By Simon O’Connor. 7th January 2015
With the Companies Act 2014 at our doorstep we would like to make you aware of the main features of the act that will affect your limited company. The act, which is due to come into effect on the 1st of June 2015, has a great deal of focus on private limited companies as they account for 90% of company types in Ireland .
Requirement to convert to new company type
All companies currently incorporated as a “Private Limited by Shares” company type, must choose to convert to one of these two new company types – LTD (Private company limited by shares), or DAC (Designated Activity Company). Guarantee companies and unlimited companies will be required to change their names under the new proposed Bill.
Single Director Companies
From June, a private company limited by shares may have only one director if desired. If your company does decide to have a sole director, you must have a separate secretary who cannot be the same person as the director. The sole director must ensure that a secretary is appointed that possesses the required skills for the role. Company Bureau can act as the secretary for your company and ensure that this important role is carried out in compliance with the Companies Act. For more information on this service please don’t hesitate to get in touch.
The Memorandum and Articles of Association to be replaced by a Single Document ‘Constitution’
Under the Companies Act 2014, a Constitution will replace the Memorandum and Articles of Association for a standard Private Limited Company. Companies will no longer have to state their objectives, meaning that the company will be permitted to trade in any legal business they desire. This means the abolishment of the doctrine of ‘ultra vires’ for the standard Private Limited Company. Private Limited Companies will be given a transition period of 18 months to adopt a new Constitution. At the end of this period, a standard constitution will be provided to all Private Limited Companies by default, however we strongly recommend that the company adopts its own Constitution to adopt additional regulations to cover situations like director’s powers, meetings, etc. Company Bureau can of course assist with this.
Simplification of Directors Duties
Included in the New Companies Act is the simplification and categorisation of offences ranked on a scale from 1 to 4 (1 being the most serious) for breaching company law. Depending on the severity, directors found guilty of breaching the companies act can be liable to punishments that will range from €5,000 – €500,000 in fines or a maximum jail sentence of 10 years.
Category 1: If you are found guilty of breaching company law which falls under category 1, it can result in a fine of up to €500,000 and/or a maximum 10 years imprisonment.
Category 2: If you are found guilty of breaching company law which falls under category 2, it can result in a fine up to €50,000 and/or a maximum 5 years imprisonment.
Category 3: If you are found guilty of breaching company law which falls under category 3, it can result in a Class A fine and/or a maximum 6 months imprisonment.
Category 4: If you are found guilty of breaching company law which falls under category 4, it can result in a Class A fine.
Note: A Class A fine falls under the Fines Act 2010 which is a sum of up to €5,000.
There are some radical changes coming in with regard to director loans. For example, in the absence of a written document there is an assumption that loans from companies to directors carry a 5% interest and are repayable on demand. To avoid any issues it is strongly recommended that all loans to and from the company need to be properly documented with regard to the term, interest rate applicable and whether such a loan carries preference over other creditors.
It should be noted that when the act is commenced, all directors must be over the age of eighteen. If an individual, rather than a body corporate, is a secretary, then they must be over eighteen also.
For more information on how the Companies Act 2014 will affect your limited company, please don’t hesitate to contact us at Company Bureau.