13 February 2015
The Irish Companies Act 2014 means companies must convert to a new entity
The Irish Companies Act 2014 is expected to commence on 1 June 2015. It is vital that company secretaries understand that the commencement of the Act will result in changes for their companies and that they must take the necessary steps to ensure a smooth conversion of their company in compliance with the requirements of the Act.
The company secretary is best placed to ensure that boards of directors are apprised of the implications of the Act and what impact it may have on their companies.
The majority of Irish companies registered with the Companies Registration Office (CRO) are private limited companies and a decision will need to be made as to which type of entity under the new legislation these companies should convert to.
The conversion options for private limited companies are:
Prior to 1 June 2015, the company secretary must ensure that the conversion options available under the Act are included on the agenda of a board meeting. Any board pack circulated in advance of the board meeting should include a memo on the companies in the group and the options available in respect of each type of company.
In the case of a private limited company, the conversion options (LTD or DAC) should be explained and the factors to be considered by the board listed.
Factors to be taken into consideration by the board include:
The company secretary should ensure that they are well prepared for any questions which the board may have. The board will rely on the company secretary to clearly set out the options available and will look for guidance from their company secretary on the most appropriate entity to conversion option.
The company secretary should also explain the practical aspects of converting to an LTD or a DAC. Typically this would involve the following:
It is possible for the directors to adopt the new constitution but it may be preferable to have the constitution approved by the shareholders before adoption. In the case of a company holding different classes of shares it is vital that the new constitution is drafted to ensure that the rights attached to the shares are retained post-conversion.
There is a transition period from the date of the commencement of the Act within which the company can re-register as:
The practicalities around the optimum time should be considered. It may make sense to have the changes approved at an extraordinary general meeting following the company’s annual general meeting. However if the company is converting to a DAC, which will entail a name change, there may be commercial reasons to effect the change at a different time.
The company secretary of unlimited companies and companies limited by guarantee will need to ensure that an updated constitution is prepared and the required steps are followed so that this may be formally adopted and filed with the CRO.
Both these types of companies will be impacted with a name change under the new Act unless exempted by the minister:
Public limited companies are not impacted by a name change under the Act. However, the company secretary of a PLC should still ensure that an updated constitution is prepared and the required steps (listed below) are followed so that this may be formally adopted and filed with the CRO. The steps are:
In addition third parties, including banks and suppliers, should be advised of the name change. The impact of the name change should not be underestimated and a plan drawn up to ensure that no aspect is overlooked.
It is vital that company secretaries understand the implications of the Act and that they are comfortable fielding questions from directors, particularly around the conversion options. This will ensure that boards have all the necessary information and guidance to ensure that the most appropriate entity is chosen.
Where the company is adopting a new suffix (DAC, UC or CLG), it is important that the adoption of the new company name is project managed carefully to ensure a seamless transition.
Ruairí Cosgrove is Director of the Entity Governance and Compliance Department at PWC