Major feature of new Companies Act is the creation of LTD or DAC type companies

Companies Act 2014

Major feature of new Companies Act is the creation of LTD or DAC type companies

Why

The new Act will introduce new company models and will affect every company on the Companies Registration Office (CRO) index in some form or other.

Almost 90% of companies currently registered with the CRO are private companies limited by shares. However, the existing Companies Acts from 1963 to 2013 use public companies as their model company type.

What you have to do

The new Act addresses this issue by introducing a new type of private company limited by shares which can be either a LTD type company or a DAC type company and it also contains the necessary legislation to make it easier to operate such a company.

Each company limited by shares will have to choose which company type it wants to be, namely a LTD type company (company limited by shares) or DAC type company (designated activity company).

Features of LTD Companies

The following are just some of the features of the new LTD company type. Please note that this is not an exhaustive list, but it gives a flavour of the type of changes coming down the tracks:

  • They will be permitted to have only one director, but there must be a separate company secretary who must have the appropriate skills to act
  • The minimum age to act as a director will be 18 years
  • They can have up to 149 members
  • They do not need to hold an AGM
  • They will have a single document constitution replacing the existing Memorandum and Articles of Association. A company will no longer have an objects clause and will have the same legal capacity as a natural person.
  • They need not have an authorised share capital, if, so desired
  • They can claim audit exemption if they meet the relevant criteria
  • They can pass majority written resolutions
  • Their name must end in “Limited” or “Ltd” or Teoranta or “Teo”

Features of DAC Companies

The following are some of the features of the new DAC company type:

  • They must have at least two directors, one of whom may be the Company Secretary
  • They can have up to 149 members
  • They do not need to hold an AGM if they are single member companies. If there are two or more members, then they must hold an AGM
  • They will have a constitution which includes the Memorandum and Articles of Association to define its objects clause and also their rules and regulations in the Articles of Association
  • They must retain their authorised share capital
  • They can claim audit exemption if they meet the relevant criteria
  • They can pass majority written resolutions unless otherwise provided in their constitution
  • Their name must end in “designated activity company”, or “d.a.c.” or “dac”, or indeed the Irish language equivalents, unless they qualify for an exemption.

Timeframe to convert to LTD or DAC type company

Initially all existing companies which are companies limited by shares will become DACs but they can either convert to a LTD type company during a transition period which is an 18 month period after the Act commences into Law and ends on 30 November 2016, or alternatively can convert to a DAC type company during a transition period which is a 15 month period after the Act commences into Law and ends on 31 August 2016.

All existing companies limited by shares which have not converted to a LTD type company or a DAC type company by those dates will be automatically converted by the CRO to a LTD company type with effect from 1 December 2016.

If Companies do not convert during the transition period they cannot use the provisions of the new Act until the end of the transition period. It is therefore important that a company that wishes ultimately to become a LTD type company or a DAC type company actually converts during the relevant transition period.

If you would like advice on your conversion options, Noel Brady or Ciara O’Luanaigh of our Company Secretarial Team would be happy to discuss any aspect of the new legislation with you.

Contacts:

Noel Brady
Tel: 01 +353 1 7998300
Email:

Ciara O’Luanaigh
Tel: 01 +353 1 7998300
Email: