The Companies Act 2014 (the “Act”) which consolidates the existing Companies Acts 1963 to 2013, is expected to commence on 1 June 2015.
There a number of material changes contained in the Act, in particular, the current model of private limited company (which is the most common company type in Ireland) will be split into two types – the private company limited by shares (“LTD”) and the designated activity company (“DAC”). There are also a number of changes aimed to improve corporate governance, for example, codification of directors’ duties.
Two new forms of Private Limited Company
Under the Act, two forms of private limited company will exist, the LTD and the DAC. In order to decide which form is the most appropriate, there are a number of factors to consider. A LTD company will have full corporate capacity (no objects clause) while a DAC will retain its objects clause and will have restricted capacity. In some circumstances, it will be very clear which company type to convert to, for example, all regulated financial institutions and/or any private limited company which has listed debt securities must convert to a DAC.
Some of the other principal differences are outlined below:
LTD
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DAC |
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Objects clause no longer required.
One document constitution to replace the M&A.
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Retains objects clause.
Will have a memorandum and articles of association.
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One director option.
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Must have two directors.
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AGMs can be dispensed for both single and multi-member companies.
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Only single member companies can dispense with AGM.
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Name will not change after conversion – will continue to use suffix “Limited” or “LTD” (or Irish equivalent).
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Name will change after conversion to “Designated Activity Company” or “DAC” (or Irish equivalent).
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Prohibited from offering securities (debt or equity) to the public.
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Permitted to offer debt securities to the public.
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18 month transition period from commencement of the Act.
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15 month transition period from commencement of the Act.
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Conversion
Within the relevant transition times, a company must decide which new form to adopt. Any private limited companies which do nothing during this time will automatically convert to a LTD after the 18 month period expires.
Conversion to either form can be achieved simply by way of passing a special resolution, adopting a new form constitution and filing the relevant forms with the CRO.
For all other company types (for example, the public limited company, companies limited by guarantee or unlimited companies) they will not have to convert but will have to review the changes in the Act that are applicable to them.
Some Key Changes in relation to Corporate Governance and Practical Matters
Default Provisions
The Act has provided a number of statutory default provisions which will apply if the constitution is silent on such matters. However, these statutory defaults can be modified or dis-applied in the company’s constitution.
Directors’ Duties
The common law directors’ duties and responsibilities have been codified and can be found in Part 5 of the Act.
Company Secretary
A company must still have a company secretary (note: for single director LTDs, the secretary cannot also be that sole director) and the Act imposes a duty on the directors of a company to ensure that the person appointed as the secretary has the skills or resources necessary to discharge their statutory or other duties.
Registered Person
Any person, authorised by the board of directors of a company, to bind the company, may now be registered with the Companies Registration Office as a “registered person”. The board and any such registered persons will be deemed to have the authority to bind the company.
Written Resolutions
The Act introduces (i) majority written resolution which can be passed as an ordinary resolution (50% or more of total voting rights – effective after 7 days from date the last member signed ) or (ii) special resolution (75% or more of total voting rights – effective 21 days from the date the last member signed). Unanimous written shareholder resolutions (which take immediate effect) are also still available to companies.
Revised Financial Statements
The Act provides for the correction of defective statutory financial statements. A company can prepare, approve, audit and file revised financial statements or revised director’s report in respect of a prior year.
With thanks to CRO for the information.
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