Private Client Update: Companies Act 2014 And Charities

Author:Mr John Gill and Paraic Madigan

The Companies Act 2014 (the “Act”) will come into force on 1 June 2015.

The Act, which will apply to every charity established as a company, brings welcome consolidation and modernisation of existing company law.

The Act is not relevant to charities established as trusts, charters or unincorporated entities.

As most incorporated Irish charities are companies limited by guarantee without a share capital (“Guarantee Companies”), they will be the focus of this update.  However, it is imperative that the board of directors of Irish charities review the constitutional documents to establish the company type and ensure that they comply with the relevant requirements under the Act.

Guarantee Companies - Key Changes

The memorandum and articles of association of existing Guarantee Companies will continue in force, although they will be jointly referred to as theconstitution.  The Act sets out certain mandatory provisions and optional provisions to be included in the constitution.  The optional provisions will apply as the default regulations, unless the constitution dis-applies or modifies those optional provisions.  The requirement for an object clause setting out the purpose of the company and the activity it can pursue will also continue and that object must be exclusively charitable to avail of charitable tax exempt status. Under the Act, Guarantee Companies can have one member, as opposed to the current seven member requirement.  This change will be useful from an administrative perspective as presently should the membership drop below seven, the remaining members are obliged to rectify the situation within six months or run the risk of losing the benefit of limited liability. Guarantee Companies must have two directors under the Act. It is likely, however, that the Revenue Commissioners will continue to insist on the appointment of at least three independent unrelated directors in order to retain charitable tax exempt status.  Unless the constitution provides otherwise, directors must retire by rotation. The name of Guarantee Companies must end withcompany limited by guarantee orCLG, save where an application is made to dispense with this requirement.  Most charities will already have been granted an exemption from the requirement to havelimited in their name and that exemption will be carried forward. Currently, all Guarantee Companies, regardless of size, are obliged to have their annual accounts audited.  Under the Act, Guarantee...

To continue reading