The Companies Act 2014 (the “Act”) was signed in law in December 2014 and will modernise company law in this jurisdiction. The Act, due to take effect from 1 June 2015, introduces new rules in relation to how companies are formed and how they are administered after incorporation and will impact all Irish Companies, their shareholders and their directors.
In this E-Zine Peter O'Neill, Associate in the Commercial and Corporate Department provides an overview of the new choice of Private Limited Company introduced by the Act.
NEW CHOICE OF PRIVATE LIMITED COMPANY
One of the most notable changes introduced in the new Act is the introduction of a second type of private limited company, the “Designated Activity Company.” After the commencement of the Act therefore, the following choice of private company limited by shares will be available:
1. Company limited by shares (“LTD”)
- Expected to be the most widely used as it will allow for flexibility on the part of the directors and shareholders.
- Can have one director, but if there is only one director, a separate person/entity must act as company secretary.
- Will have a simplified single-document constitution (as opposed to existed model of having a separate memorandum and articles of association).
- Will have unlimited corporate capacity and as such the company's constitution will not include an objects clause.
- May dispense with requirement to hold an AGM.
- Must use “Limited” or “Ltd” as part of its name.
2. Designated Activity Company (“DAC”)
- Similar in many respects to existing model private limited company.
- Must have at least 2 directors.
- Company's constitution will continue to include an objects clause and the doctrine of ultra vires will continue to apply – although the implications of a company entering into an ultra vires transaction are diluted to a certain extent.
- Can only dispense with requirement to hold an AGM where it is a single member company, otherwise, an AGM must be held.
- May be suitable in the case of certain joint ventures.
- Must include “Designated Activity Company” or “DAC” as part of its name.