The vast majority of existing corporate bodies have been formed as companies by registration under the Companies Acts. The Companies Act 1963 and its predecessor Acts dating from 1908 have provided for broadly similar categories of company. The Companies Act 1963 as amended, was replaced by the Companies Act 2014, which has made changes to the types of company that may exist and may be formed.
Most companies are private companies, limited by shares. This is the type of body corporate typically used by trading businesses. They are described as “LTD”s. The shareholders’ liability is limited to the nominal value of their shares (or the share value plus share premium, if applicable). This is usually paid up in full on issue, although the payment can be deferred to an extent. Generally, the amount is nominal.
Companies formed under the laws of other countries are generally recognised by Irish law. Where a company which is incorporated abroad establishes or is deemed to establsih a branch, it has obligations to register as a branch with the CRO in Ireland. In this case, it must file prescribed branch documentation. This includes its certificate of incorporation, constitution or its equivalent, translated into English or Irish, a list of directors together with prescribed information in respect of them. See the section in relation to the registration of a branch of a foreign incorporated company in Ireland.
Formerly, a company incorporated outside Ireland which established a place of business in Ireland, that was not a branch as defined, was required to deliver certain details to the CRO. This requirement has now been rationalised. The obligation applies to “branches” only. Certain provisions of the Companies Act, apply to all bodies corporate in the State, while most apply only to companies formed under the Irish Companies Act.
The 2014 Act provides for new types of company. A limited company (LTD) is the successor to a private company and is the default type of company under the Act. Most existing private limited companies became limited companies, for the purpose of the 2014 Act. The 2014 Act has modified existing companies, to a certain extent. The effect of the 2014 Act on existing companies is set out in separate sections.
It is possible in principle to re-register one type of company under the 2014 Act as another type of company under the Act. A new constitution must be registered. The requirements applicable to the new type of company must be complied with. This may require significant alterations, which makes re-registration impractical in some cases. See generally the section on re-registration of companies.
Pre-2014 Act Private Companies
The Companies Act, 1963 required that private companies have at least two members and not more than fifty members. The vast majority of companies were private companies, under the 1963 Act. Almost all such companies have become private companies limited by shares (LTDs) under the 2014 Act.
A private company under the 1963 Act and a private company limited by shares under the 2014 Act, must have restrictions on the transfer of its shares. They may not be offered to the public. They may not be freely transferable.Where a private company exceeded fifty members for any reason, it lost certain significant privileges. A private limited company under the 2014 Act, may have up to 149 shareholders.
Since 1994, a private company can have a single member. Where there is a single member, certain provisions, such as those for shareholders’ meetings and rights etc., are unnecessary. The 2014 Act allows private limited companies with a single shareholder and/ or a single director.
A private limited company is appropriate where there is a small or limited group of owners. Family businesses are commonly run as private companies. The shares remain in the control of a relatively small number of shareholders. Often the only shareholders are the directors and managers. Private limited companies are, in practice, the entity or vehicle used by the vast majority of small and medium-sized enterprises. Many large scale “family” owned businesses are also private limited companies.
Private Limited Companies/ LTDs I
A private company limited by shares, referred to as a “LTD” for short, must have a constitution. It is to set out the company’s name, that the liability of its members is limited and that it is a private company limited by shares. There may be between one and one hundred and forty-nine members.
The constitution is to set out the authorised share capital and its division into shares of fixed amounts. Alternatively, it may set out that the share capital shall stand divided into shares of a fixed amount specified in the constitution. The authorised capital need not be specified as such. In this case, it is enough to state that the share capital is divided into shares of a particular amount, generally €1.00. There is no minimum paid up capital required for private limited companies unless a restricted director is involved in its management.
An LTD may not issue its shares to the public. It may not issue debt securities. There must be restrictions on the transfer of its shares. It may not issue debentures on a regulated market. It may not trade as a credit institution or insurance undertaking. It may not have limited objects.
The constitution of a limited company is a single constitution, containing clauses which formerly would have been comprised in the memorandum and articles of association. There is no Table A in the 2014 Act with default articles, unlike the case under the earlier Companies Acts. If the company adopts additional regulations, the constitution is to set them out.
The constitution of an LTD is to be in accordance with the form specified in Schedule 1 of the Act. It is to be divided into numbered paragraphs, signed by the subscribers in the presence of at least one witness and authenticated in the manner set out in the Act. The constitution may be amended by special resolution.
Private Limited Comanies / LTDs II
The constitution of an LTD no longer sets out an objects clause. The legislation requires that an LTD is to have full and unlimited capacity to undertake any business or activity or enter any transaction for any purpose. It is to have full rights and powers for such purposes. Accordingly, the “ultra vires” (outside powers) rules do not apply to private limited companies under the 2014 Act.
The statutory default positions, in particular in respect of many of the mechanics of the company’s operation are set out in the Act. The effect is that many provisions which were formerly commonly adopted as standard articles are largely reflected in the new standard default provision in the 2014 Act.Supplemental amending regulations may be adopted.
The provisions in the constitution set out in the Act apply, subject to any contrary or amending provision in the company’s constitution. Most provisions may be amended to much the same extent as was the case where they were provided for in the Articles. This position makes it easier to determine what default provisions (which are now set out in the Act) have been omitted. Some provisions may not be amended.
There are various possibilities in the 2014 Act in relation to which supplemental regulations may make the chosen provision, different to the default position. These are likely to become reflected in additional standard regulations. They may for example, include the removal or variation of the default provisions about shareholders’ pre-emption rights and the acquisition of the company’s own shares.
The company’s constitution continues to constitute a contract between the shareholders with each other and with the company. This extends both to the provisions of the constitution and the provisions of the Act relating to the governance of the company. The contract covers the operational matters now provided for in the Act, which were formerly provided for by standard articles.
Designated Activity Companies
A designated activity company (DAC) may be incorporated for one or more objects or purposes. The DAC effectively allows for a status that is similar to a pre-2014 Act private limited company. Existing private companies can be converted into designated activity companies. Some financial service institutions cannot be LTDs and may be effectively required to be DACs.
A DAC allows for the possibility of a company with limited objects, in respect of which the ”ultra vires” (powers) rules still apply. As was the case with private companies prior to the 2014 Act, there may be a designated activity company (DAC) limited by shares or a DAC limited by guarantee, having a share capital.
A DAC must have the suffix DAC, Designated Activity Company or their Irish language equivalent appended to its name. It must have two directors. It may not issue its shares to the public. Its shares are not freely transferable. It may list debt securities, subject to conditions. It can have between 1 and 149 members.
The constitution of a DAC consists of a memorandum of association and articles of association. Together, they comprise the constitution. The memorandum of association of a DAC is to set out its objects and that its members’ liability is limited. In the case of a DAC limited by shares, the amount of the share capital and its division into fixed amounts is to be set out.
In the case of a DAC limited by guarantee, each member is to undertake, in the event of a winding up while he is a member or within a year thereafter, to contribute to the assets, such amount as may be required for payment of debts and liabilities contracted before he or she ceases to be a member, payments of costs and charges of winding up and adjusting of rights, not exceeding an amount specified in the memorandum. The memorandum may specify the maximum amount, which may be and usually is nominal.
The validity of an act done by a DAC is not to be invalidated on the grounds of lack of capacity by reason of anything contained in its objects. The articles of association of the DAC may contain regulations. The regulations may provide for anything that is not prohibited by law. The (optional) provisions in the Act are to apply insofar as they are not excluded by the articles of association which have been adopted. The standard default provisions in the Act apply but may be modified by a contrary provision.
Company Limited by Guarantee
The Companies Act 1963 allowed for the incorporation of a company limited by guarantee having a share capital or a company limited by guarantee, not having a share capital. The formation of the former type of company, was prohibited by the Companies (Amendment) Act, 1983.
In the case of companies limited by guarantee, the members (shareholders) undertake to contribute up to a specified amount on a winding up. This is usually a nominal amount. There is no requirement to subscribe cash or monies during the lifetime of the company. Companies limited by guarantee are commonly used as common area management companies and as charitable, educational or regulatory, sports and social clubs.
Companies limited by guarantee do not necessarily have shares. A person becomes a member by being admitted, generally by falling within the defined qualifying class. A certificate of membership may be issued to confirm membership. In theory, a private company limited by guarantee, could also have a share capital.
A company limited by guarantee not having a share capital was by default, a public company. It could have any number of members, as long as there were at least seven. It required at least two directors. It did not have shares, so that the question of their issue to the public or their transferability did not arise.
Under the 2014 Act, a company limited by guarantee without a share capital (CLG) is to have a memorandum of association and articles of association. They are together to comprise a constitution. The format is set out in the schedule to the 2014 Act. It is neither a private company limited by shares nor a public company.The CLG must have an objects clause. It must have two directors.
The constitution is to set out that each member undertakes in the event of winding up, to pay an amount in respect of debts, liabilities, costs and expenses, not to exceed a specified amount, which may be nominal. It must have at least one member, but there is no limit on the number of members. It does not have a share capital. It may list debt securities, subject to conditions.
Unlimited Companies I
Unlimited Companies II
The 2014 Act provides that an unlimited company may be a private unlimited company (a ULC), a public unlimited company (a PUC) or a public unlimited company without a share capital (a PULC).
- it is a private unlimited company or a public unlimited company, as the case may be;
- the amount of share capital with which the company is registered; and
- its members have unlimited liability.
Public Limited Companies I
The Companies Acts 1963 required that a public company have at least seven members. A public limited company under the 1963 Act could be formed from the outset as such. It could also be formed by conversion of a private company into a public limited company.
1983 legislation required by EU Directive, effectively required the re-registration of existing public companies as public limited companies (plcs), with a minimum capital. The minimum issued share capital, which a public company was required to have was set at €38,092.14 (IR£30,000) in 1983.
Public limited companies are entitled to offer and sell their shares to the public. Only a public limited company can offer its shares to the public. Their shares may be freely transferable. Its shareholders are generally investors and are usually distinct from the board of directors and management. Only a public company can list its shares on a stock exchange, on which its shares can be free bought and sold.
The regulation of public companies under the Companies Act is more restrictive than that of private companies.ubject to certain limitations and exceptions, public limited companies must publish a prospectus when issuing shares. Many public companies are also listed on Stock Exchanges and are subject to the relevant Listing Rules. Listed companies are subject to a detailed and rigorous regime of disclosure in addition to that applicable under company law. These laws are designed to protect investors and maintain the integrity of the market for its shares.
Public Limited Companies II
The 2014 Companies Act largely retained the pre-existing provisions relating to public limited companies. The most significant change was the decrease in the minimum required capital to €25,000 from €38,092 (£30,000).
A PLC may be incorporated with a single-member enjoying much of the privileges of a private single-member company. A PLC continues to require at least two directors.
A public limited company’s constitution continues to consist a memorandum and articles of association. It requires an objects clauses. However, the 2014 Act provides that the acts done by a PLC are not to be called into question on the grounds of lack of capacity due to anything contained in the objects clause.
Members of the PLC may take proceedings to restrain acts which are outside the company’s powers, unless they involve the performance of an existing contract.
A public limited company may be formed under the 2014 Act for any lawful purpose. An existing company may be reregistered as a PLC, subject to compliance with conditions. Existing PLCs incorporated under earlier Companies legislation continue.
The power of incorporation was one of the few Crown prerogatives that survived into the modern era. Many older bodies corporate, (typically educational, charitable bodies and other public bodies) were incorporated by Charters granted by the Crown, prior to 1922. Many prominent chartered institutions still exist, including the Bank of Ireland, many hospitals, cultural and educational bodies.
Bodies corporate may be established by Act of Parliament or of the Oireachtas, or by delegated legislation. Prior to general companies legislation, many bodies (often designated Commissioners, Boards etc.) were incorporated by Acts of the Westminster Parliament. Numerous private acts established corporate bodies during the nineteenth century.
In modern times, many public companies and semi-state bodies have been established by Acts of the Oireachtas. Many significant entities have been formed as statutory corporations. They include RTE, the Electricity Supply Board, Radio Telefís Éireann and Córas Iompair Éireann. In more recent decades, legislation has tended to enable or empower the establishment of a private company.
References and Sources
Companies Acts, 1963 to 1999
Companies Act 2014 (Irish Statute Book) Various Parts
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.1 Courtney
Keane on Company Law 5th Ed. Ch.1(2016) Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Palmer’s Company Law