The Irish Companies Act 2014 will take effect from 1st June 2015, bringing changes that will make it easier to set up a company in Ireland and easier to manage going forward.
After this date, you will have three options for your existing Private Limited Company by Shares:
- Convert to a new type LTD company; OR
- convert to a DAC (Designated Activity Company); OR
- do nothing.
A Designated Activity Company is considered to be more appropriate to specific objects companies rather than general trading companies and for this, and other reasons noted below, it may be appropriate to consider converting the existing private limited company once the transitional phase has begun 01st June 2015.
Key Changes Under Companies Act 2014
Following enactment the following key changes will take place:
- There will be an 18 month transition period from 01/06/2015 to 30/11/2016.
- An existing private limited company by shares will be treated as a DAC (Designated Activity Company) during the transition unless you file an application to convert to a new LTD company.
- The new type LTD company will operate without specific objects and these will now be enshrined in law and much wider than under the Companies Acts 1963 to 2013.
- The new LTD will have a ‘constitution’ instead of a memorandum & articles. Companies do not state their objects if they are registered as a new LTD company.
- There is no automatic conversion so an application must be filed to do this and to convert the existing memorandum/articles to comply with the new regulations.
- One Director is permitted for a new LTD or converted LTD but there must be a separate Company Secretary.
- The new LTD company by shares will have ‘Limited’ after its name or the suffix LTD
- DAC companies will have ‘Designated Activity Company’ after its name or the suffix DAC.
- Designated Activity Company encompasses companies which have a specific object for which they are registered. It will have certain regulations in its constitution which it wishes to retain under the new act, detailing certain objects and articles of association which are not specified in the template LTD company constitution.
- Examples of companies specifically envisaged as DACs are: Charities, Management Companies, Guarantee Companies & companies incorporated for a specific purpose to which the shareholders wish the capacity of the company to be clearly defined.
- If no conversion is filed during the transitional period the company will be deemed in law to be a LTD on 30/11/2016 and to have constitution comprising the provisions of its existing memorandum/articles, bar the objects.
- An existing Private Limited Company by Shares does not have to change its name during the Transition Period - it only needs to change its name if it is converting to a DAC, by using the prefix of DAC after its name.
Why Convert to the New LTD?
- There are Unlimited Objects, no ‘ultra vires’ concept.
- One document constitution replaces need for Memorandum & Articles.
- There are codified Director and Secretary rules.
- There is no requirement to hold a physical AGM, written AGM minutes or resolutions. However, all the members entitled to attend and vote at such a meeting would have to sign a written resolution authorising this before the latest date for holding of such meeting.
- One Director and one Secretary is the minimum requirement for company officers.
- DAC, ‘Designated Activity Company’, is considered to be more appropriate to semi-state bodies.
So whether you already have an Irish limited company or are thinking of setting on up. carefully review these points to determine which of the options laid out above best suits your situation.