Morning Ireland - Companies Act DAC Deadline
29 August 2016
On 24 August, Claire Lord, Head of Corporate Governance & Compliance, spoke to RTE's Morning Ireland about the 2014 Companies Act and the 31 August deadline for companies who wish to re-register as DACs. You can listen to the segment here.
Rte.ie published the following report:
The 2014 Companies Act introduced important changes in the way companies are to be registered in Ireland - with most firms now having to choose between being listed as a Designated Activity Company or a Limited Company.
And this day next week marks an important deadline for that decision - but as of yet the vast majority of companies have taken action.
"Certain types of companies have to be Designated Activity Companies," said Claire Lord, partner at Mason Hayes & Curran, pointing to credit institutions and insurance firms as examples of the business types that would have to move to the new classification.
"Companies can choose to become a Designated Activity Company, too, for example charities."
And while the minority of companies might ultimately need to make that switch, those that do will have to file paperwork to do so by 31 August - next Wednesday.
For the majority of firms out there, however, it is more likely that they will gain the Limited Company (Ltd) designation instead.
"The law pointing companies in that direction because it's an easier company to administer," she said, adding that that decision does not need to be formally made until November.
Should a company fail to do so by then, they will automatically become a new-form Ltd - which could be problematic for those that should have chosen the DAC route.
However, even for those that might have chosen to class themselves as Ltd, simply allowing that to happen by default may not be the best course of action to take.
"It's better practice to have your company do what it's meant to do and adopt a constitution that is easy to interpret and to bring your company up to date," Ms Lord said.
Doing so should also help companies to avoid any potential hiccups down the road - avoiding some of the issues that might arise if they continue to straddle old and new rules around their formation.
And Ms Lord says making the change is relatively straight-forward - and cheap to accomplish.
If a firm wants to become a DAC, shareholders can pass an ordinary resolution - though this only allows firms to meet the minimum requirements set out in the law.
"We're recommending companies pass a special resolution and update their constitution properly so it refers to the new provisions and the new act," she said."
Should the Ltd form be chosen, directors can pass a resolution to meet the minimum requirements - but again a special resolution would be required to do the job fully.
"It's an exercise in good governance and it shouldn't need to be repeated for a number of years if the steps are taken now," Ms Lord said.