Companies Act 2014. Why it’s better to convert your Limited Company rather than choose the default option

By Liz Niland, 14th August 2015 

The Companies Act 2014 commenced into law on the 1st of June 2015 and has consolidated and reformed Irish Company Law. Every Company, director and shareholder is affected by this and will have choices to make. One of the main choices being; Do you convert your Limited company during the 18 month transition period or let the CRO convert your company by default at the end of the transition period?

During the 18 month transitional period, existing Private Limited Company by shares will fall under Designated Activity Company (DAC) law as they are very similar in structure. If the 18 month transitional period has passed and you have not converted, the CRO will enforce the default mechanism and automatically convert the company to the new LTD type. All the CRO will do in this instance is issue a new Certificate of Incorporation for the company, and your existing Memorandum & Articles of Association (M&A) will be now be classed as the Company’s new Constitution.

As you may be aware, the Memorandum of Association is the document that governs the relationship between the company and the outside, (such as trade restrictions and objects clause) and the Articles of Association are the rules for internal company relations (this will reference certain regulations and subsections of the Companies Act 1963 – 2013, applicable to the company.)

The New Constitution and its importance

The New Constitution does not have a Memorandum, as there is no trade restrictions on the company with the removal of the objects clause. The rest of the Constitution covers all of the new consolidated Companies Act 2014 and the Supplemental Regulations in the Constitution refine certain regulations from the Companies Act 2014 that either does not apply or is specific to the company. (Please note in the New Companies Act 2014: ‘Table A’ has been re-numbered and if you look at the very first paragraph in the Articles of your existing company, you will see references to ‘Table A’ of the Companies Act 1963 – 2013, which might not reference the same regulation in the New Companies Act 2014). What this all means is that the legal document governing your company will reference old and out of date legislation and may not be suitable for your requirements.

Another important point made to me last week by a Solicitor is that under the Companies Act 2014, a director is not permitted to use any property of the company (e.g. laptop, mobile phone, etc.) for personal use unless the Constitution specifically allows for this. This is another valid reason to convert and adopt a new Constitution rather than go down the default route. Any companies looking for finance, investment, etc. will be expected to have a proper Constitution compliant with the Companies Act 2014 also.

What happens if I take the default conversion option?

Whilst going down the default route is technically a breach of directors duties under the Companies Act 2014, there is no penalty or prosecution for not converting and letting the CRO convert your company at the end of the 18 month transitional period. However as a Director or professional advisor, you need to be aware that the company may be left legally exposed if they avail of some of the new features of the LTD company, such as the single director company, audit exemption or dispensing of AGM and such features are not permissible under the existing Memorandum & Articles of Association.

What Should I do?

The vast majority of professional advisors are recommending to their clients that they convert their company before the end of the conversion period and adopt a new Constitution suitable for their business type. It is up to you whether or not you take on board such advice, however, for a couple of hundred euro, it may help avoid any potential legal issues in the future. It’s worth bearing in mind that a consolidation of the Companies Acts is something that history shows to take place around once every fifty years.

For more information on company conversions, please do not hesitate to contact our Company Secretarial Administrator, Sinéad Floody on +3531 6461625 or email

Contact us now for further details

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