Companies Act 2014 - What it means for SME companies

The Companies Act 2014 was enacted on 23 December last and is expected to come into effect on 1 June 2015. The Act is the most significant piece of legislation in company law in over 50 years in the state.
The Act seeks to consolidate and reform Irish company law with an emphasis on the private limited company (the model for 99% of companies in the state), with one of the main objectives being to make the running of companies easier.
One of the first issues for directors to consider is which new company format to take with the commencement of the Act. There will be two options available for current private limited companies: 
- Companies Limited by Shares (‘LTD’)
- Designated Activity Company (‘DAC’)
There will be an 18 month transition period where companies will need to decide to become a LTD or a DAC. Should no option be made (filed in the Companies Office), such companies will automatically and by default become a LTD.
Some of the main differences between the 2 company formats are listed below:
- Can have 1 Director
- Can dispense with AGM
- Will not require an objects clause
- No Authorised Share Capital requirement
- Cannot list Debt security
- Minimum of 2 Directors
- Can only dispense with AGM if a single member company
- Must have an objects clause
- Authorised Share Capital requirement
- Can list Debt security
The majority of companies will elect to be a private limited company by shares (LTD). One of the main benefits is the sole director requirement. However, such companies must have a separate company secretary who has the requisite skill to act (in the opinion of the director). The LTD will have a one document constitution (rather than the heretofore Memo & Arts) and, as above, will not require an objects clause, i.e. it will have unlimited corporate capacity, and cannot act ‘ultra vires’.
The Designated Activity Company (DAC) will continue to have the two document constitution (Memo & Arts) with an objects clause. DACS will be suitable for companies who wish to list debt securities. This company format will be compulsory for some private companies such as credit institutions.
The above article is a very brief summary introduction to the two company format options available for the private limited companies (the current format for SME companies). The article also alludes to aspects of the new legislation beyond the scope of this present article. In the weeks ahead, we intend to provide further readable summaries of important aspects of the new legislation, which relate to SME company directors.
To discuss these and other issues which may be relevant to your company, call Ultan McCarthy on 01-444 5260 for professional advice.