- On 17th July 2015
- companies act, irish law, law, legal
The Companies Act 2014 came into effect on 1st June 2015. It represents a profound change in Irish company law and a substantial challenge for practitioners. However, it can also be seen as a positive development as it consolidates and modernises the law. The Act brings together all the previous enactments into one statute. The private company limited by shares is the most common type of company registered in Ireland and the main changes relate to this company. Under the Act, there are two different types of private company, the private company limited by shares (LTD) and the designated activity company (DAC).
The Act requires all private companies to convert to either an LTD or a DAC. They will have until the 30th November 2016 to do this. If a private company does not convert during the transition period, it will automatically convert to an LTD. If this happens, the private company will have the option to register as a DAC by passing a shareholder resolution. Other company types will not have to make the conversion i.e. PLCs, guarantee companies, unlimited companies and investment companies. However, the Act has introduced some changes relating to them.
KEY FEATURES OF A COMPANY LIMITED BY SHARES (LTD)
The Doctrine of Ultra Vires (beyond its power) no longer applies to the LTD therefore it will not have an objects clause. The LTD is not required to hold physical Annual General Meetings of shareholders (AGMs). The LTD’s name will not change after conversion and can use ‘Ltd’ or ‘Limited’ or the Irish equivalent at the end of its name. It no longer needs a minimum of two directors, one is sufficient, however single director companies will require a separate company secretary. The LTD can have a maximum of 149 members (as compared to 99 members in the previous legislation).
KEY FEATURES OF A DESIGNATED ACTIVITY COMPANY (DAC)
The DAC will continue to require an objects clause. Its capacity will be limited by its objects clause and it will be required to hold physical Annual General Meetings, unless it is a single member company. After conversion, it must change its name to use the affix ‘DAC’ or ‘Designated Activity Company’ or the Irish equivalent. It must have two directors and a company secretary. It may be appropriate for a company to convert to a DAC where an objects clause is needed, for example, if it wishes to restrict the corporate capacity of a joint venture vehicle.
COMPANY LAW OFFENCES
The Act will categorise and update all company law offences which will assist in the enforcement of company law. It also increases the severity of the penalties. There are four categories:
- Conviction on indictment which can result in a term of up to ten years imprisonment and/or a fine of up to €500000.
- Conviction on indictment punishable by a term of up to five years imprisonment and/or a fine of up to €50000.
- A summary offence attracting a term of up to six months imprisonment or a Class A fine.
- A summary offence punishable by imposition of a Class A fine (a fine not exceeding €5000).
Category one offences include false accounting and fraudulent trading. The less serious offences under category two ranges from dishonest dealings before a company becomes insolvent or goes into liquidation, financial assistance and other similar offences. Category three offences includes non-filing of annual returns and failure to hold an AGM. Category four offences are only punishable by a fine, such offences include failure to make routine filings.
KEY CHANGES RELATING TO LIQUIDATION
The Act still provides for the three types of liquidation, namely compulsory liquidation, members’ voluntary liquidation and creditors’ voluntary liquidation. However, the Act aims to further align and update the procedures for liquidation to provide certainty and consistency. For the first time, there is a statutory obligation for a person to have certain qualifications before he/she can be appointed liquidator. A liquidator, including a provisional liquidator, can continue to act in a winding up where the appointment was made before the Act came into effect. The documents to be filed and the periods have been altered under the Act. The E1 and E2 forms no longer need to be witnessed and/or signed by a peace commissioner or the equivalent. If a liquidator resigns, a statutory document must be submitted to the CRO.
These notes are intended as a general guide to the Companies Act 2014.. It is not intended to cover all the changes introduced by the Companies Act 2014 and does not constitute legal or any other advice on any matter addressed.
17th July 2015
Nooney & Dowdall Solicitors
16 Mary Street,