The substantive provisions of the Act came into force on the 1st June 2015. It should be noted that there is a transitionary period of 18 months from the commencement of the Act.
Under this new legislation all existing private limited companies will be obliged to alter their legal form. The two forms to which they must transition is a private company limited by shares (“LTD”) or designated activity company (“DAC”).
Types of Company which must take the form of DAC
This form of company will apply to certain entities which cannot take the form of a LTD company namely:-
- Credit Institutions and Insurance Undertakings s 18 (2)
- Companies with listed debt securities s 56(3) and 68
Contrast DAC and LTD
| DAC | LTD |
| Single document constitution including articles of association | Single document constitution differing from old memorandum and articles of association. |
| Objects clause. | No objects clause as it has full and unlimited capacity to enter transactions or undertake any business activity. |
| Has the ability to list debt security, permitted to operate as a credit institution or insurance undertaking. | Cannot list debt security, operate as a credit institution or insurance undertaking. |
| Must have a minimum of two directors | One director (however a different person will still need to act as a company secretary if there is only one director). |
Converting to a DAC
Re-registration in Companies Registration Office as a DAC by passing an ordinary resolution resolving that the company be so registered S56(1). This Ordinary resolution must not be later than three months prior to the expiration of the transition period.
In certain circumstances the following groups may require conversion of the company to a DAC:
- An existing private company shall re-register as a DAC if a notice is served on it by a member or members holding shares that confer in aggregate more than 25% of the total voting rights in the company. Such notice by members should be served not later than three months before expiry of the transitionary period under the Act.
- The following parties may apply to the High Court for an Order directing that the Company re-register as a DAC. The High Court must make such an order unless cause to the contrary is shown.
- Holders of 15% or more of the nominal value of the Company’s share capital.
- One or more creditors of the company who hold 15% or more of the company’s debentures entitling the holders to object to alterations of its objects.
Procedure for Registration as DAC
The procedure is set out in section 63 of the Act.
The application for re-registration together with the following documents should be delivered to the Companies Registration Office:-
- A copy of the ordinary resolution or the resolution of the directors.
- A copy of the Memorandum and Articles of the Company as altered by the resolution. The memorandum must be altered so that it states that the company is to be a designated activity company.
- A statement by the director or secretary (in the correct form) that the requirements of the act as to re-registration as a DAC have been complied with.
Directors Obligations
Section 60 contains statutory obligations to prepare a constitution in the prescribed form, deliver a copy to each member and to deliver the constitution to the Companies Registration Office unless:-
- Members have already adopted a constitution (s59 (1)).
- The company is required to re-register as a DAC under s56(2) or 56(3)
- The company is in the process of registering as another type of company s56(3) and part 20.
- The company is in the process of registering as a DAC pursuant to a resolution passed under section 56 (1).
There is no specific penalties/offence for directors that fail to prepare and register the new constitution.
For further information on the Companies Act 2014 and a DAC, please contact Julie Sweeney.
