The Companies Act 2014 introduces a “conversion” process for all private companies limited by shares to convert to one of two new company types, the LTD or DAC model.
The main changes are:
It is recommended that private companies limited by shares now convert to one of the two new company types. The company passes a special resolution to amend its M & A (or in the case of an LTD, adopts a new one-document constitution) and submits these documents together with appropriate Form N1 (LTD) or Form N2 (DAC) to the Companies Registration Office (CRO). These documents can be filed free of charge with the CRO and the forms are available from the CRO website.
There is a Transition Period to allow companies to convert. The relevant dates are 31st August 2016 for conversion to a DAC and 30th November 2016 for conversion to an LTD. Companies that do not convert to an LTD company type will be treated as a DAC until end of Transition Period. If the company does not convert, it does not have to change its name during the Transition Period, and, at the end of the Transition Period, it will be converted by law, to the LTD model and a new electronic certificate of incorporation will be issued by CRO.
Although private companies will convert automatically after the expiry of the Transition Period, it should be noted that, if a company does not engage in the conversion process, a member of the company holding not less than 15% of nominal value of the company’s issued share capital or a creditor holding not less than 15% of the company’s debentures which restrict alterations to the company’s objects may apply to the High Court for an Order directing that the company re-register as a DAC. Whilst there is no specific penalty or offence for directors that fail to prepare and register a new form of constitution, directors have a statutory obligation to ensure that the company complies with the new Act.
A disadvantage of not making the conversion to the new company type (and choosing a constitution that is tailored to your company’s requirements) is that the deemed constitution imposed by the Act may lack clarity and be confusing. For example, the deemed constitution may for this reason to be unacceptable to the company’s lenders.
This is the type of company that is mostly used by charities, sporting organisations and management companies. Companies of this type will continue to be deemed as Companies Limited by Guarantee, however, the following changes apply:-
The points to be noted for these companies are as follows:-
There is a transition period, ending 30th November 2016, by which Unlimited Companies may continue to not have the company type included in their names. However, if after this date an Unlimited Company has not changed its name and submitted an amended constitution (M & A) the CRO will automatically change the name and issue a new Certificate of Incorporation.
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