The Companies Act 2014 - What You Need to Know

As you may be aware The Companies Act 2014 has been signed into law and is operative from 1 June 2015. The Act consolidates and modernises Irish company law and is expected to make it easier for companies to do business in and through Ireland. The principal changes under the Act relate to the private company limited by shares (the “private company”), which is the most common type of company in Ireland. In order to become a single director company, the company must convert to a LTD. A transitional period of 18 months will apply to existing companies to make a decision to convert to a LTD or a Designated Activity Company. Below is a helpful guide and FAQ on the impact the Companies Act will have of your business and the action you must take:

THE COMPANIES ACT 2014

The Companies Act 2014 will introduce new company models and the new law will affect all companies that are already on the register. The Companies Act will commence on the 01.06.2015 where companies must decide on the new model for their Company. I already own a Personal Limited Company; what action do I need to take under the new Companies Act 2014? Under the new Companies Act 2014, every Irish Personal Limited Company must decide to register as either a;

1. i) Company Limited by shares (LTD)

or

1. ii) Designated Activity Company (DAC)

What is a Company Limited by Shares? A Company Limited by Shares will have full unlimited capacity to undertake business with no objects clause. Under a Company Limited by Shares, the new Act removes the requirement for the Company to state what objects the company has been set up to do. A constitution will replace the Memorandum and Articles of Association for a LTD company.

• A Company Limited by Shares can only have one Director

• A Company Limited by Shares must have a Secretary

• The Director and Secretary of a Company Limited by Shares cannot be the one person

• The Director of a Company Limited by Shares is required to make sure that the company secretary has the skills or resources necessary to discharge his or her statutory and other duties

• Directors and Secretaries of A Company Limited by Shares must be a minimum of 18 years

• A LTD company can avoid holding an AGM where all the members entitled to attend and vote at such general meeting sign, a written resolution, acknowledging receipt of the financial statements, resolve that all such matters as would have been resolved at the AGM and confirm no change in the appointment of the Auditors (if any appointed). See section 175(3)

• It is anticipated that most contractors will adapt to the new model of a Company Limited by Shares given that it is the more flexible of the two options available

What is a designated activity company (DAC)? A Designated Activity Company is very similar to the existing Personal Company Limited Structure where a minimum of 2 Directors are required for the Company. Limited Companies which continue to need an objects clause will need to r-register as a Designated Activity Company. The need of an objects clause relates to a section in the memorandum of association that describes the objectives for which the Company was formed. If the company activities fall outside of these objectives, the firm is said to be acting outside its powers. A Designated Activity Company will have the words Designated Activity Company’ or ‘DAC’ as part of the Company name. A Designated Activity Company can also apply to have debt instruments listed. The Directors of a Designated Activity Company are required to make sure that the company secretary has the skills or resources necessary to discharge his or her statutory and other duties. Unlike a Company Limited by Share, a Designated Activity Company must hold an AGM. The primary difference between a LTD and a DAC is that a DAC remains governed by its objects clause. However, a majority of companies adopt “catch-all” objects in their memorandum so this difference may amount to very little in practice. How do I change my Company to a Company Limited by Shares or to a Designated Activity Company? Private limited companies which were incorporated prior to the new Companies Act, which are limited by shares, can decide to change to a Company Limited by Share or a Designated Activity Company from the 1st June 2015. It is not possible to change the Company prior to the 1st June 2015 Contractors have a transitional period of up to 18 months to decide to change their Company to Company Limited by Share or a Designated Activity Company. Claire Fagan Business Development Director Tel: +353 1 8077106