Unregistered Companies

Overview I

Existing companies limited by guarantee were continued in being by the Companies Act, 2014.  During the transitional period of 18 months from 1 June 2015, the provisions of the earlier Companies Act relating to the use of the words “limited” and “teoranta” in their name applied. The new provisions regarding their name applied as and from the end of the transitional period, i.e.  1 December 2016,  unless they changed their name to incorporate the new style of name, before that date.

The provisions of the Companies Act applicable to private limited companies apply to companies limited by guarantee, save to the extent that they are dis-applied or modified.  References to membership by virtue of a shareholding, rights and incidents of membership including the right to vote and to receive a distribution arising from shareholding, are interpreted as making analogous provision in the case of a company limited by guarantee.

A company limited by guarantee may be formed for any lawful purpose by persons subscribing their names to a constitution and complying with the provisions in relation to registration.  It may also be formed, by the re-registration of another type of body corporate, by a merger or by division. A CLG may not be formed and registered, unless it appears to the CRO that, when registered, it will carry on an activity in the State in accordance with its memorandum of association.


Overview II

Some provisions which apply to private limited companies do not apply to companies limited by guarantee. In particular, the following provisions do not apply;

  • provisions regarding shares;
  • allotment of shares;
  • power to convert share to stock;
  • transfer of shares;
  • acquisition of own shares;
  • procedures for declaration and payment of dividend;
  • bonus issues;
  • share qualifications for directors;
  • written majority resolutions;
  • holding of own shares.

Constitution I

The constitution of a company limited by guarantee consists of a memorandum of association and articles of association.  The memorandum of association of a CLG shall state

  • its name;
  • that it is a company limited by guarantee registered under the Companies Act;
  • its objects;
  • that the liability of members is limited;
  • that each member undertakes, if the company is wound up while he is a member or within one year, that he will contribute to the assets of the company, such amount as may be required for payment of its debts, liabilities, costs, charges of winding up, and the adjustment of the rights of other contributories.

The constitution is to be in the format specified in Schedule 10 to the Act or as near to it as circumstances permit.  It is to be printed and contained in a single document in a legible form.  It may be in non-legible form, which may be reproduced in legible form.


Constitution II

It must be signed by each subscriber and one witness who shall attest the signatures. It may be authenticated in another prescribed form. Where the constitution is amended; it must be shown as registered in consequence of the amendment.

The articles of a CLG may contain the regulations.  The Companies Act provides for both mandatory and optional provisions. In so far as the articles of a CLG do not exclude or modify them, the optional provisions in the Companies Act apply. The articles must state the number of members with which the company proposes to be registered. The articles may consist solely of a statement that the provisions of the Companies Act are adopted.

The memorandum and articles of a company limited by guarantee registered prior to the 2014 Act, continue in force save to the extent they are inconsistent with the mandatory provisions of the 2014 Act.


Name I

The name of a CLG must end with the words “Company Limited by Guarantee” or “Cuideachta faoi Theorainn Ráthaíochta.  The words may be abbreviated to clg or ctr, capitalised or not capitalised, with or without full stops.

A CLG which carries on business other than under its registered name must register that other name under the Register of Business Names Act.

It is an offence for a body which is not a CLG, to carry on a trade, business or profession under a name which includes the words “company limited by guarantee”, “cuideachta faoi theorainn ráthaíochta” or the equivalent words “clg”, “ctr” etc.  It is an offence on the part of CLG or any officer in default, to use the name in circumstances which would be reasonably expected to give the impression that it was a CLG, where this impression is likely to be material to any person.


Name II

The Registrar of Companies may exempt the use of the words “company limited by guarantee” or “cuideachta faoi theorainn ráthaíochta”.  The objects of the company must be the promotion of commerce, art, science, education, religion, charity or some other prescribed object.

The constitution must require that its profits are to be applied for the promotion of its objects and must prohibit distributions to members. It must provide that on a winding up, its assets if any, are paid to a body with the same objects.  A statement is required on registration of compliance with this requirement.

Any alteration in the constitution must be notified to the Registrar.  The constitution may not be altered so that it no longer complies with the conditions by which the company benefits from the exemption. The Registrar may direct a change of name requiring that the words “company limited by guarantee” etc., be added.


No Share Capital

A CLG does not have a share capital.  Every provision in its constitution or any resolution, purporting to divide the undertaking into shares or interests, is treated as a provision for share capital. This is so, notwithstanding that the nominal amount or number of such shares is not specified. It is void.

A CLG may not purport to issue shares.  Contravention is an offence on the part of the CLG and any officer in default. Any provision in the memorandum or articles of a CLG or any resolution purporting to give power or right to participate in the divisible profits of the company is void.

A CLG shall neither apply to have securities or interests of them traded or listed nor have securities admitted to trading on any regulated market.


Objects

A CLG has the capacity to do any act stated in its objects in its memorandum of association.The objects are to be stated in the memorandum.  An object includes anything stated in the memorandum as a power to do anything, whether or not the word “power” is used.

The capacity of the CLG extends to doing any act or thing that appears to it to be requisite, advantageous or incidental to, or to facilitate the attainment of that objective. It must not be inconsistent with any enactment.

The validity of an act done by a CLG is not invalidated on the grounds of lack of capacity by reason of anything in its objects.  However, a member may bring proceedings to restrain the doing of an act which would be beyond the CLG’s objects /capacity.  No action shall lie in respect of an act done in fulfillment of a legal obligation arising from a previous act of the CLG.

It remains the duty of the directors to observe the limitations on their powers arising from the CLG’s objects.  Actions which would be beyond the capacity of the directors may be ratified by the CLG by special resolution.

The resolution shall not affect the liability of the directors unless the special resolution specifically relieves them separately.  A party to a transaction with a CLG is not bound to enquire as to whether it is permitted by the CLG’s objects.


Alteration of Objects I

A CLG may by a special resolution alter its memorandum of association by abandoning, restricting or amending any existing object or by adopting a new object.  Notice of the meeting to alter the CLG’s objects must be given to the shareholders and debenture holders who are entitled to object. At least 10 days’ notice shall be given.

10 days’ notice of the meeting is also required if the written resolution procedure is used. Where the CLG is permitted to omit the words “clg” or the Irish equivalent from its name, prior notice of the meeting or written resolution must be given to the CRO.

If an application is made to the court for the alteration to be cancelled, it shall take effect only to the extent approved by the court.  An application may be made by not less than 15% of the CLG’s members or debenture holders having the right to object to an alteration.  The application may not be made by any person who has consented to or voted in favour of the alteration.  The application must be made within 15 days. It may be made on behalf of one or more persons.

On the application, the court may make an order cancelling or varying the alteration on such terms as it sees fit.  It may adjourn the proceedings in order for an arrangement to be entered for the purchase of the shares concerned.


Alteration of Objects II

If a CLG passes a resolution altering its objects and no application is made within 15 days, it shall within 15 days deliver a copy of the amended memorandum of association to the CRO.  When the application is made, it shall forthwith give notice to the CRO and shall also register any order made on foot of the same.

A CLG may amend its constitution by a special resolution in relation to the undertaking by a member to contribute on a winding up.  However, the amount may not be increased without the member’s consent.

The articles of association of a CLG may be altered, added to or amended by special resolution.  Any provision contained in a memorandum of association of a CLG which could lawfully have been contained in its articles may be altered by special resolution.

An application may be made to the court for cancellation.  This provision does not apply where the memorandum itself provides for or prohibits the alteration of the above provisions.  It shall not authorise a variation or abrogation of the special rights of any class of members.


Directors I

A CLG must have at least two directors.  The provisions in respect of sole directors do not apply to it.

A person may be a director of no more than 25 companies limited by guarantee, or 25 companies, one or more of which, is a company limited by guarantee and one or more of which is any other company or body corporate capable of being wound up under the Companies Act.

Unless the Constitution otherwise provides, the following provisions apply to the election of directors.  At the first AGM, all directors are to retire. In every subsequent year, one-third of the directors retire. If the number is not three or a multiple of three, then the number nearest one-third shall retire.  The longer-serving directors retire first.  Where persons have served equal periods, those who retire are determined by lot.


Directors II

A retiring director is eligible for re-election.  The CLG may at a general meeting fill any vacancy.  In default of so doing, the retiring director shall if offering himself for re-election be deemed re-elected unless at the meeting it is expressly resolved not to fill the vacated office or a resolution for the re-election of the director has been put and lost.

Unless and to the extent that the constitution of the CLG otherwise provides, the remuneration of the directors as such as is determined, from time to time, by the CLG in general meeting. A director may be paid all travelling, hotel and other expenses properly incurred in attending meetings of the directors and general meetings and otherwise in connection with the business of the CLG.

The general provisions regarding removal of directors apply to CLGs.


Members

The subscribers to the memorandum of association are the first members of the CLG. Such other persons whom the directors admit to membership; or who are admitted to membership, pursuant to the provisions of the constitution either supplementing or limiting the power of the directors in this regard, are also members.  Their names must be entered in the register of members, in order to be directors.

The articles are to provide the number of members that there are to be.  If it increases the number beyond that contemplated by the articles, particulars are to be delivered to the CRO. The articles may provide for the maximum number of members, subject to the power of the CLG to register an increase.

A Register of members is to be maintained. Members may resign by serving notice to that effect on the directors at the registered office.  The director may require a person to resign by serving notice unless the constitution otherwise provides.  The death or bankruptcy of a person terminates his membership.  In the absence of provision to the contrary in the constitution, every member is to have one vote.

The general provisions regarding the convening of meetings, apply to companies limited by guarantee.A CLG, with two or more members, may not dispense with the holding of an annual general meeting. Members having not less than 10% of the voting rights may require the convening of a meeting.

Proxies may be appointed. Every member and every proxy has a right to one vote.  The member shall be entitled to vote unless money due to the company has not been paid. A member may demand a poll.


Financial Statements

The provisions in respect of financial statements of insurance and credit institutions under the Companies Act are varied to the extent provided by EU Directives.

The requirement for a corporate governance statement and certain modifications of obligations in respect of financial statements apply to CLGs which have debentures admitted to trading on a regulated market.

An audit exemption is available to CLGs which meet certain criteria in the Act.  The 2014 Act amended the earlier legislation under which the audit exemption was not available to companies limited by guarantee, not having a share capital.  There is provision for the requisition of an audit report, by one tenth of the members who may accordingly disapply the audit exemption

The provisions of the Companies Act concerning the filing of abridged financial statements do not apply to a CLG that does not trade for gain.  A CLG which does not so trade, is exempted from filing statements with the CRO.  A special form of auditor’s report is required to be filed unless audit exemptions apply.

Statutory auditors who are of the view that adequate accounting records have not been kept must report this matter to the CRO and the Director of Corporate Enforcement.


Winding Up

Contributories (members) are liable on foot of the guarantee in the constitution, where a company limited by guarantee is wound up.  Every past and present member is liable to contribute to the assets up to a maximum of the amount of their guarantee.

In practice, the amount guaranteed is usually nominal.  No member is liable to contribute if he has ceased to be a member for more than a year.  A past member is not liable to contribute in respect of debts contracted after he has ceased to be a member.

The provisions regarding the public offering of securities, market abuse law, transparency obligations, apply to CLGs, insofar as they apply to companies other than public limited companies.


References and Sources

Primary References

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)  Ch.32   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

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

Gore-Browne on Companies

Palmer’s Company Law