The new Companies Act is now effective and has a number of provisions which can benefit Irish companies and directors. Even sole traders should look at what’s in the Act.
All existing companies must choose to convert to one of two new company types – LTD (Private Company Limited by shares) or DAC (Designated Activity Company).
The vast majority will opt for LTD, which is a simplified company type.
Here are ten ways the new Companies Act will benefit smaller Irish businesses:
- LTDs can have just one director, as long as another person, who is suitably skilled, acts as company secretary. This will be attractive to sole traders who can now benefit from limited liability by registering as a one person limited company.
- Articles and Memorandums will be no more. An LTD needs only a one-page constitution document.
- There won’t be a need for limiting ‘objects’ clauses. LTDs are free to engage in a variety of commercial activities.
- Physical AGMs aren’t a requirement, either, once all parties sign a resolution in relation to matters normally dealt with at an AGM, such as acknowledging receipt of the financial statements
- LTDs can apply to file late returns to the District Court rather than through the more expensive High Court.
- Audit exemptions are easier to avail of. Only two of three size criteria (balance sheet under €4.4 million, turnover under €8.8 million or average employee number under 50) need to be met. Previously, all three had to be met.
- If your business owes you more than €10,000 for more than 21 days, you can apply to the courts for the liquidation of the company. However you must have proven that that you have served written notice of payment to the company’s registered office
- Domestic mergers no longer need court approval.
- New “Summary Approval Procedures” are a new simplified procedure for certain restricted procedures – those that can be considered to prejudice a shareholder or a creditor. It will no longer be necessary to get court approval for certain types of loans directors, for example
- A legal distinction is now made between voluntary and involuntary strike off.
You should talk to your accountant or company formation specialist about the impact the new Act has on your business. If you make no changes to your existing company structure then it will automatically be converted into an LTD on 1 December 2016.
All documents relating to the conversion can be filed for free. Visit the Companies Registration Office website to access conversion forms.
Read about the pros and cons of operating as a sole trader compared with through a limited liability company in this ThinkBusiness.ie guide to structuring a new business.