The Companies Act 2014 came into effect on 1st June 2015. It replaced the Companies Acts 1963-2013 and it brought in many reforms to the operation of companies in Ireland making it easier to setup and maintain a company in Ireland.
The main implications of the Act can be summarised as follows:
ONE DIRECTOR COMPANIES
Starting from the 1st of June 2015, all new companies have a choice of two different types of companies to setup:
The simplified Private Limited Company (LTD) model:
- Is allowed to have one director but must have a separate secretary
- Can pass majority written resolutions
- Does not need to hold an AGM in certain circumstances
- Has a simple one-document constitution to replace the Memorandum and Articles of association (M&A)
- Does not have any stated objects (can engage in any allowed activity)
- Name of the company must end with the suffix “Limited” or “Teoranta
The Designated Activity Company (DAC) model:
- Is a private company limited by shares OR by shares and guarantee
- Must have at least two directors
- Can pass majority written resolutions (where constitution allows)
- Is required to hold an AGM where there are 2 or more members
- Has a two-document constitution – a M&A which has stated objects
- The name of the company must end with the suffix “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” unless it is exempted
All existing limited companies have to decide which type of company they want to be going forward.
Requirements for Limited Companies to Convert to New Company Type The Companies Act 2014 introduces a “conversion” process required for all private companies limited by shares to convert into one of two new company types, the LTD or DAC model.
All existing private limited companies currently registered as a Private Company Limited by Shares can choose to convert to one of the two new company types once the Companies Act is commenced (1st of June 2015).
AGE REQUIREMENT UNDER THE NEW ACT:
Every director and secretary must be aged 18 or over. Any appointment where the company officer is a minor is void. This applies to companies that were incorporated prior to the new Act’s introduction and any minor who is currently appointed as a director, ceases to be a director.
ANNUAL RETURNS AND FINANCIAL STATEMENTS
The Act reduces the compliance requirements on companies further removing the requirement to have an audit in most cases.
In relation to annual returns delivered to the Registrar on or after 1 June 2015 the following are the requirements in relation to the changeover period:
- If the financial year ends before 1 June 2015 and the financial statements are signed by the director(s) before 1 June, they must be prepared and filed in accordance with the 1963-2013 Companies Acts;
- Financial statements signed after 1 June 2015 should be prepared and filed in accordance with the Companies Act 2014.
FIXING OF LENGTH OF FINANCIAL PERIODS
Under section 288 of the new Act, the financial statements attached to a company’s first full annual return (ie with financial statements) must cover the period from incorporation and must not be for a period longer than 18 months. Each subsequent financial year begins on the date immediately after the last financial year end date and must be for a period of no more than 7 days shorter or longer than 12 months.
REVISION OF FINANCIAL STATEMENTS AND/OR DIRECTORS’ REPORT
A new provision in the 2014 Act is that if the company becomes aware of an error in the Financial Statements, they should correct the error and file the corrected documentation with the CRO not more than 28 days after the date of revision. Where copies of the original Financial Statements or original Directors’ Report have been laid before the company in a general meeting or delivered to the Registrar, all revisions should be made with reference to sections 366 to 379, CA 2014.
Where a revision is filed with the CRO, section 376(6), CA 2014, requires that the original Financial Statements or Directors’ Report shall continue to remain on the Register.
Companies will only have to meet 2 of the 3 size criteria to qualify as a “small company” for the purposes of claiming an audit exemption. Guarantee and Group companies will be able to qualify for the audit exemption. There will be a new audit exemption available to Dormant companies.
EXTENSION OF TIME TO FILE ANNUAL RETURN WILL BE AVAILABLE FROM THE DISTRICT COURT
From the commencement date of the Companies Act 2014 (1 June 2015), applications for an extension of time to file an annual return can be made through the District Court as per section 343(5) of the Act. The costs of making an application to the District Court are far less than the High Court (which is currently the court prescribed).
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Please note that this commentary does not purport to be a comprehensive review of Company Law. Feel free to contact us to discuss your requirements before any particular transaction is entered into.