirements for Companies Limited by Guarantee

This is the type of company that is mostly used by charities, sporting organisations and management companies. Companies of this type will continue to be deemed as Companies Limited by Guarantee, however, the following changes apply:-

• the name of the company must end with the suffix “Company Limited by Guarantee” (CLG) or “Cuideachta faoi theorainn Rathaiochta”
• a charity or “not for profit” company may apply to dispense with the suffix CLG.
• a new constitution to replace the existing M & A must be filed in the CRO.
• the two document constitution must have an objects clause and must state that, on winding up, each member will contribute to the assets of the company as may be required up to the amount stated in the (former) Memorandum.
• minutes will also be required to complete this process.
• two directors are still required.
• eligibility for audit exemption may be claimed, where applicable.
• a single member company limited by guarantee may dispense with holding an AGM.
• a company limited by guarantee that does not trade for the acquisition of a gain may be exempt from filing accounts with the CRO.

Requirements for Unlimited Companies

The points to be noted for these companies are as follows:-

• the name of the company must end with the suffix “Unlimited Company” or “Cuideachta Neamhtheoranta.”
• a new constitution to replace the existing M & A must be filed in the CRO.
• there must have an objects clause and a two document constitution, stating the share capital.
• minutes will also be required to complete this process.
• two directors are still required.
• exemption may be granted by the Minster for Jobs, Enterprise and Innovation.

There is a transition period, ending 30th November 2016, by which Unlimited Companies may continue to not have the company type included in their names. However, if after this date an Unlimited Company has not changed its name and submitted an amended constitution (M & A) the CRO will automatically change the name and issue a new Certificate of Incorporation.

For further information please contact us on 01 6770335 or at info@joyntcrawford.ie.

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