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Companies Act 2014
It's nearly here...
The Companies Act is expected to commence this June and it is now time for Irish companies to prepare for the transition. Nessagh Quinn takes you through the key features of the new Companies Act.
After a long wait, the Companies Act 2014 (the “Act”) was signed into law by the President on 23 December 2014 with an expected commencement date of 1 June 2015. The Act consolidates and reforms existing Irish company law and is the largest piece of legislation the State of Ireland has ever seen.
It is now time for Irish companies, directors, secretaries and shareholders to prepare for the transition. Through their shareholders and directors, all existing private limited companies need to make a very important decision to either convert to a designated activity company (“DAC”) or to a company limited by shares (“LTD”). Once this decision has been made, companies should begin drafting their new constitutions which will replace their existing Memorandum and Articles of Association. The transition period is a period of 18 months from the date of commencement.
The differences between a DAC and an LTD and the various methods of conversion were outlined in the September edition of this bulletin.
There is also a requirement for other company types to take action during the transition period, for example a private unlimited company will need to file a change of name and a newly drafted constitution to reflect the name of the company ending with “Unlimited Company” or abbreviated to “UC”. Similarly, a company limited by guarantee will need to file a change of name and a newly drafted constitution to reflect the name of the company ending with “Company Limited by Guarantee” or abbreviated to “CLG”.
As a consequence of converting to a new company type or lodging a name change to show the correct form of company under the Act, companies will be faced with the requirements to change the legal form of its name wherever it appears. To name but a few areas, a new company seal will be required, company stationery, website and signage will need to change, statutory registers and share certificates will need to reflect the name change as will the name on company bank accounts.
Existing private limited companies that convert to the new model form LTD will not face the additional administrative burden as that of a DAC, as the company name will continue to end with “Limited” or “LTD”.
Some of the other key features of the Act that companies should be prepared for are:
• the long awaited Directors Compliance Statement.
• eight fiduciary duties which will apply to directors, shadow directors and de facto directors have now been codified into the Act.
• audit exemption for groups and dormant companies.
• revision of defective financial statements.
• changes to the approval of financial statements.
• changes as regards the registration of charges with the Companies Registration Office.
• requirements regarding director’s loans to and from a company whereby the Act encourages loans to be in writing.
• for the first time in Irish law, mergers and divisions of Irish companies will be possible.
It is not yet clear when the provisions of the Act relating to certain financial statements related requirements, the Directors’ Compliance Statement or the requirements for a statutory Audit Committee are expected to commence. Companies should be ready to take action should the commencement date of these sections apply to financial years commencing on or after 1 June 2015.
The Corporate and Legal team here in Deloitte would be delighted to assist you and your company in moving towards the new world of the Companies Act 2014.
To read our publications:
Companies Act 2014, a time to act click here
Your guide to the Companies Act 2014, click here
Companies Act Compliance, click here