With the Companies Act 2014 due to become effective in June 2015, existing private limited companies (EPC’s) will need to make a decision as to what company type they will convert to under the new provisions.

Choose between LTD and DAC

This decision process will effect over 85% of Irish companies presently registered as private limited companies. The choice for existing private companies (EPC’s) will be to convert to either:

1. New private company limited by shares (LTD), or
2. Designated Activity Company (DAC)

18 Month Transition Period

There will be an eighteen month transition period from the date of commencement of the Act during which time the directors and shareholders of EPC’s will need to decide whether to opt to become either an LTD or a DAC. During this transition period, EPC’s which have not yet elected to convert to either a LTD or DAC will, by default, be treated as DAC’s up until the time they either formally convert to a LTD or until the end of the eighteen month transition period. At the end of the transition period, companies which have not formally converted will be treated as LTD’s. This will have implications for companies for which may require to exist as DAC’s as they will not have made the conversion to effect this.

DAC Is More Like EPC

The DAC company type is more comparable to the EPC with a constitution comprising both a memorandum and articles of association and which is restricted by its objects. Companies such as those that have debt securities, are listed to trade on a market or those such as licensed banks would be prohibited from registering as LTD’s.

Here Is a Brief Comparison Between LTD and DAC

What Steps To Take Now To Prepare For The Commencement Of The Act Later This Year?

Step 1. Review current group structures and take steps to wind up or voluntarily strike off companies no longer required. Step 2. Identify companies that have tailored memorandum and articles of association, different share classes, specific share rights, operate shareholder agreements etc. Such companies will need to make necessary changes to their one document constitution if they are to convert to the new form private company, Ltd. Step 3. Confirm any companies that may need to consider converting to a DAC, eg companies that list securities either shares or debt, companies involved in joint ventures or SPV’s that have a particular object clause to be maintained, companies requiring banking approval etc. Such companies will need to ensure conversion to a DAC to avoid committing a breach under the Act. Step 4. Consider the company name changes that will be required post conversion in relation to letterheads and invoices, websites, bank accounts, new company seal, amended statutory registers and share certificates, Revenue Commissioners and other relevant registrations.

What Questions Do You Have?

We are happy to help. Please post your comment below or call Mary Flanagan, Director of Business Advisory Services at Cooney Carey, on 01 677 9000. Alternatively, send her an email: mflanagan@cooneycarey.ie

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