The Companies Act 1963 and the many amendments, other acts and orders which govern company law in Ireland will shortly make way for an all-encompassing new company law regime. The Companies Bill 2012 (the "Bill"), which is currently making its way through the Oireachtas, is expected to be signed in 2014 but not to come into force until three to six months after enactment.
Changes to Existing Private Companies Limited by Shares
The Bill significantly changes the administration of company law in Ireland and will have a fundamental impact on all companies registered in Ireland, particularly private companies limited by shares which account for approximately 89% of all companies registered. The Bill is divided into two parts:
Volume I (parts 1 to 15) dealing with companies which are currently private companies limited by shares; and Volume II (parts 16 to 25) dealing with all other types of companies. How does this affect your company?
The Bill proposes that existing private companies limited by shares will be converted into either: (i) a Company Limited by Shares ("CLS"); or (ii) a Designated Activity Company ("DAC"). Once the Bill is enacted, if your company is a private company limited by shares, you will need to decide if it should become a CLS or be re-registered as a DAC. Some matters to consider when making this decision include:
does the company require an objects clause in order to prevent it from acting beyond its powers (ultra vires)?; and is the company required to have a limited capacity by any current arrangement or agreement. For example, banking arrangements? If the answer to these questions is no, then the company may become a CLS. A CLS is a private company limited by shares, but it does not have an objects clause. It will have the same contractual capacity as a natural person, and thus the ultra vires rule will not apply to it. Some other characteristics of a CLS are:
It will have a one-document constitution instead of the current Memorandum and Articles of Association; and It may have only one director, however, where a company has only one director that person may not also be secretary (all other types of company will be required to have at least two directors). If the company requires an objects clause or its capacity is restricted by some agreements or arrangements then it will be required to re-register as a DAC.
Actions to be taken when the Bill is enacted and the new consolidated companies act is commenced...