CA14 Company Conversion Deadline

Download Draft Company Conversion Options – Client Letter

At this stage accountants and company law advisors are well aware of the conversion options for companies under the Companies Act 2014.

For existing private companies which existed as at 1st of June 2015 they must either opt in to the Model Private Company (LTD) regime or opt out of the Model Private Limited Company Regime into the Designated Activity Company Regime.

1. Opt in to Simplified Model Private Co – LTD Regime
   1. Member driven – S.59
   2. Director driven – S.60
   3. Do Nothing – The Irish Option – S.55
2. Opt out of Simplified Model Private Co – DAC Regime
   1. Member driven – 56.1, S.56.2, S.57.1, S.56.3
   2. Creditor driven – S.57.1

Timing of Conversion

A transition period of 18 months has been provided from the date of commencement of the Act. This is to allow companies sufficient time to comply with their statutory conversion obligations and for the CRO to Act on the statutory deeming provisions.

There is an option to extend this period to up to 30 months by Ministerial Order should difficulties arise, but the CRO have publically stated that it is not their intention to avail of this option.

Commencement Date:  1st June 2015

• Any company incorporated after commencement under the new act will be registered as one of the new company types under the act i.e. LTD, DAC, CLG, PLC, PUC, PULC, ULC.
• All existing private companies (EPCs) operate under DAC rules during this period and fall under Part 16 of the Act until the end of the transition period, if they do not actively convert to LTD.

15 Months Later:  31st August 2016

This is the final date for companies who wish to convert to DACs to initiate the conversion procedure. After this date it will only be possible to re-register as a DAC under Part 20 of the Act.

18 Months Later:  30th November 2016

The end of the transition period.

• Any EPC incorporated under previous Companies Acts which have not actively converted to one of the two new company types will be automatically converted to LTD. The CRO will do this by giving effect to the deeming provisions under Section 61 of the Act which provides for any company which has not taken action to be deemed LTD and the company will be issued with a new certificate of incorporation showing LTD in their name. Any company which has converted to a DAC during the transition period will have been issued with a new certificate of incorporation showing DAC in their name.
• Companies which are not EPCs will also be required to make a change in so far as they must show their company type in their name. Any company requiring a name change under the Act which has not submitted the appropriate name change application to the Registrar of Companies will be deemed to have changed their name and will be issued with a new certificate of incorporation showing the company type in the company name in the following format:
  • Guarantee companies limited by shares will now have Designated Activity Company added to their name.
  • Public Guarantee companies will now have Company Limited by Guarantee added to their name.
  • Unlimited companies will now have Unlimited Company added to their name.

The “Do Nothing” Conversion Option

While there clearly is a statutory default conversion option provided for in the legislation this statutory default was provided for in order to enable a smooth administrative transition for those companies that chose not to comply with the requirements of the new Companies Act. It is critical that all professional advisors advise their company clients in relation to the transition process and specifically the implication of allowing a statutory default.

The main implications of allowing a statutory default and allowing a “Do Nothing” Conversion include:-

• 60 of the Act compels directors to convert the company if a member’s driven conversion or other form of re-registration is not completed prior to 30^th of November 2016.
• Even when a company is statutorily defaulted to a Model Private Limited Company, while the company is issued with a new certificate of incorporation by the CRO, they will not have a formally updated constitution which may cause future delays in relation to banking and legal transactions.
• Under S.62 of the Act, if in the future, members make an application under S.212, where the directors have failed to comply with the requirements of S.60, it will be presumed until the directors prove otherwise, that the directors have acted in a manner oppressive to the member who makes the application.
• Failure to convert in a company in accordance with either S.59 or S.60 of the Act will result in a breach of the requirements of every director to comply with company law and potentially result in a breach of their fiduciary duties.

All accountants and professional advisors should inform their clients of the options and requirements of the act on a timely basis. To help with this we have a drafted a letter that you can use for your company clients.

Some accountants are doing this conversion option themselves and anyone who is a member of companiesact2014.com has the templates to facilitate them do their own conversion. Many accountants however are choosing to outsource the conversion process on the basis that they either do not have the resources in the office to do the work or that this is not something they do every day so outsourcing is a better option from a risk management perspective. If you want any help with your conversions contact our Conversion Team (David, Alison or Meghan) on 053 910 0000 and we can take this off your desk for you.

Download Draft Company Conversion Options – Client Letter