EPCs: should you become an LTD or a DAC?

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The Companies Act 2014 came into operation on 1st June 2015. From this date there is an eighteen month transition period during which Existing Private Limited Companies (EPCs) will have to make a decision on which of the new entity types they wish to become.

EPCs can become the new simplified private company limited by shares (LTD) or a Designated Activity Company (DAC).

The table below lists some of the key differences between the two new company types:

New LTD company model (LTD)

Designated Activity Company (DAC)

It may have just one director (but it must have a separate secretary if it has only one director). It must have at least two directors.
It can have between one and 149 members. It can have between one and 149 members.
It does not need to hold an AGM. It needs to hold an AGM where the company has two or more members.
It has a one-document constitution which replaces the need for a memorandum and articles of association. It has a constitution document which includes a memorandum and articles of association.
It will not have an objects clause because it has full unlimited capacity to carry on any legal business, subject to any restrictions in other legislation. It has a memorandum in its constitution which states the objects for which the company is incorporated.
It has limited liability and has a share capital. It has limited liability and has a share capital or is a private company limited by guarantee with a share capital.
Name must end in “Limited” or “Teoranta” (there is no requirement to change name for existing EPC). Can be abbreviated to LTD. Name must end in “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe”. Can be abbreviated to DAC. (existing EPC will need to change its name and update stationery, letterheads, websites etc).
It cannot list debt securities. It can list debt securities.

During the transition period, an EPC will be treated as a DAC, even though its company name may end in Limited or LTD, until it re-registers as a DAC or LTD. If it does not re-register during the transition period, it will automatically become a LTD on 1 December 2016, which is when the transition period expires.

Companies wishing to convert to a DAC must initiate the procedure by 31 August 2016.

If you are still not sure whether to convert to LTD or DAC please see our conversion questionnaire:

Should I convert my EPC to DAC or to LTD? 

Click here to take our quiz to find out whether you should convert your EPC to a DAC or an LTD: http://www.jordanstrustcompany.com/thinking/-/blogs/epcs-should-you-beco...

If the answer to any of these questions is yes, you need to convert to DAC.

We also recommend that directors of EPC’s consult with the company’s shareholders, especially if they have shareholders who are not directors to ascertain what their preference is regarding the two conversion options available to them. It may also be prudent to consult with key creditors such as banks.

What happens if I do not convert?

If at the end of the transition period, 30 November 2016, conversion has not been completed, the Registrar of Companies will enforce the change and convert the company to the new form LTD. A new certificate of incorporation will then be issued automatically.

Automatic conversion is not a recommended option for the following reasons:

Company may be deemed to have a corporate form and constitution that doesn’t suit their requirements;

Conflicts between existing Memorandum and Articles of Association as lodged in the public records and provisions of Companies Act 2014;

Members will be able to seek remedy in the courts under the legislation (including payment of compensation or the purchase of their shares) if they feel their rights as members have been prejudiced by the company taking no action;

May impact the company’s dealings with banks, potential investors, enterprise boards and any other third parties; and

Companies wishing to have a ‘single director’ cannot do so until they convert.

If you want to learn more about the Companies Act 2014, please refer to www.cro.ie/conversions/overview or contact your company’s designated consultant.

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Publication produced courtesy of Grant Thornton Ireland

The information provided in this publication are put forward for further consideration only and are not intended to be acted upon without independent professional advice.

Neither Jordans Trust Company Limited nor its associated group companies, nor any employees or directors of these companies can accept any responsibility or liability for any loss occasioned to any person no matter howsoever caused or arising as a result of or in consequence of action taken or not taken in reliance on the contents of this publication.

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