Companies Act 2014 Transition Period Ending - Action Required?

Author:Mr David O'Donnell and Claire Lord
Profession:Mason Hayes & Curran

The ability of private companies limited by shares incorporated prior to 1 June 2015 to convert to a Designated Activity Company by way of ordinary resolution expired on 31 August 2016. The passing of this deadline serves as a gentle reminder that the 18 month transposition period, ending 30 November 2016, is fast approaching.

The Companies Act 2014 (the "Act") allowed companies a transition period, from 1 June 2015 to 30 November 2016, during which they could elect to re-register as a Designated Activity Company ("DAC"). On 1 December 2016, any existing private company that has not taken the appropriate steps to re-register as a DAC will automatically convert to a private company limited by shares ("LTD").

A company which does not intend on becoming an LTD on 1 December will need to do the following to re-register as a DAC:

pass a special resolution approving re-registration; and file the necessary paperwork with the Companies Registration Office ("CRO") well in advance of the 30 November 2016 deadline. Why re-register as a DAC?

In brief:

certain types of companies must register as a DAC, eg credit institutions or companies that have or wish to have debentures admitted to trading or listed on a regulated market; certain types of companies are more suited towards being a DAC, eg joint ventures or companies that are incorporated for a single purpose; directors may be in breach of their duties by not ensuring the Act has been complied with, in circumstances where the company should be re-registered as a DAC; shareholders could seek redress in circumstances where they feel their rights have been prejudiced by the company's failure to re-register in accordance with the Act; and although a company which takes no action prior to 30 November 2016 will automatically convert to an LTD on 1 December 2016, its constitution, ie its memorandum and articles of association, will look exactly the same. The constitution will not make reference to, or take account of, the change in the law governing the automatically converted LTD or the conversion of the LTD. This may make the constitutional documentation of the company difficult and time consuming to interpret. For a more detailed analysis of the distinction between a DAC and an LTD, please click here.

Practical advice for those considering re-registering as a DAC

The CRO anticipates that it will be inundated with re-registration applications approaching 30 November 2016 and it will not guarantee...

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