New Companies Act 2014 - Are you ready for the change? 25th June 2015
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New Companies Act 2014
Are you ready for the change?
25th June 2015
New Document Title
www.bakertillyrg.ie
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“The new Companies Act 2014 – Are you
ready for the change?”
Background
The new Companies Act 2014 (‘The Act’) which is effective for all companies from 1 June 2014
is the most significant change ever introduced in Irish Company Law and will impact upon every
company, director and shareholder.
In this publication we outline some of the key details of the Act and explore the options
available to you and your business.
What are the key impacts of the Act?
The Act has 25 parts with parts 1 to 15 introducing a new type of private company (LTD) and
contains all of the legislation which will apply to the new private company limited by shares.
The remaining parts of the Act provide for the other company model types:
1. Designated Activity Company (DAC),
2. Company Limited by Guarantee CLG),
3. Public Limited Company (PLC),
4. Public Unlimited Company without share capital (PULC),
New Companies Act
5. Private Unlimited Company without share capital (ULF) and
6. Unlimited Company (UL).
The vast majority of Irish companies are currently private companies limited by shares.
Therefore these companies will need to choose whether to convert to a LTD or a DAC.
It is expected that the majority of existing private companies will convert to the LTD
model due to the simplified constitution, minimum of one director, and continuity of
company name. However, certain regulated fund companies and financial institutions will be
required to convert to a DAC.
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Some of the main elements of a LTD and DAC are as follows:
Company Limited by Shares (Ltd) Designated Activity Company (DAC)
A LTD is a private company limited by shares. A DAC may be either limited by shares, or limited by
guarantee with a share capital.
Will have a single document constitution which Will have a two part document constitution.
replaces the need for a Memorandum and Articles of
Association.
It will not have an objects clause because it has full Must have a Memorandum and Articles of Association
unlimited capacity to carry on any legal business. with an objects clause, but the ultra vires rule will be
reformed.
May have a single director, aged over 18. Where a Must have two directors, each aged over 18. One of
company has a single director they will need another them may also be the Company Secretary. A corporate
person or a corporate body to act as Company body can act as Company Secretary. The
Secretary. Directors must ensure that the Company Secretary has
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either the skills or resources necessary to discharge his/
her statutory and other legal duties.
Need not have an authorised share capital. Must have an authorised share capital.
May dispense with the holding of a physical AGM. A DAC cannot dispense with holding a physical AGM
unless it is a single member company.
May utilise the majority written resolution procedure. DAC may utilise the majority written resolution
procedure, unless its constitution (M&A) provides
otherwise.
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Time-line for the changes
1 June 1 - 15 10 - 18
Dec 2014 2015 Months Months
Enactment Commencement Action Required Transition Period
Ends
The conversation process is mandatory and companies which do not convert within the first
15 months of the transition period will be automatically converted to the simplified Private
Limited Company Category once the transition period expires. However, the company leaves
themselves open to action from shareholders if this results in shareholders’ interests being
harmed or breaches of fiduciary duties.
The transition period will last until 30 November 2016 but maybe extended by a further 12
months if difficulty arises in implementing certain areas of legislation.
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Other key provisions of the Act:
Directors Duties
Under the Act, directors’ fiduciary duties have been codified making it easier to
determine what is expected of a director. Directors are now responsible for complying with the
Companies Acts (previously this was the responsibility of the company secretary).
The duties of the director are now much clearer and require directors:
• to act in good faith in what the director considers to be in the company’s interests;
• to act honestly and responsibly;
• to act in accordance with the company’s constitution and to exercise powers only for lawful
purposes;
• not to use company property for own or others’ use unless approved by the members or
the constitution;
• not to fetter discretion unless permitted by the constitution or entered into in the
company’s interests;
• to avoid conflicts of interest unless released by members or by the company’s
constitution; and
• to exercise care, skill and diligence; and to have regard to the interests of the members as
well as employees.
Categorisation of Offences
The Act provides for a four fold categorisation of offences. Throughout the Act, offences are,
as created, categorised as attracting a particular category of penalty.
Categories 1 and 2 cover indictable offences while categories 3 and 4 cover technical or filing
offences.
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Offence Liability
Category 1 On summary conviction, to a class A fine or imprisonment for a term
not exceeding 12 months or both; or
On conviction of indictment, to a fine not exceeding €500,000 or
imprisonment for a term not exceeding 5 years or both.
Category 2 On summary conviction, to a class A fine or imprisonment for a term
not exceeding 12 months or both; or
On conviction of indictment, to a fine not exceeding €50,000 or
imprisonment for a term not exceeding 5 years or both.
Category 3 Class A fine or imprisonment for a term not exceeding 6 months or
both.
Category 4 Class A fine within the meaning of the Fine’s Act 2010 - currently a fine
not exceeding €5,000
Financial Statements – some other changes
• Audit exemption has expanded to include group companies and companies limited by
guarantee and the thresholds increased
• The ability to claim the audit exemption has also been extended to certain dormant
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companies and companies limited by guarantee as well as certain small groups
• The disclosure of interests in shares and share options has been amended; de
minimis interests of less than 1% are no longer required to be notified.
• It will be necessary for large companies that have an annual turnover of €50
million and above in the previous two financial years to have an audit committee
• Mergers and Divisions Regime – procedures being introduced to allow
private companies to merge or divide without court approval under the summary
approvals procedure resulting in savings, in both time and money, for companies.
How can we help?
The new Act will impact every company in existence and it imposes significant new du-
ties and obligations on directors along with new categories of offences as well as
increased penalties for non compliance.
Baker Tilly Ryan Glennon have extensive knowledge of the new legalisation. If you have any
queries with regard to the impact of it on your business please contact Siobhan Dunne in our
Company Secretarial Department on (01) 496 5388 or any of the following:
Liam Twohig Niamh Larkin Niall May
Senior Partner Audit & Assurance Partner Audit & Assurance Partner
ltwohig@bakertillyrg.ie nlarkin@bakertillyrg.ie nmay@bakertillyrg.ie
+353 (0)1 496 5388 +353 (0)1 496 5388 +353 (0)1 496 5388
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