For the majority of existing private companies, directors will need to decide whether to convert to an LTD or a DAC. Below is a list of queries to which if answered ‘yes’ will mean that you should convert your existing private limited company to a DAC, there is no choice.
- Does the existing private limited company perform a designated activity (i.e. is it a management company or a special purpose vehicle)?
- Is the company a joint venture company with specific objects?
- Does the Company have a specific charitable object/objects and is it a private company limited by shares?
- Is the existing private limited company governed by a shareholders agreement?
- Does the existing private limited company have banking covenants restricting its activities?
- Have members holding more than 25% of the ordinary share capital served notice on the company enquiring/requiring conversion to a DAC?
- Is there a requirement for an objects clause?
- Does the existing private Limited company have listed debt, securities or shares?
- Is the company a licensed bank, a charity or an insurance undertaking?
- Does the company have debt securities listed?
- Is the company an insurance undertaking or a credit institution and is it a private company limited by shares?
- If the company is regulated by the MIFID regulations or UCITS managers, the CA is not explicit in its requirement nor has the central bank issued guidelines as to whether such a company should register as a DAC or an ‘LTD’. In the absence of clear guidance the recommendation would be that MIFID regulated entities should register as a DAC.
For other companies that have the choice as to whether it should convert to a ‘DAC’ or an ‘LTD’ and do not come within the above remit the following are the principal differences between each type:
LTD versus DAC
Parts 1-14 of the Companies Act 2014 sets down the regulations governing the LTD. Part 16 of the Companies Act 2014 lays down the regulations governing the DAC. The DAC is also subject to the regulations laid down in Parts 1-14 except where dis-applied. Chapter 1 of Part 16 lists the provisions which have been dis-applied.
Choosing whether to opt for a LTD or a DAC will depend on the requirements of a particular business as discussed above. The LTD is the new simplified private company while the DAC more closely resembles the existing private company.
Some of the Key features of each type are described in the table below:
| LTD | DAC |
| Name must end in LTD | Name must in DAC unless exempt |
| Limited Liability | Limited Liability |
| Can not have an objects clause | Must have objects clause |
| One document constitution | Two document constitution |
| Does not need to have an authorised share capital | Must have an authorised share capital |
| Can be single member | Can be single member |
| One director minimum | Two director minimum |
| Must have company secretary who cannot be the sole director | Must have company secretary who may also be one of the directors |
| Can avail of the audit exemption | Can avail of the audit exemption |
| May dispense with requirement to hold AGM | Only single member DAC may dispense with the requirement to hold AGM |
| Can utilise majority and unanimous written resolutions | Can utilise majority and unanimous written resolutions unless the Constitution states otherwise |
| Cannot be a credit institution | Can be a credit institution |
| Cannot be an insurance company | Can be an insurance company |
| Cannot list debt securities | Can list debt securities |