DACs by Guarantee
The Companies Act, 2014 continued in being companies limited by guarantee having a share capital, which were incorporated under the previous legislation. They are deemed to be a Designated Activity Companies limited by guarantee. The Act continued in force their memorandum and articles of association, save to the extent that they are inconsistent with the mandatory provisions of the Act. They may be altered in accordance with the provisions and conditions under which the memorandum or articles may be altered or permitted.
Where the guarantee company was governed by Table D in the schedule to the Companies Act, 1963, it continues to be governed by those regulations, to the extent that the regulations are not inconsistent with the mandatory provisions of the 2014 Act. The regulations may be altered and added to in accordance with the conditions under which the articles may be altered.
Where the name, as set out in its memorandum, of an existing guarantee company, having a share capital is altered or deemed altered, the CRO shall issue to the company a new certificate of incorporation in respect of it, being a certificate of incorporation that is altered to meet the circumstances of the case.
During the transitional period, or if before the expiry of that period, the company has changed its name to include either of the required sets of words, then in the period preceding the making of that change, the provisions of the earlier Companies Acts relating to the use of “limited” or “teoranta” (or their abbreviations) apply to the name of an existing guarantee company, having a share capital, in place of the new provisions.
On and from the expiry of the transitional period on 1st December 2016, or upon the company changing its name to include either of the required sets of words, whichever happens first, the new provisions apply as respects the name of an existing guarantee company, having a share capital.
If on the expiry of the transitional period, the company has not changed its name to include either of the required sets of words, the name of an existing guarantee company, having a share capital, as set out in its memorandum shall be deemed to be altered by the replacement of
- “designated activity company” for “limited” at the end thereof, or
- “cuideachta ghníomhaíochta ainmnithe” for “teoranta” at the end thereof,
as the case may be.
Shares of a DAC I
A DAC shall not offer its shares to the public. It shall not apply to have its securities (or interests in them) admitted to trading or to be listed on any market, whether a regulated market or not, in the State or elsewhere. This does not prohibit the admission to trading or listing (or an application being made therefor) on any market of debentures (or interests in them) on the same terms and limitations as to amounts as limited companies.
Where the shares of a DAC are divided into different classes, an alteration of the class rights must be approved by the class. Where the rights attach to the shares, other than by the memorandum, and the articles does not contain provisions for variation of the rights, they may be varied only if the holders of 75 percent in nominal value of the issued share capital consent in writing to the variation or a special resolution is passed at a separate general meeting by the holders of that class to approve the variation.
Where the rights are attached by the memorandum, and the memorandum or articles contain provision for the variation of those right, and the variation of those rights is connected with giving, varying or revoking an authority regarding the allotment of shares or with the reduction of the company share capital by any of the permissible means, those rights shall not be varied unless the above requirements (75% consent or special resolution of the class) are complied with, and any other requirements of the memorandum or articles of association are complied with (to the extent that they are not covered by the 75 percent requirement).
Shares of a DAC II
Where rights are attached to a class of shares of a DAC by the memorandum or otherwise and there were provisions in the articles for variation as at incorporation, or where they are otherwise attached, the articles contain the provision for variation, then in either case, where the variation is not in the above categories (reduction of capital or allotment of shares), then the rights may be varied in accordance with provisions of the memorandum articles only.
Where rights are attached to the shares by the memorandum and there are no provisions for variation of the rights in the memorandum or articles, then the rights may be varied only with the unanimous consent of the members.
Procedure for Variation of Rights
The provisions applicable to the variation of class rights for limited companies apply to Designated Activity Companies. The quorum for each meeting other than an adjourned meeting is two persons holding or representing at least one-third in nominal value of the shares of the class in question and one person holding shares of the class in question, in the case of an adjourned meeting. Any shareholder or his proxy may demand a poll.
Any amendment of the provision in the articles of a DAC for the variation of right attaching to the class of shares is itself deemed of variation of rights.
The rights of the dissenting class rights holder to apply to court within 28 days to cancel the resolution which varies their class rights, applies to a DAC. The court may if it is satisfied in the circumstances that the variation would be unfairly prejudicial, disallow the variation.
Directors of DAC
The provisions applicable to the governance of LTDs, generally, apply to DACs. In addition, the directors must observe the limitation of their powers in the DAC’s objects clause.
A Designated Activity Company shall have at least two directors. The provisions relating to sole directors of limited companies do not apply to DAC.
A person shall not at any one time be a director of more than 25 DACs or 25 companies one or more of which is a DAC and one or more of which is a company of the type capable of being wound up under the Companies Act.
AGM and Accounts
The provisions whereby a limited company may dispense with holding an annual general meeting, do not apply to DAC. DACs are not automatically entitled to adopt unanimous written resolutions but may be enabled to do so, by their constitution. A similar provision applies to majority written resolutions.
The general accounts requirements for companies do not apply to DACs which are credit institutions or insurance undertakings, to the extent that another specific provision is made for their accounts by law. There are common EU rules. The provisions in respect of corporate governance statements apply to DACs that have debentures admitted to trading on a regulated market.
There is an exemption from filing annual financial statements for a DAC if it is formed for charitable purposes and is exempted by an order made by the Charities Regulator.
Unless a DAC is entitled to avail itself of the audit exemption, the statutory auditors shall prepare a report to the directors which confirms that they have audited the relevant statutory financial statements and report to the members on the accounts. A copy of the audit report is to be annexed to the annual return. The return may be made electronically.
If the DAC is being wound up every present and past member is liable to contribute to its asset an amount sufficient to pay its debts and liabilities. However, in the case of a DAC limited by shares, no contribution is required beyond the amount unpaid on the shares in respect of which he is liable as a member. In the case of a DAC limited by guarantee, no contribution is liable beyond the amount, undertaken to be contributed.
A past member is not liable to contribute if he ceased to be a member more than a year before the commencement of winding up. He is not liable to contribute in respect of debts contracted after he ceased to be a member.
Nothing in the legislation is to invalidate an insurance policy whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the DAC are liable exclusively in respect of the policy or contract.
References and Sources
Companies Act 2014 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.30 Courtney
Keane on Company Law 5th Ed. (2016) Ch.6 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
Gore-Browne on Companies
Palmer’s Company Law