IT’S BEGUN – The Companies Act 2014 has finally arrived, and has been up and running since 1st June, 2015.

Although there are teething problems sinces it commenced on Monday 1st June 2015 for now they appear to be mainly of a technical nature, e.g. problems filing changes of directors and other statutory forms.  Overall commencement has started quietly possibly due to a collective intake of breath by service providers.  Everyone seems to be waiting to see what everyone else will do but, at some stage we are all going to have to dive into the Act.

The naysayers forecasting Armageddon have been proved wrong as the transition period starts for service providers and companies in Ireland.  A bright new day – possibly!.  Certainly it will be easier to incorporate a company but, there will be compliance issues surrounding companies in existence prior to 1st June 2015.  An anomoly surrounding shares raised by the Irish Stock Exchange has already been detected with amending legislation likely to be enacted shortly.  The discontinuance of Places of Business for External Companies will definitely catch companies out.  It will be interesting to see if this list grows any longer.

Despite such quibbles it is an astonishing achievement that so many people (on or connected with the Company Law Review Group) gave their time voluntarily to consolidate 150 years of case law, and over 50 years of company law to generate an Act set out in clearly defined sections and plain English.  Their efforts, and the commencement of The Companies Act having waited almost 15 years are to be applauded.

The Companies Bill was signed into law by President Higgins on December 23^rd, and is now the Companies Act 2014.  

The Companies Act 2014 will be commenced on 1^st June 2015.  There will be a transition period of 18 months and existing companies will need to consider conversion within this period.

We will be in touch with all our existing clients directly over the coming months, advising and supporting them in relation to changes and in particular with regard to conversion.

If you have any specific queries, please don’t hesitate to call us, we are delighted to help.  We understand that it’s important for you to understand your options so you make the correct decisions.

One of the main reforms the Bill is introducing, is a new form of company, the private company limited by shares (CLS) which will be new the model company.

New Model Company – CLS

The CLS is the new type private company limited by shares which benefits from most of the reforms introduced under the bill. It will have a one-document constitution, facility to have a single director and the ability to dispense with physical AGMs. It can also pass majority resolutions, claim eligibility for audit exemption and have up-to 149 members.

Given most existing companies are private companies limited by shares, these companies must consider whether to convert to a CLS or a DAC. It is expected that most companies will choose to convert to the new CLS private company limited by shares.

Designated Activity Company – DAC

The DAC is similar in form to the current private company limited by shares, and not all of the reforms will apply to the DAC. Unlike the CLS, a DACs activities are limited by its object clause. It must have a minimum of two directors (one of which can be the Company Secretary). The DAC cannot dispense with the need to hold a physical AGM. Like the CLS, it can pass majority resolutions, claim eligibility audit exemption and have up-to 149 members.

Examples of DACS

• Companies required to limit business activities to a defined capacity e.g. SPVs
• Joint Ventures – shareholders want to define corporate capacity
• Private companies regulated by the Central Bank of Ireland i.e. UCITS
• AIFMs,
• insurance companies
• Companies limited by guarantee with a share capital

A further consideration is that the DAC must change its company name i.e. Bayatelle Funding Ltd would become Bayatelle Funding DAC

CONVERSION

There will be an 18 month transition period and companies should formally resolve to convert within 15 months. During the transition period, all existing private companies limited by shares must convert to either a CLS (Private company limited by shares),or a DAC (Designated activity Company), their options are as follows:

• Convert to new CLS using model constitution
• Convert to new CLS using adapted existing M&A, which will now be a constitution
• Register as a Designated activity Company (DAC) –where members want this
• Register as a DAC because you are required to e.g. listing debt securities, credit institution

This applies to private companies limited by shares formed before the new Act. During the transition period existing private companies are deemed to be DACs until they convert and won’t benefit from any of the new reforms available to the CLS.

Companies who do nothing will be deemed by law to be a CLS. The Companies Registration Office will intervene; and the company will have a constitution comprising the contents of its current memorandum (without objects & articles). Eligible members or creditor who deem their rights to have been prejudiced by the inaction of company or directors in terms of conversion options, will be able to apply to court for relief.