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 a checklist of what directors should do to prepare for the introduction of the Act.
WHAT SHOULD YOU DO TO PREPARE FOR THE INTRODUCTION OF THE ACT?
- Directors of all existing private limited companies should liaise with shareholders to decide whether there is a wish to convert to a company limited by shares, or a designated activity company. In this regard, it is important to note that under the Act, some companies are obliged to convert to DACs – we can advise further if required.
- The introduction of the Act is an ideal opportunity for directors and shareholders involved with large complex group structures to consider whether that structure can be simplified as part of the transition under the Act.
- Review your existing Memorandum and Articles of Association and consider how the new form constitution should be adjusted to best suit your requirements – this may vary on a case by case basis and so it is important that specialist advice is sought so avoid any of the “default” provisions inadvertently applying to a company going forward.
- Arrange for proper unambiguous agreements to be put in place to document all directors' loans to or from the company so as to avoid the statutory presumptions relating to directors’ loans from applying.
- Check all contracts and agreements to consider whether changing a company's constitution will require consent of any other party (for example, and lender may have included a covenant not to amend a company's constitutional documents in a security document, or a similar covenant may be contained in a shareholders’ agreement which has previously been entered into).
- Where a company is required to change its name (for example, in the case in any unlimited company, it will need to change its name to include “UC” or “Unlimited Company” as part of the company name), arrange for a new company seal and updated stationary to be ordered. All issued share certificates should also be re-issued to reflect the new company name.
- DO NOT DELAY!! Remember, the rules relating to DACs will apply to private companies limited by shares for the duration of the transition period or until the company opts to convert to an LTD status. In order to avail of the benefits of being an LTD under the Act (e.g. one director, unlimited corporate capacity, dispense with holding an AGM), it is important for directors and shareholders to be pro-active and convert as soon as possible.
Remember that this article is for information purposes only and does not constitute legal advice. Specific advice should always be taken in given situations.