Companies Act 2014 has been saved
Companies Act 2014
Conversion deadline reminder
The Companies Act 2014 introduced a conversion process whereby all existing private companies limited by shares should either “opt in” and convert to either a new form private limited company (the “LTD”) or “opt out” and convert to a designated activity company (the “DAC”) or another type of company during the transition period of 18 months, which commenced on 1 June 2015.
The deadline for conversion to the new form LTD is 30 November 2016. The deadline to convert to a DAC by way of ordinary resolution has now passed. However, companies still have the option to convert to a DAC by passing a special resolution of the members before the expiration of the transition period. All existing private limited companies can also convert to any other type of company during the transition period by passing a special resolution of its members.
During the transition period, the law of the DAC will apply to all existing private limited companies. Such companies that have not applied to become either an LTD, DAC or another type of company during the transition period will be automatically converted to an LTD by the Companies Registration Office (CRO) on 1 December 2016. A new certificate of incorporation will be issued by the Registrar of Companies and the company will be deemed to have a constitution made up of its existing Articles of Association and its existing Memorandum of Association, excluding its objects clause and any provisions of the Memorandum of Association which provide for, or prohibit the alteration of all or any of the provisions of its constitution.
Why take action?
- Conversion to a new company type will mean that the company will have a new constitution and it is a great opportunity to tidy up the current Memorandum and Articles of Association.
- The conversion process will result in an updated assessment being made as to the correct corporate structure to suit your company’s business needs.
- If you wish to preserve the objects clause currently set out in the Memorandum of Association, you need to convert to a DAC or another type of company; an LTD will not have an objects clause.
- Conversion to the new form LTD brings many benefits; to name but a few, companies can operate with one director, there is no requirement for physical AGMs and it is optional to have an authorised share capital.
The Companies Act 2014 also sets out the requirement for some companies to change their name. Companies limited by guarantee (unless exempted) and Unlimited Companies should change their name during the transition period in order to have the company type added to the end of the company name. Failure to change the name of the company before 30 November 2016 will result in the name of the company being automatically changed by the Registrar of Companies who will issue a new certificate of incorporation with the appropriate company type suffix as part of the company name. Changes to the company name will affect the company’s letterheads and signage.
We recommend that directors initiate a discussion with the shareholders on the options that are available to the company, as failing the members taking action, the onus is on the directors to take action.
How can we help?
The CRO have indicated that they are expecting a significant number of applications to be received towards the end of the transition period which will result in a delay in getting applications processed. We would therefore encourage companies to consider converting at the earliest opportunity.
We have a dedicated team who can assist you in the conversion process in an efficient and timely manner and we can provide you with a new constitution suited to your company’s needs.