COMPANIES BILL 2012
As the Companies Bill 2012 (the “Bill”) nears enactment, companies are beginning to prepare for transition to the new regime. The Bill will repeal the entire Companies Acts and will consolidate them in a single statute. When enacted, the new Companies Act will contain 1,431 sections. The Bill is built around the most common company type in Ireland which is the private company limited by shares. These companies will be subject to an eighteen month transition period (which can be extended by the Minister for a further twelve months) during which directors and shareholders must decide to either, subject to the passing of a resolution, register as a new form company limited by shares (known as a “CLS”) or as a designated activity company (“DAC”).
For most companies, the decision will be determined on the basis of whether they want to avail of certain new company law procedures that are available to the CLS such as the abolition of company objects, the availability of a one director minimum and the ability to dispense with annual general meetings or whether they want to opt out and retain a more familiar corporate form. Management companies, not for profit entities, charities and voluntary organisations incorporated as companies limited by guarantee will be required to change their names so as to include the words “Company Limited by Guarantee” in the title.
Directors of existing private companies will also have to decide whether to or not to draft a new form constitution. A private company can continue with a constitution that takes the form of its existing Memorandum and Articles of Association notwithstanding that this document refers to laws and regulations that will have been repealed.
The Bill is effectively split in two parts as follows:-
(i) Parts 1 – 15 which covers the new model private company limited by shares or CLS; and
(ii) Parts 16 – 25 which covers all other types of companies which include:-
- Guarantee companies;
- Unlimited companies; and
- External companies.
Key Features of the new CLS:-
- There will be no requirement to have an objects clause and the concept or doctrine of ultra vires will no longer exist.
- A CLS will have a one document constitution.
- The minimum number of directors is one and the company must have a company secretary.
- A multi member company can dispense with the requirement to hold annual general meetings.
Key features of a DAC:-
- A DAC will have a two document constitution similar to the current Memorandum and Articles of Association.
- A DAC will end with the suffix DAC.
- A DAC must have a minimum of two directors.
- A DAC cannot dispense with the requirement to hold an AGM.
Conversion of existing companies:-
On the enactment of the Bill, all private limited companies will be treated as DACs for a transition period of eighteen months. Existing private companies which do not elect to convert to a DAC will be deemed to have become a new CLS at the end of the transition period. An existing private limited company can elect to become a DAC by passing an ordinary resolution and making the necessary filings with the Companies Registration Office three months prior to the end of the transition period. Where a company is deemed a DAC but not converted before the end of the transition period, the members may apply to the High Court for an order to convert. A company may elect to convert to a new model private limited company during the transition period by passing a special resolution.