Conversion

Registration as DAC

An existing pre-2014 Act company may reregister as a designated activity company, in which event, it is deemed a designated activity company for the purpose of the Act. It could reregister by passing an ordinary resolution (members) at least three months before the expiry of the transitional period. In either case, the provisions of the Companies Act 2014 in relation to the designated activity companies apply to it after re-registration.

An existing pre-2014 Act company could be required to re-register as a designated activity company before the end of the transitional period, if not later than three months before that date, a notice in writing was served on it by members holding at least 25 percent of the total voting rights of the company.

If an existing private company did not re-register as a designated activity company, then members, who together held at least 15 percent of the company’s share capital or debentures could apply to the court for an order directing that it should so reregister. The court could unless cause was shown to the contrary, make the order or such other order as seemed just.

If an existing private company was, governed (in whole or in part) by the regulations contained in Table A, then those regulations  continue in force and the articles of the designated activity company are be deemed to comprise the whole of those regulations or, as the case may be, to include the parts concerned of those regulations. This does not apply to the extent that those regulations are inconsistent with a mandatory provision of the 2014 Act.

The re-registration of an existing private company as a designated activity company pursuant to the Act does  not affect any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings which might have been continued or commenced against it in its former status may be continued or commenced against it in its new status.


Default Conversion er 2014 Act

After the commencement of the Companies Act, 2014, existing private companies could become limited companies,  designated activity company or one of another type of company, provided for by the Act.  An existing private company could decide within the 18 months transitional period ending on 1st December 2016, to convert to become a “2014 Act” private limited company.  It could within 15 months opt to become a designated activity company or another type of company under a simplified procedure.

On 1st December 2016, a private limited company formed under the earlier legislation was deemed to become a limited company under the 2014 Act (an LTD), if it had failed to convert to another type of company during the transitional period (1st June 2015 to 30th November 2016). Accordingly, all existing private limited companies that did not otherwise convert during the transitional period, were deemed converted on 1st December 2016 into the new form limited company, an LTD.

During the transitional period, a private limited company was treated as a designated activity company. It did not have to incorporate the words “DAC” or designated activity company in its name or the Irish equivalent.  The provisions of the previous Companies Act applied during this period.


Transitional Period Options

There were a number of methods by which a pre- 2014 Act private limited company could opt to become an LTD during the transitional period.  The members by special resolution under the existing memorandum and articles, could adopt a new constitution in the prescribed format and register it with the CRO.

The constitution of an LTD must contain at least certain minimum provisions, which are reflected in the brief model constitution set out in Schedule 1 to the Companies Act, 2014. It may contain supplemental regulations which vary the default positions in the Companies Act.

If a pre-existing company did not adopt a new constitution (by resolution), the company (the directors) could (and in strict terms, were obliged to) prepare a single document constitution in the prescribed form, based on the existing memorandum and articles of association and register it with the CRO.

Upon delivery of the constitution as adopted by resolution to the CRO in the transitional period, a private limited company became a LTD / new form (private) limited company.  A new certificate of incorporation was issued by the CRO.

After the transitional period,  general provisions allow for the amendment of the constitution and re-registration from one type of company to another. See the separate section dealing with the alteration of the constitution and reregistration as a different type of company.


Transitional Period Options II

If the shareholders did not adopt a new constitution, and if the company did not re-register as another form of company, the directors of a private company were obliged during the transitional period to prepare a constitution for the company and deliver it to each shareholder and file it to the CRO. This obligation sought to motivate companies to take action during the transitional period. However, the legislature accepted that this might not happen so that the above default provisions applied if steps to convert had not been taken by 1st December 2016.

If by the end of the transitional period, neither the shareholders and/or directors had  adopted a new constitution in the 2014 Act format and /or  had not reregistered as another form of company, the private limited company was deemed to become a limited company (LTD) under the 2014 Act with single document constitution in 1st December 2016.

The single document constitution comprises its existing memorandum and articles of association,  excluding the objects clause. The CRO was obliged to issue a new certificate of incorporation.   Subject to this, the default Companies Act provisions apply. The existing articles and memorandum of articles may be anomalous and require interpretation, as they may refer to older legislation.

A company that did not reregister as a limited company continued to be known by its name (rather than as a DAC) during the transitional period, notwithstanding that during that period, it was governed by the laws relating to DACs. The company was governed by its existing memorandum and articles  until it was reregistered as a designated activity company or limited company


Conversion in Transitional Period I

An existing private company may by special resolution, passed in accordance with its existing memorandum and association and articles, subject to compliance with the provisions as to the variation of rights and obligations of members, during the transitional period, adopt a new constitution and deliver to the CRO.

Such a constitution need not contain supplemental regulations to the extent that the matter is dealt by the default provisions of Parts 3 to 15 of the Act  (which now contain much of the detailed operational regulations in statutory form). The CRO  issue a certificate of incorporation stating that the company is a private company limited by shares registered under the Companies Act 2014.

There was an obligation on the directors of existing private companies to prepare and deliver a constitution to the CRO during the transitional period if the members did not resolve to adopt one. The obligation was a civil obligation and could be enforced by the OECD. Where the directors failed to adopt a new constitution, they were deemed to breach their civil obligations to the members.


Conversion in Option Period II

The directors were obliged to prepare a new constitution and to deliver a copy to each member and to the CRO. The provisions of that constitution of the company,which was to be prepared by the directors was to consist solely of

  • the provisions of its existing memorandum, other than provisions that  contained its objects; or provided for, or prohibited, the alteration of all or any of the provisions of its memorandum or articles; and
  • the provisions of its existing articles.

The obligation applied unless

  • a constitution had been already adopted by resolution of the members;
  • it was required by its members to be registered as a designated activity;
  • it was otherwise proceeding to reregister as another type of company; or
  • an application for an order to reregister it as a designated activity company was pending.

Re-registration as DAC I

A private limited company may reregister as a designated activity company (a DAC).  This requires a member’s special resolution converting the company concerned to the relevant type of company.  The requirements applicable to that type of company must be complied with.

Until 1st August 2016, there were a number of simplified possibilities for conversion to a DAC.  A private company could become a DAC by passing an ordinary resolution.  If the directors did not convene a meeting for this purpose or were unwilling to convene an extraordinary general meeting, the members holding more than a quarter of the voting rights of the company could serve a notice requiring that the company re-register as a designated activity company.

Where a private company did not re-register as a DAC within the transitional period, members together having 15 percent of the shares (or creditors having 15 percent of debentures, having the right to object to alterations in the objects clause) could apply to court and the court could make such order as seemed just to it. The application could be mafe on the basis that the member’s or creditor’s rights had been prejudiced. This did not affect or limit the general jurisdiction of the courts in relation to oppression, which might also be available, depending on the circumstances.


Re-registration as a DAC II

On re-registration as a DAC, the company’s memorandum and articles is amended so that it is stated to be a designated activity company or the Irish language equivalent “cuideachta ghníomhaíochta ainmnithe” in place of “limited” or “teoranta”, as the case may be, in the company’s name. It could continue to enjoy any existing exemption from the use of the words “limited”  and “teoranta”, thereby exempting the use of the words “designated activity company or ”cuideachta ghníomhaíochta ainmnithe”.

Where a resolution was filed to re-register as a designated activity company, the company’s memorandum and articles were required to be changed so that they provided that it was a designated activity company.  The company was required to file a new memorandum and articles of association together with a declaration confirming compliance in a prescribed format. An application in the form prescribed together with a compliance statement by the directors or secretary confirming that the conditions for reregistration have been complied with are required.

Provided that the documents are in order, the CRO issued a new certificate of incorporation appropriate to the type of company concerned.

The procedures under the Act may be followed, after consultation by the company with the Department of Enterprise Jobs and Innovation, by a private company that has been incorporated under pre-1963 Companies legislation. The provisions of that legislation may apply to the designated activity company, in so far as they have contractual effect, subject to the mandatory provisions on the 2014 Act.


Challenges

Any member of a company who considers that his or her rights or obligations have been prejudiced by the exercise, the non-exercise or by the exercise of any of the above powers in a particular manner by registration by the company ay apply to the court for an order under the jurisdiction on oppression.

It is presumed in such an application that if the directors of the company have failed to comply with their obligations, that they have exercised their powers in a manner oppressive to the applicant or in disregard of his or her interests unless the members of the company have adopted a new constitution.

Where a constitution comes into being, one or more creditors of the company who hold, or together hold, not less than 15 per cent of the company’s debentures entitling the holders to object to alterations of its objects, may apply to the court for relief if the constitution prejudices their rights or interests son or persons. On the hearing of an application, the court may grant such relief to the applicant or applicants as the court thinks just.


Re-Registration Generally

There is increased freedom for companies to re-register as a different types of company under the 2014 Act. For example, a company without share capital can register as a company with a share capital and vice versa.

Re-registration may take place at any time in accordance with the general provisions for re-registration applicable to the other type of company. There are common provisions for re-registration from one kind of company to another.  It requires the filing of a special resolution altering the constitution, whether single a document or two document constitution and compliance with the particular requirements in the legislation in respect of the re-registered type of company.

There are specific requirements, for certain types of conversions. See generally the section on re-registration. For example, where a company re-registers as an unlimited company, it must file updating financial statements unless it has filed statements and annual returns within the previous three months. The statements must be for the period ending within the previous three months. The financial statements must be audited unless otherwise qualified for exemption from audit.


Status on Conversion

A private limited company incorporated under the older Companies Acts, unless converted to a DAC or prohibited from being converted, is deemed to be a limited liability company (an LTD) under the  Companies Act 2014. It is deemed to have a constitution that comprises its existing memorandum (varied as below) and its articles, subject as below.

At the end of the transitional period, if it had not delivered to the CRO  a constitution (in the form provided under the 2014 Act) the existing private company was deemed to have, in place of its existing memorandum and articles, a constitution that comprises

  • the provisions of its existing memorandum, other than its objects and provisions  providing for or prohibiting, the alteration of all or any of the provisions of its memorandum or articles; and
  • the provisions of its existing articles.

If a new constitution was not registered, every private company limited by shares, other than those which had reregistered as designated activity companies became a private limited company under the 2014 Act at the end of the transitional period. The constitution, as so constituted by those provisions, is deemed to satisfy the requirements of 2014 Act as to the form of a company’s constitution. The company is deemed to have become a private company limited by shares to which the 2014 Act applies. The CRO was required to issue to the company, a new certificate of incorporation stating that the company was a private company limited by shares and registered under the 2014 Act.

The existing regulations continue in force and the existing articles of the company are deemed to comprise the whole of those regulations or, as the case may be, to include the relevant parts of those regulations. This does not apply to the extent that those regulations are inconsistent with any mandatory provision of the 2014 Act.

The regulations may be altered or added to under and in accordance with the conditions under which the company’s constitution may be altered or added to in the 2014 Act. References in those regulations to any provision of the prior Companies Acts is read as references to the corresponding provision of the 2014 Act.


Transitional Period

An application for the purpose of re-registration as a DAC, in the prescribed form and signed by a director or secretary of the company, could be delivered by the company to the CRO during the transitional period. It was to bee accompanied by

  • copy of the ordinary resolution or the resolution of the directors;
  • a copy of the memorandum and articles of the company as altered by the resolution; and
  • a statement of compliance by a director or secretary of the company that the requirements of the Act as to re-registration as a designated activity company had been complied with by the company.

The Registrar (CRO) could accept the statement of compliance as sufficient evidence that the required resolutions had been duly passed and that the other conditions for re-registration as a designated activity company had been satisfied and that the company was entitled to be re-registered as that type of company.


Reregistration as a DAC

If on an application for re-registration of an existing private company as a designated activity company, the CRO  is satisfied that a company is entitled to be so re-registered, it must issue to the company a certificate of incorporation, stating  that it is issued on re-registration of the company and the date on which it is issued.

On re-registration as a DAC, the name of the company takes the words “designated activity company”, DAC or D.A.C. as a suffix to its name. The Irish language alternatives, CUIDEACHTA  GHNIOMHAIOCHTA  AINMNITHE, CGA or  C.G.A. may be used instead.

Upon the issue to a company of a certificate of incorporation on re-registration, the company, becomes a designated activity company Any alterations in the memorandum and articles set out in the resolution concerned take effect accordingly.

A certificate of incorporation issued on re-registration to a company is conclusive evidence that the requirements of the Act as to re-registration and the matters precedent and incidental thereto have been complied with; and that the company is the type of company which is set out in the certificate.


References and Sources

Primary References

 

Companies Act 2014 s,54 – 63 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016) Ch.2    Courtney

Keane on Company Law 5th Ed. (2016) Ch.4 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

Shorter Guides

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

UK Sources

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