How will the new Companies Act 2014 affect your limited company?
If you are a director of an Irish company you should be aware that the new Companies Act 2014 was signed into law in December last year and will become operative on the 1st of June, 2015. The Act will consolidate and modernise Irish company law. In this article we would like to make you aware of the main features the Act will introduce and how it will affect your limited company.
New company types
One of the main features of the new Act is the requirement for all companies currently incorporated as a Private Company Limited by Shares to convert to one of two new company types – LTD ( Private Company Limited by Shares) or DAC ( Designated Activity Company).
Private Company Limited by Shares (LTD) – One of the key features of this new company type is that it does not require an object of clause, which allows the company to trade in any legal business they desire. This will mean the end of ‘Ultra Vires’ for the standard LTD Company. Another key feature of this new company type is the ability to have only one director on the company. If a company does decide to have a sole director, the company must appoint a separate secretary who cannot be the same person as the director.
Designated Activity Company (DAC) – A DAC is very similar to the existing private company limited by shares. This company type is suitable for companies who may require an objects of clause which is likely to appeal to a small amount of shareholders and investors who will want to ensure that the company in which they have invested continues to carry out on the business it was intended to. A DAC must have a minimum of two directors.
Do I have to convert my company and how long do I have?
Under the new Companies Act 2014, directors are obligated to convert their company to one of the new company types within the 18 month transitional period which begins on the 1st of June 2015. Until a company has been converted, it cannot avail of the new features of the new LTD company type. If a company fails to make a conversion during the 18 month transition period, it will be defaulted to a LTD company type. It is important to understand that this lack of action could potentially cause legal problems for the company, its directors and also its shareholders. The company will be forced to adopt a default constitution that may not be suitable for its type of business. We would advise that all company directors take a pro-active approach to the new Companies Act and convert to a new company type as soon as possible.
Company Bureau Formations (companyformations.ie) have a tailored package ready for when the new Act is commenced. The package to convert to the new LTD format includes drafting of minutes, resolutions, and a new constitution with full supplementary regulations. We can also assist you to convert to the new Designated Activity Company (DAC) entity if required, as well as the other new entities that the act creates. If you would like more information on converting to a new company type or on incorporating a new company , please do not hesitate to contact the experts at Company Bureau on +353(0)1 6461625 or alternatively you can email them at firstname.lastname@example.org.