One of the main reforms the Bill is introducing, is a new form of company, the private company limited by shares (CLS) which will be new the model company.

Posted by Van Geraghty on Monday, 3 November 2014

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One of the main reforms the Bill is introducing, is a new form of company, the private company limited by shares (CLS) which will be new the model company.

New Model Company – CLS

The CLS is the new type private company limited by shares which benefits from most of the reforms introduced under the bill. It will have a one-document constitution, facility to have a single director and the ability to dispense with physical AGMs. It can also pass majority resolutions, claim eligibility for audit exemption and have up-to 149 members.

Given most existing companies are private companies limited by shares, these companies must consider whether to convert to a CLS or a DAC. It is expected that most companies will choose to convert to the new CLS private company limited by shares.

Designated Activity Company - DAC

The DAC is similar in form to the current private company limited by shares, and not all of the reforms will apply to the DAC. Unlike the CLS, a DACs activities are limited by its object clause. It must have a minimum of two directors (one of which can be the Company Secretary). The DAC cannot dispense with the need to hold a physical AGM. Like the CLS, it can pass majority resolutions, claim eligibility audit exemption and have up-to 149 members.

Examples of DACS

• Companies required to limit business activities to a defined capacity e.g. SPVs
• Joint Ventures - shareholders want to define corporate capacity
• Private companies regulated by the Central Bank of Ireland i.e. UCITS
• AIFMs,
• insurance companies
• Companies limited by guarantee with a share capital

A further consideration is that the DAC must change its company name i.e. Bayatelle Funding Ltd would become Bayatelle Funding DAC

CONVERSION

There will be an 18 month transition period and companies should formally resolve to convert within 15 months. During the transition period, all existing private companies limited by shares must convert to either a CLS (Private company limited by shares),or a DAC (Designated activity Company), their options are as follows:

• Convert to new CLS using model constitution
• Convert to new CLS using adapted existing M&A, which will now be a constitution
• Register as a Designated activity Company (DAC) –where members want this
• Register as a DAC because you are required to e.g. listing debt securities, credit institution

This applies to private companies limited by shares formed before the new Act. During the transition period existing private companies are deemed to be DACs until they convert and won’t benefit from any of the new reforms available to the CLS.

Companies who do nothing will be deemed by law to be a CLS. The Companies Registration Office will intervene; and the company will have a constitution comprising the contents of its current memorandum (without objects & articles). Eligible members or creditor who deem their rights to have been prejudiced by the inaction of company or directors in terms of conversion options, will be able to apply to court for relief.

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