New Companies Act

In the last number of weeks, Company Directors have been contacted by the Companies Registration Office about the new Companies Act 2014. Here we cover what you need to do at this point.

The Companies Act 2014 will come into effect from 1 June 2015. The objective of this legislation was to streamline and modernise company law in Ireland. As a result, there are a number of changes that companies and their directors will need to consider and discuss with their Accountant.

If you are currently set up as a company, you will be obliged to alter your legal form, you cannot continue in your current ltd company form; this does not need to happen straight away however. From June 1st there will be a transition period of 18 months. You have up until to this point to decide whether to opt in to the new regime and become a) a 'new' private company limited by shares (LTD) or opt out by becoming b) a designated activity company (DAC). If, by the end of that period, a private limited company has not chosen one of these options, it will automatically become a LTD.

What is a LTD?

In order to become a LTD company you will need to opt in to the new regime.  If a company becomes a private company limited by shares (LTD company), it is allowed to have only one director. 

A LTD company will now have a constitution document so you will need to get one of these drafted. This document does not state the objects of the company, therefore the LTD company is not restricted to a single trading activity. A LTD company, under the new Companies Act, does not need to hold an Annual General Meeting.

 

What is a DAC?

In order to become a DAC, a private company will have to do so within the 18 month transition period after the 1st June 2015 and submit the relevant documents to the CRO.

All DAC’s, must have the words “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” at the end of their name.  These can be abbreviated to “d.a.c.” or “dac”, c.g.a.” or “cga”.

If a company becomes a DAC, it must have at least two directors.

A DAC will now have a constitution document. This document sets out the objects of the company, therefore a DAC may be restricted to a single trading activity.

 

 

Am I obliged to change the company type and convert?
 

No. If, however, at the end of the transition period( 30th November 2016) you have not converted, the CRO will change the company automatically to be a LTD company.

Until a company converts to a LTD company type, an existing private company limited by shares is deemed to operate as a DAC throughout the transition period.

No fees will be charged by the Companies office for companies undergoing the conversion process or meeting the name requirements under the new Act. The CRO has proposed to allow the relevant documents to be filed for free.

 

So what do I need to do?

Depending on the type of business you are it may be advisable to convert yourself to a LTD, so as to not restrict your company’s activities during and after the transition period.

You may also need to consult any stakeholders of your business for their input. For example, your bankers may be supplying you with credit and may not wish you to convert to a LTD company as theoretically you could carry out multiple activities outside your current remit. In this instance your bankers may wish to restrict the activities of the company, as they see this is in their best interest to support repayment of the credit/loan.

 

Conclusion

As this a complex area you should contact your accountant for advice and support, as soon as possible.

It should be noted this new company legislation is unchartered territory for all involved and its interpretation may be subject to change as the months pass by. We will endeavor to keep you informed of any of these changes as best we can.

Date published 20 May 2015

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.