THE NEW COMPANIES ACT 2014 (THE “ACT”) WILL COMMENCE IN JUNE 2015. THE ACT WILL BE THE CULMINATION OF A NUMBER OF YEARS WORK UNDERTAKEN BY THE COMPANY LAW REVIEW GROUP TO CONSOLIDATE EXISTING COMPANY LAW INTO ONE CONCISE PIECE OF LEGISLATION.
Types of Private Company
It is important that companies are aware of the changes that will be brought about by the Act and one of the most significant changes is to the types of companies. Following commencement, the current private company limited by shares may take one of two formats; it may be a Company Limited by Shares (“LTD”) or a Designated Activity Company (“DAC”). Other private companies, such as a company limited by guarantee with a share capital and companies involved in certain activities such as publishing offer documents will be required to re-register as a DAC. For the main elements of a LTD and a DAC follow this link to our article on ‘What you need to know about the new Companies Bill’.
Other Types of Company
Other company types will also exist. These include:
||Company limited by Guarantee, without a share capital
||Public Limited Company
||Public Unlimited Company having a share capital
Public Unlimited Company without a share capital
||Private Unlimited Company with a share capital
What must your company do?
Essentially, every existing private company limited by shares will have three options:
- Choose to become a LTD;
- Choose to become a DAC; or
- Do nothing.
1. Choose to become a LTD
Should a company choose to become a LTD it must do so, before the end of the transition period, by either:
– Passing a special resolution of the members and submitting a new constitution to the Companies Registration Office (“CRO”) along with Form N1; or
– Having the directors prepare a new constitution that preserves members’ rights and following circulation to all members delivering it to the CRO for registration with a resolution and Form N1.
2. Choose to become a DAC
A company may choose to be a DAC. A DAC is closest in form to the existing private limited company. The company will be required to state that the Company is a Designated Activity Company and to substitute the words “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” for “Limited” or “Teoranta” in the Company’s name.
A company may change to a DAC by either:
– Altering its constitution by ordinary resolution, in the case of a voluntary re-registration, and submitting this to the CRO with the constitution and Form N2; or
– By resolution of the directors, in any of the following cases of compulsory registration:
– Upon notice by a shareholder holding more than 25 per cent of the total voting rights in the company;
– By reason of the Company’s non-compliance with the limitation on offers of securities to the public; or
– Pursuant to a court order under the legislation.
Where a private company limited by shares converts to a DAC a new Certificate of Re-Registration will be issued by the CRO. This is to show the company’s new name including the suffix “Designated Activity Company” or “DAC”. In addition, other administrative changes will also be required such as replacement of the company seal, company stationery and letterheads, company nameplate, share certificates and company website to reflect this change of name.
3. Do nothing
Companies may decide to do nothing within the transition period. Where the new-form Constitution has not been formally adopted, it will be deemed to apply. Therefore, the new Constitution will be the existing Memorandum & Articles of Association with the exclusion of those clauses containing its objects or provisions that provide for, or prohibit alteration to, any of the provisions of the M&A.
In cases where nothing is done, a member will be able to seek remedy in the courts under the legislation (including payment of compensation or the purchase of their shares) if they feel their rights as members have been prejudiced by the company taking no action.
Shareholder rights in the process
It should be noted that the members of your company may also take action during and after the transition period.
– In the 15 month period after commencement (up to 1 September 2016) any member(s) holding 25% or more of the voting rights in a company may serve written notice on that company to re-register as a DAC before the end of the transition period.
– Where no action has been taken to re-register the company any member(s) holding 15% or more of the voting rights or creditors holding at least 15% of debentures may, in the 15 to 18 month period after commencement (from 1 September 2016 to 30 November 2016), apply to the court requesting that the company convert to a DAC.
– After the 18 month transition period any member(s) who hold more than 15% in nominal value of the issued share capital or creditors holding at least 15% of debentures who feel that they have been prejudiced by a failure to convert to a DAC or otherwise may apply to the court for remedies.
How BDO can help?
Our corporate secretarial department are well versed with the new provisions of the Act, the new company types and the new form of constitution and would be more than happy to discuss your company’s needs with you at a time that is convenient. Please contact the Corporate Secretarial Department at +353 (0)1 4700000.
Beaux Lane House
Mercer Street Lower
t: 01 4700000