NEW COMPANIES ACT 2014
In our last article we briefly spoke about the introduction of the Companies Act 2014. After a lengthy passage through the Oireachtas, the Companies Act 2014 was signed into law on 23 December 2014 and is likely to come into effect in June 2015.
The main features of the new Companies Act 2014 are as follows:
- Creation of new types of Company;
- Codification of Directors’ duties;
- Expands audit exemption; and
- Introduces summary approval procedure to ease prohibitions on certain restricted activities.
We briefly mentioned in our last column the extension of the availability of the audit exemption to Group Companies, Limited by Guarantee Companies and Dormant Companies where certain criteria are met.
This week we will focus on the most significant changes which are the new types of Companies created by the Companies Act 2014 and the actions required by Company Directors of Private Limited Companies.
New Types of Private Company
Once introduced the current Private Company Limited by Shares must change its format into either of the following:
Company Limited by Shares (“LTD” – sometimes referenced as “CLS”)
The main features of this type of Company are as follows:
- Minimum 1 Director (in which case there is a requirement to appoint a separate secretary);
- One document constitution that will contain no objects clause;
- May adopt written AGM’s instead of holding physical meetings;
- No change of name required ;
- Eliminates the requirement to have a stated authorised share capital; and
- Not entitled to list securities (debt or equity) for sale to the public.
Not every company can be a LTD, for instance banks and insurance companies cannot be.
Designated Activity Company (“DAC”)
The main features of a DAC which are very similar to our current private limited company structure are as follows:
- Minimum of two directors;
- Continue to have a two document constitution – Memorandum and Articles of Association required with an objects clause;
- Must hold a physical AGM (unless a single member company in which case written AGM’s are permitted);
- Company name will now end in DAC (with resultant changes to stationary, websites’, company seal etc.);
- Must state its authorised share capital;
- Not entitled to list equity securities for sale to the public but may list qualifying debt securities.
Certain entities will be compelled to register as a DAC, such as credit institutions and insurance companies.
Other types of Companies
Other types of companies will of course exist under the Companies Act 2014, these include:
- CLG – Company Limited by Guarantee , without a share capital
- PLC – Public Limited Company
- PUC – Public Unlimited Company
- PULC – Public Unlimited Company without a share capital
- ULC – Private Unlimited Company with a share capital
These will be discussed in more detail in our next article.
What is the Time Frame for Changes?
The Act provides for an 18 month transition period after the Act commences (most likely June 2015) during which time private companies will need to decide which type of new entity best suits their needs.
1st June 2015 – 31st August 2016 : All existing companies limited by shares will be treated as DAC’s until:
- They convert to a LTD company; or
- Re – register as a DAC.
Those that elect not to convert to either type of new entity during the transition period will be treated as a DAC for that time and at the end of the 18 month period will automatically become an LTD.
How can O’Donovan Lavin help?
As you can see the Act introduces significant changes which will affect every Company, Director and Shareholder. At O’Donovan Lavin we have a dedicated team that can advise you on all aspects. For a reasonable fee we will advise you as to which structure suits you best, complete all the relevant forms on your Company’s behalf and submit them to the Companies Registrations Office to ensure your business is Act compliant.