The Companies Act 2014
The Companies Act 2014 came in to operation on 1st June 2015 and is the single biggest piece of legislation enacted in the history of the State.
It consolidates and updates the previous 17 Companies Acts into one single piece of legislation and consists of 1,448 sections; broken down into 25 Parts. This represents a significant change for Irish Companies and Irish Company Directors.
There are certain clauses that an existing private limited company (EPC) needs to be aware of and we are here to help you, the directors, through this time of change.
Types of Companies
Existing private companies can convert to:
- The new form of private company limited by shares (LTD) or
- A designated activity company (DAC)
The majority of existing private limited companies will choose to convert to the new form of private company limited by shares (LTD). Only companies which perform a designated activity will convert to a DAC.
The new Act provides for a transition period of 18 months, between 1st June 2015 – 30th November 2016 for the conversion to a LTD.
Under the new Act, the Company’s Memorandum and Articles of Association will be known as the Company’s Constitution.
As part of making this change, the Company may take the opportunity to update its existing Rules and Regulations, if needs be.
Main points relating to the new LTD company
A LTD will be governed by a single document, known as its Constitution. This replaces its current Memorandum and Articles of Association.
A LTD is not required to have an Objects Clause. Under the new Act, it will have full capacity to enter into transactions and undertake any business or activity.
A LTD may have only one director. However, in such cases, a different person must be appointed Company Secretary.
A LTD may dispense with holding an Annual General Meeting.
A LTD does not require an authorised share capital.
Company Limited by Guarantee
The name of the company will have to change to replace the suffix Limited with Company Limited by Guarantee or CLG and the Articles of Association should be reviewed to reflect the new Companies Act and to deal with any issues regarding membership of the company.
A LTD’s name will end with “Limited” or “Teoranta”, which after its registration may be shortened to “Ltd” or “Teo”.
Changes to the company name will affect company letterheads, stationery and signage. Any documentation submitted to the CRO after 30th November 2016 which bears the incorrect name will be refused.
If no change is made
If no change is made, at the end of the transitions period, the company is deemed to be a LTD under the new Act. The existing Memorandum and Articles of Association will continue to apply unless they are inconsistent with the mandatory provisions of the new Act. Any references in the Company’s existing Memorandum or Articles to a provision of the prior Companies Acts will be read as a reference to the corresponding provision of the new Act. This will add an extra challenge when attempting to find out a Rule that governs the Company as sections in the old Act must be compared with sections in the new Act. If these Rules do not agree with the mandatory sections of the new Act, the new Act prevails.
Almost all companies who do not change, will end up being governed by the Companies Act, 1963, its old Memorandum and Articles of Association and the Companies Act 2014. This is likely to be unacceptable to your bank or other funders of the company who would expect that the company has an up-to-date Constitution that is clear and easy to follow. It may also lead to confusion for the Board of Directors and the Members.
It is the duty of each Director to ensure that the company complies with the new Act.
We recommend that each company should adopt a new Constitution which satisfies the requirements of the new Act and re-registers as a LTD or DAC. We believe that the continuance in force of the existing Memorandum and Articles in the manner outlined above is “untidy” and could be confusing for users in the future.
It is important to remember that the company may be party to an agreement or Deed under which any change in the company’s Constitution requires third party approval. All agreements, facility letters, security documentation, shareholder agreements, etc., should be checked in this regard.
If you have any questions regarding the impact of the Companies Act 2014 or if you wish to make these changes, please feel free to give us a call. We would be pleased to assist you in any way that we can.