All companies are required to keep adequate accounting records but, what precisely does “adequate accounting records” mean?

Adequate accounting records are records which:

• correctly record and explain transactions of a company;
• detail assets, liabilities, financial position, profit or loss of a company; and
• enable directors to prepare annual financial statements.

The type of information which must be contained within the accounting records should cover information such as outlined below.

• All monies received and spent
• All assets and debts
• All purchases and sales
• Records of stock held
• Records of services purchased or provided
• Record of all goods bought and sold, including a record of itemised invoices

Time is money so, handling all of the above personally may not be the most cost effective option for a company. 

Consider:

–          having a qualified book-keeper (part-time or full-time)

–          retaining information in a simple format – does not have to be a costly bespoke piece of software.

As always, if you have any questions on this blog please contract myself or one of my colleagues.

On the 1st May 2015, Richard Bruton signed The Companies Act 2014 (Commencement) Order.

As anticipated the Companies Act 2014, will commence on the 1st June which the exception of some provisions relating to financial Statements.

The order can be viewed by clicking on  http://www.irishstatutebook.ie/pdf/2015/en.si.2015.0169.pdf.

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.

 OPTION ONE – Participation by Directors and Members

A new Constitution is drafted by the Directors which is approved by the members by means of an ordinary resolution prior to 30^th September 2016 or by Special Resolution after that.

OPTION TWO – Member or Members who hold 25% of Total Voting Rights Serve notice on the Company

In the event the company takes no action, a member or members who hold share that confer, in aggregate, more than 25% of the total voting rights, can serve a notice in writing requiring the company to convert to a DAC.

OPTION THREE – Member or Members who hold in excess of 15% Issued Share Capital of the Company

(S58)In the event the company takes no action, a member or members who hold in excess of 15% of the issued share capital can get a conversion order from the Courts instructing the company to convert to a DAC.

(S969) On re-registration, the CRO will issue your Company with a new Certificate of Incorporation. The company designation will be “DAC” or “Designated Activity Company” or as gaeilge “CGA” or ““Cuideachta Ghníomhaíochta Ainmnithe”.

IF NO ACTION IS TAKEN

A company who takes no action, will by default at the end of the transition period become the new simplified private company limited by shares. This may not be the appropriate structure under which the company should operate. In certain circumstances, the company also risks being instructed to convert by a court order.

(S63)In addition, if members and/or creditors believe they have been prejudiced by the company’s inaction, they can apply to the courts for relief.

Change Company Name

Changing a company name takes careful planning.  Here’s a checklist to help, while not exhaustive, it might include something you haven’t yet thought of!

Your thoughts and questions are welcome!

Conversion to the new simplified model of the Private Limited Company

Transition Period

The new Companies Act 2014 will require all companies to make key decisions during the coming months.  There will be an 18 month “transition” period during which companies must decide to convert to the new simplified model of the Private Limited Company or a Designated Activity Company. It is expected that most companies will choose to convert to the new private company limited by shares.  This blog will focus on conversion to simplified model of the Private Limited Company only. Conversion to the Designated Activity Company will be dealt with in a separate blog.

Your company will need to consider provisions of the Companies Act, review existing Articles of Association to decide what provisions need to be included in your company’s new constitution.

What’s the status of my Company during the Transition Period?

Until your company has converted, it will be deemed as a Designated Activity Company and cannot avail of the reforms of the Act.  Where Table A has been adopted (in full or part), these provisions will apply during the transition period, even though the Companies Act 1963 – 2013 will have been repealed.

How does my Private Limited Company Re-register as a new Private limited Company?

Your private limited company can convert in one of the following three ways

1. (S59) Members – The Company adopts a new constitution by way of a special resolution ensuring it is passed in accordance with the company’s existing Memorandum and Articles and adopts a new Constitution.
2. (S60) Directors – The Directors adoption of a new constitution is limited to consisting of provisions of its existing Memorandum and Articles excluding the objects clause and clauses that prohibit amending all or any of the provisions of the existing articles of association.  Directors must prepare a constitution, issue to every member of the company prior to registering it with the CRO.  If the company does not do, so it faces the risk of a member(s) or creditors applying to the courts for applicable relief. The new constitution cannot alter the rights and obligations of the  members as set out the Company’s Memorandum and Articles.
3. (S61) Default Position – The Act has made provision for a default position at the end of transition period. If your company opts for the default position, it will be deemed to have become a new private limited company with a Constitution made up of provisions from of its existing Memorandum and Articles excluding the objects clauses and any or that prohibit, amending all or any of the provisions of its memorandum and articles.  If your company decides to opt for the default position – the CRO will not update your existing Memorandum and Articles of Association.

(S26) On re-registration, the CRO will issue your Company with a new Certificate of Incorporation. The company designation will be “Ltd” or “Limited” or as Gaeilge  “Teo” or “Teoranta”. 

Advantages of taking Action

• Your Company has certainty and avoids being at the mercy of default statutory provisions and a “deemed constitution”.
• Directors can avoid the obligations which would otherwise arise where the members elect to do nothing, by proactively putting a new constitution to the members to adopt;
• Companies cannot avail of any of the new provisions until conversion.
• Adoption in this way gives members freedom to revise the provisions of the act (subject to compliance with the rules on variation on class rights), it also allows the inclusion of references to the Act and adoption (or disapplication) of new optional provisions set out in the act.

Disadvantages of doing nothing:

• Your company will be treated as a DAC during the transition period.
• Members who deem their rights have been prejudiced by inaction of the company in terms of conversion options may apply to the courts for relief.
• Uncertainty and potential additional costs the Act will need to be checked for each transaction to determine the validity of the Articles.

If you would like clarification or have any questions please feel free to post a question using the comment box below.

18th May 2015 is the deadline date to either incorporate a company or change its name due to the expected commencement date of the Companies Act on 1st June 2015.  Until 18.05.2015 companies can be incorporated or change their name using existing statutory forms based on existing company law.  Provided the statutory forms are accurate and filed by 18.05.2015 the companies will be incorporated or, the name changed on or before Friday 29th May 2015.

Any statutory forms incorporating or changing company names filed after 18th May will not be processed by the Companies Registration Office and will be returned.

In practise there will be a hiatus between 18.05.2015 and 29.05.2015 during which it will not be possible to file statutory forms to either incorporate a company or change a company name.  From 1st June 2015 normal service will resume with the Companies Registration Office as all statutory froms will reflect the Companies Act 2014 due to be enacted on that day.

Contact us if you have any issue surrounding this, particularly if you need a company urgently between 18.05.2015 and 29.05.2015.

Extension to File Annual Returns – District Court

When the new Companies Act 2014 commences on 1^st June 2015 it will be possible to apply to extend the  time to file your company’s Annual Return via the District Court (Section 343 (5)).

The costs of going to District Court will be significantly cheaper than the High Court which is currently the prescribed court for these applications.

The process is that the District Court will hear applications and subject to a positive outcome for the company, will make an Order extending the filing time.

The company should then file the Order with the CRO within 28 days. Subject to filing the order within the 28 days AND filing the Annual Return within the time specified by the District Court  – the documents will be deemed to have been received on time by the CRO and consequences for late filing (such as loss of audit exemption and late filing penalties) won’t apply.