With the commencement of the Companies Act 2014 (“CA 2014”) on 1 June 2015, directors of existing private limited companies need to decide which company type under the new Act is most suitable for them, either a Designated Activity Company (“DAC”) or the new model company type of Company Limited by Shares (“LTD”), and amend or prepare new constitution documents accordingly.
For the duration of the 18-month transition period, existing private companies limited by shares will operate under the DAC legislation, so company directors should seriously consider converting sooner rather than later in order to take advantage of the less burdensome obligations provided for the new LTD company type.
For the majority of companies incorporated under the old acts, the provisions of Table A of the Companies Acts 1963-2013 form part of their Articles of Association. Now, for the first time, Table A has been incorporated into the CA 2014 either as voluntary or compulsory provisions, with provisions that are voluntary noted as such, with the phrase “save to the extent that the company’s constitution provides otherwise”.
Amendment Of M&As For DACs
Where a company re-registers as a DAC (or is obliged to re-register as a DAC under Section 60(1)-(2)), the form of the M&As will remain as it is under the current legislation with two exceptions:
- The M&As must be amended to state that the company is a DAC; and
- The company name must be changed to replace “limited” or “teoranta”, with “designated activity company” or “cuideachta ghníomhaíochta ainmnithe”, respectively, pursuant to Section 63(2).
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Adoption Of A Single Document Constitution For LTDs
In the case of converting to the new-form LTD company, existing private companies have two options:
- Directors are obliged to prepare a new-form constitution, circulate it to members and submit it to the CRO during the 18-month transition period, unless;
- The company adopts a new-form constitution by special resolution. Adoption by special resolution is subject to:
- Compliance with the company’s existing memorandum and articles of association; and
- Statutory requirements regarding rights attaching to classes or shares as set out in Section 59(1).
Form & Contents Of New-Form Constitution
The form and contents of a new single-document constitution are set forth in Section 19 and Schedule 1 of CA 2014, but the main difference between a constitution and an existing M&As is that it has no objects clause. Also, Section 19 refers to the constitution’s provisions as “regulations” rather than “articles”. However, it is not simply a matter of removing the objects clause as Section 19(2)(b) requires that the constitution be divided into paragraphs numbered consecutively. As such, internal references would need to be amended to reflect this new format.
Changes To Companies’ Constitution Documents
Adopting a new-form constitution by special resolution provides members with an opportunity to revise the provisions of a company’s existing memorandum and articles of association (subject to compliance with the rules on variation of class rights (Section 59(1)). This means references to the new Act can be included and optional provisions can be adopted or disapplied.
Changes to companies’ constitution documents are just one of the many aspects of the new legislation that directors of existing private companies will need to consider and decide on between commencement and the end of the 18-month transition periods.