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Company Conversion Deadline Looming
26th August 2016
As you are probably aware, the Companies Act 2014 commenced on the 1st of June 2015. This was the single biggest piece of legislation enacted in the history of the state, and it represents a significant change for Irish Companies and Irish Company Directors.
One of the new requirements of the legislation is that companies incorporated prior to 1st June 2015 need to go through a conversion process. The vast majority of Irish companies limited by shares are expected to convert to New Private Limited Companies, the deadline of which is 30th November 2016. The Companies Registration Office (CRO) encourages us to file early as they cannot guarantee forms will be processed in time for the automatic conversion, therefore they have suggested a date of no later than 31st October 2016 for receipt of applications, with the conversion period then ending on 30th November 2016.
The time to decide is now!
It is widely known that there is a ‘do nothing’ option which will automatically convert a limited company to a New Private Limited Company after 30th November 2016. However, we do not recommend this avenue for the following reasons:
- Even when a company is statutorily defaulted to a New Private Limited Company, while the company will be issued with a new certificate of incorporation by the CRO, they will not have a formally updated constitution (to replace the outdated Memorandum & Articles of Association) which may cause future delays in relation to banking and legal transactions, where it may be argued by the other party that the company has a corporate form and constitution that does not actually suit their requirements, and that they require it to be urgently amended.
- Delays may also be experienced with potential investors, e.g. Enterprise Boards.
- Under S.62 of the Act, if in the future, shareholders 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 shareholder who makes the application.
- Failure to convert a company in accordance with the Companies Act 2014 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, which could contribute to a failure of the company and which may result in a liquidator’s report going to the ODCE, which may have restrictions on future directorships.
- While there are professional outlays to covert your company, the CRO is accepting all documentation during the conversion period without any filing fees being due. It is our expectation that the CRO will implement a charge for conversions dated after 30th November 2016.
Our recommendation to convert to a New Private Limited Company is that you go through the shareholder driven conversion under S.59 of the 2014 Act. If you wish we can facilitate this process for you. This conversion needs to be completed by 30th of November 2016 but in order to draft the paperwork and submit the application on time we need you to confirm that you want assistance converting no later than 9th September 2016.
If you have any questions, or want to discuss how the new Companies Act 2014 impacts on you and your business, please feel free to give us a call. We would be delighted to assist you in any way that we can.