Who Needs to Convert to a DAC?

DAC Conversion Procedures Downloads

Who Needs to Convert to a DAC?

 Companies that cannot be LTD and thus must convert to DACs
1. Credit institutions
A Credit Institution means –
  • a company or undertaking that is the holder of a licence under section 9 of the Central Bank Act 1971,
  • a company or undertaking engaged solely in the making of hire purchase agreements (within the meaning of the Hire Purchase Act 1946) and credit sale agreements (within the meaning of that Act), in respect of goods owned by the company or undertaking,
  • a company or undertaking engaged in the business of accepting deposits or other repayable funds or granting credit for its own account, or
  • a company or undertaking that is a trustee savings bank licensed under the Trustee Savings Banks Act 1989;
2. Insurance Undertakings
An Insurance Undertaking means an undertaking that is the holder of an authorisation within the meaning of—
  1. Regulation 2 of the European Communities (Non-Life Insurance) Regulations 1976 (S.I. No. 115 of 1976),
  2. Regulation 2 of the European Communities (Non-Life Insurance) Framework Regulations 1994 (S.I. No. 359 of 1994),
  3. Regulation 2 of the European Communities (Life Assurance) Regulations 1984 (S.I. No. 57 of 1984),
  4. Regulation 2 of the European Communities (Life Assurance) Framework Regulations 1994 (S.I. No. 360 of 1994), or
  5. European Communities (Reinsurance) Regulations 2006 (S.I. No. 380 of 2006); 
3. Companies who list debt securities
Companies that are not required to become DACs but regularly cause confusion in terms of the DAC Conversion Decision
  1. Schedule 5 Entities
Schedule 5 to the Companies Act 2014 lists a series of entities that for example can not be considered small entities under S.350 of the Act and can not avail of the audit exemption. These entities are predominantly regulated entities. All Schedule 5 Entities are not compelled to become DACs but may choose to do so unless they come within the definition of a credit or insurance undertaking as defined above in which case they must convert to a DAC.
2. Companies in which Enterprise Ireland, Local Enterprise Boards or Udaras Na Gaeltachta have invested in.
Just because these companies have external investment does not mean they need to become DACs. Investors holding more than 25% of the share capital may exercise their voting rights to block the company converting to a Model Private LTD (or by court order if they hold more than 15% of the voting rights) but it is incumbent on the shareholder to exercise that right and usually this type of Government funding does not carry voting rights.

3. Companies with preference shares and different share classes

As immediately above just because there are different share classes doesn’t mean they need to be converted to DACs. They can chose to if they wish but they do not need to.
Companies That May Need to Consider DAC Conversion
  1. Companies in Dispute
It is critical that the DAC Conversion Options are fully explained to all companies with internal disputes or those who are on the verge of ending up in dispute. Under S.62 if the exercise or non-exercise of powers in relation to conversion (under Part 2 Chapter 6) results in any member of a company forming the opinion that their rights or obligations have been prejudiced by action or inaction they may make  section 212 application to the courts. The directors of companies of this nature need to make sure to comply with the requirements of the Act and not allow a statutory default do nothing “Irish Option” conversion take place. They should also allow members decide if they want to maintain the status quo and opt into the DAC regime rather than going the simplified model private LTD route.
2. Companies that have external investors
A key feature of the simplified model private limited regime is the fact that the concept of restriction of activities in the form of a principal objects clause is gone. There are further simplifications and reliefs in terms of the requirements to hold AGMs under S.175.3. In companies where there are external investors that hold shares and voting rights in the company but are not involved in the day-to-day operations they may prefer to continue under the old rules and old regime. The options need to be explained to them.

3. Companies that have tailored their M&A in the past to create a higher level of Governance

The main benefit of the Model Private LTD company is that it is a simpler regime. It does not necessarily make sense for companies who have invested time and money in tailoring their memorandum and articles of association and creating bespoke shareholders agreements in the past to give them a higher than normal level of governance to opt into a regime that creates a lower level. This does not mean that companies that have a shareholders agreement should not become LTD Companies but they should consider carefully whether DAC or LTD is a more suitable vehicle for them.

Some accountants are doing this conversion option themselves, however many accountants  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 have any urgent questions about DAC Conversions or if you want any help with your conversions contact our Conversion Team (David, Anne, Alison or Meghan) on 053 910 0000 and we can take this off your desk for you.

CA14 Company Conversion Deadline - Part 1

CA14 Company Conversion Deadline

Conversion Deadline 1

CA14 Company Conversion Deadline - Part 2

S.59 Members Driven Conversion


Video 2

CA14 Company Conversion Deadline - Part 3

Company Limited by Guarantee Conversion Procedures

Part 3