Did you miss the transition period deadline to convert to a new company type?
The Companies Act 2014 (the “Act”) provided for an 18 month transition period whereby private companies limited by shares were to take action and opt to convert to one of the new company types being (i) a private company limited by shares (“LTD”) or (ii) a designated activity company (“DAC”). This transition period ended on 30 November 2016, and those who failed to convert were automatically converted to an LTD by the Companies Registration Office (“CRO”) on 1 December 2016 with their existing Memorandum and Articles of Association being replaced with a deemed constitution.
A deemed constitution consists of the existing memorandum and articles excluding the objects clause and any provisions which restrict the amendment of the constitution of the company or that are inconsistent with a mandatory provision of the Act. Therefore, there could be ambiguity surrounding the governing regulations of a company automatically converted on 1 December 2016.
The directors of a company automatically converted by the CRO should ensure that an LTD is the correct company type for its business and that there is no requirement to re-register as a DAC. e.g. a company governed by a shareholders’ agreement or party to a joint venture may be required to operate as a DAC. Indeed there could be circumstances where a company must operate as a DAC as it is prohibited from being an LTD (e.g. a credit institution).
If the directors of a company consider that the LTD company type is not suited to the activities of the company, the company may pass a resolution to re-register as a DAC or other type of company.
The Act also provided that Companies Limited by Guarantee (“CLG”) and Unlimited Companies (“ULC”) that did not change their name prior to the end of the transition period automatically had their names changed with effect from 1 December 2016. Such companies have been issued with new digital Certificates of Incorporation by the CRO which contain their new name. The name change required under the Act for CLGs replaced the word “Limited” with “Company Limited by Guarantee” and for ULCs added the words “Unlimited Company”. There may be unlimited companies that, prior to the end of the transition period, had names such as “Formula Company” or “Della Property Company”. If no action had been taken prior to 30 November 2016, those names are now “Formula Company Unlimited Company” and “Della Property Company Unlimited Company”.
Such companies should now ensure that their company seals, letterheads, webpage, signage, invoices, payroll, and any other documents showing their new name have all been updated. Furthermore all documents filed with the CRO should now show the new name only.
The constitutions of these companies remain in force notwithstanding that the Companies Acts, 1963-2013 have been repealed. However, these constitutions are still subject to the same interpretational difficulties which arise with LTDs insofar as that any provision contained within the constitution that is inconsistent with a mandatory provision of the Act will not apply.
Every company that has failed to act should take the opportunity now to review it's name and the provisions of its constitution to ensure consistency with the Act.
KPMG Legal Services are happy to carry out a review and prepare the necessary documentation to change name and/or bring a constitution in line with the Act.
For more in depth information please contact Andrea Sherlock, Associate Director, Legal Services.
Click here for more information on the range of Company Secretarial services we provide (PDF, 1MB).