SECTION: REGULATORY COMPLIANCE

The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know? The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know?

Published: 15.03.2016 |
Last Updated: 22.03.2016
Diarmaid
Diarmaid
Diarmaid Ó Corrbuí

Diarmaid is Chief Executive Officer of Carmichael Centre for Voluntary Groups.

The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know?

Company conversion process

The 2014 Companies Act brought in a comprehensive overhaul and consolidation of company law in Ireland. The Act came into effect from 1 June 2015. One of the provisions of the 2014 Act was a “conversion” process for all private companies limited by shares to convert into one of two new company types. These are the new LTD (private company limited by shares) type company and the Designated Activity Company (DAC) under Part 16 of the Act. 

Private Companies have 18 months from the commencement date of the Act (1st of June 2015) to opt for conversion to either a LTD or a DAC company model. In other words, they must complete the conversion process by the 30th of November 2016.  No fee will be charged by the Companies Registration Office (CRO) for the conversion during this 18 month transition period. After that date, private companies that have not undertaken the conversion process will be automatically deemed by the CRO to be converted to a LTD company model on the Companies Register.

Implications for CLGs (Companies Limited by Guarantee with no share capital)?

Carmichael Centre have been receiving a lot of queries from nonprofit organisations who are concerned and confused about whether they are required to going through a similar conversion process. In order to clarify the situation, we asked Dr. Tom Courtney of Arthur Cox and chair of the Company Law Review Group (CLRG) which advised the Minister on the new Act, to set out how CLGs are impacted by this conversion process. In nutshell; 

1. Existing CLGs do not need to re-register or go through a conversion process
2. CLGs which do not have an exemption from having “Limited” in their name should consider seeking an exemption before 30 November
3. On 30 November their name will change by law to “Company Limited by Guarantee” instead of Limited unless they have got an exemption
4. Failure to recognise this and change bank accounts websites, documentation, contracts etc. can have adverse consequences. It will be an offence to have “Limited” or “LTD” in your name if you are not an LTD company under the 2014 Act. Directors can be made personally liable for issuing documents with the wrong name and contract are not contracts if entered into with a company which uses its wrong name.

The Companies Act will also have an impact on the Constitution (the Memorandum and Articles of Association – “Memo & Arts”) of CLGs. The Act will require CLGs to have an objects clause in their Constitution but there will be no “Table C” that applied to Memo & Arts under previous company law, but instead there are some 87 statutory-default provisions will apply to the company’s internal administration, “save to the extent that its constitution provides otherwise.” What this means in effect is that unless your company updates its Constitution (the Memo and Arts) and bring it in to compliance with the new 2014 Act and excludes the statutory default provisions, they will be deemed to apply to your company. 

Help is at hand

So the advice is that you should review and update your Constitution (your Memo and Arts) to ensure that it is fit for purpose for your organisation and it is compliant with the 2014 Act. 
We know from experience that reviewing and updating your Memo and Arts is a time consuming and often a costly exercise. Carmichael Centre is therefore, delighted that through TrustLaw and Dechert Solicitors we will be making a Constitution template and guidance booklet available free of charge to the sector. The constitution template will be complaint with the 2014 Act and will provide a great help to organisations in reviewing and updating their constitution. The template and guidance booklet will be available by the end of April. We will be making a formal announcement shortly about the launch date of the template on our website and through our social media channels so keep an eye out for it.

SECTION 6: REGULATORY COMPLIANCE

The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know? The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know?

Published: 15.03.2016 |
Last Updated: 22.03.2016
Diarmaid
Diarmaid
Diarmaid Ó Corrbuí

Diarmaid is Chief Executive Officer of Carmichael Centre for Voluntary Groups.

The Companies Act 2014 and the conversion deadline – what nonprofit CLGs need to know?

Company conversion process

The 2014 Companies Act brought in a comprehensive overhaul and consolidation of company law in Ireland. The Act came into effect from 1 June 2015. One of the provisions of the 2014 Act was a “conversion” process for all private companies limited by shares to convert into one of two new company types. These are the new LTD (private company limited by shares) type company and the Designated Activity Company (DAC) under Part 16 of the Act. 

Private Companies have 18 months from the commencement date of the Act (1st of June 2015) to opt for conversion to either a LTD or a DAC company model. In other words, they must complete the conversion process by the 30th of November 2016.  No fee will be charged by the Companies Registration Office (CRO) for the conversion during this 18 month transition period. After that date, private companies that have not undertaken the conversion process will be automatically deemed by the CRO to be converted to a LTD company model on the Companies Register.

Implications for CLGs (Companies Limited by Guarantee with no share capital)?

Carmichael Centre have been receiving a lot of queries from nonprofit organisations who are concerned and confused about whether they are required to going through a similar conversion process. In order to clarify the situation, we asked Dr. Tom Courtney of Arthur Cox and chair of the Company Law Review Group (CLRG) which advised the Minister on the new Act, to set out how CLGs are impacted by this conversion process. In nutshell; 

1. Existing CLGs do not need to re-register or go through a conversion process
2. CLGs which do not have an exemption from having “Limited” in their name should consider seeking an exemption before 30 November
3. On 30 November their name will change by law to “Company Limited by Guarantee” instead of Limited unless they have got an exemption
4. Failure to recognise this and change bank accounts websites, documentation, contracts etc. can have adverse consequences. It will be an offence to have “Limited” or “LTD” in your name if you are not an LTD company under the 2014 Act. Directors can be made personally liable for issuing documents with the wrong name and contract are not contracts if entered into with a company which uses its wrong name.

The Companies Act will also have an impact on the Constitution (the Memorandum and Articles of Association – “Memo & Arts”) of CLGs. The Act will require CLGs to have an objects clause in their Constitution but there will be no “Table C” that applied to Memo & Arts under previous company law, but instead there are some 87 statutory-default provisions will apply to the company’s internal administration, “save to the extent that its constitution provides otherwise.” What this means in effect is that unless your company updates its Constitution (the Memo and Arts) and bring it in to compliance with the new 2014 Act and excludes the statutory default provisions, they will be deemed to apply to your company. 

Help is at hand

So the advice is that you should review and update your Constitution (your Memo and Arts) to ensure that it is fit for purpose for your organisation and it is compliant with the 2014 Act. 
We know from experience that reviewing and updating your Memo and Arts is a time consuming and often a costly exercise. Carmichael Centre is therefore, delighted that through TrustLaw and Dechert Solicitors we will be making a Constitution template and guidance booklet available free of charge to the sector. The constitution template will be complaint with the 2014 Act and will provide a great help to organisations in reviewing and updating their constitution. The template and guidance booklet will be available by the end of April. We will be making a formal announcement shortly about the launch date of the template on our website and through our social media channels so keep an eye out for it.