Companies Bill 2012 Passes Final Stage
Written by 10th December 2014on
After much debate, the highly anticipated Companies Bill is expected to be enacted into law shortly. It passed final stages on 10 December 2014 and is now ready to be signed into law by the President with the expectation that he will do so later this month.
The comprehensive Act consolidates all existing company law into 17 Schedules. It is the largest reform of company law the state has seen in half a century. It is expected to come into effect on 1 June 2015 and is intended to make running a business in Ireland easier.
Operators of Private Limited Companies now have an important decision to make.
While the Act restates much of the current Irish company law, it also modernises much of the legislation making it more accessible and user friendly.
One of the major changes within the Act is the provision for two new types of private limited company to replace existing private limited companies. Those involved with private limited companies will have to decide whether they are best served by converting their existing private companies to:
- private company limited by shares (CLS); or
- the designated activity company (DAC).
The majority of the innovations are to be found in the CLS structure, making them more user friendly, and it is anticipated that this will prove to be the preferred option for most. A DAC more closely resembles existing private limited companies inheriting some of its traits.
It is important that some consideration is given to the options available under the new regime so that the decisions made are informed ensuring a smooth transition from the existing to the new rules. The main differences between a CLS and a DAC under the new regime are:
|Only required to have one director.||Must have at least two directors.|
|The shareholders of a CLS can dispense with the formality of holding an AGM by passing a written resolution to that effect.||Unless it has one shareholder, a DAC must formally hold an AGM each year.|
|Will have a single document constitution with no objects clause.||Will have a two part constitution comparable to the existing memorandum and articles of association|
|Not required to have an authorised share capital.||Must have an authorised share capital.|
|May not list debt securities for sale to the public.||May do so.|
There will be an 18-month transition period during which existing private limited companies can choose one of the following options:
- opt-out: a company can pass an ordinary resolution up to three months before the end of the transition period resolving to become a DAC.
- opt-in: the members or directors of a company can choose that a company becomes a CLS before the end of the transition period.
- do nothing: following the 18-month transition period, any existing private limited company that has not taken active steps to re-register as either a DAC or a CLS will be automatically deemed to have become a CLS. During the transition period, existing private limited companies that have not re-registered will be subject to the law applicable to DACs.
For more advice on the steps that you need to take now, please contact Ruairi Mulrean.