This presentation provides an overview of key changes and requirements under the Companies Act 2014, including how to avail of the audit exemption, convert existing companies to the new structures of LTD or DAC, the process for unlimited companies, and addressing issues with directors' loans and late CRO filings. The presentation outlines the options and steps involved in complying with the Act.

1. Practical Application of the
Companies Act 2014
December 2015
Presenter: Conor Sweeney

2. Presentation Outline
• District Court Application
• Company Conversions
• Converting to Unlimited
• Directors Loans
• Availing of Audit Exemption
• CRO Filing Issues

3. EXTENSION TO FILING AN ANNUAL
RETURN

4. District Court Application
• Sec 343 - new mechanism for companies that
have missed the filing deadline for filing the
annual return and financial statements on
time.
• eliminate the need to pay late filing penalties
and more importantly for most companies,
retain the audit exemption

5. District Court Application
• The company may make an application to their
local District Court (or High Court) seeking an order
extending the time for filing the annual return and
the financial statements.
• If granted by the Court, the company must file the
order with the CRO within 28 days and then file the
annual return and the financial statements (audit
exempt if applicable) with the CRO within the
extended time granted by the Court. Only one
application can be made per order.

6. District Court Application
• The company cannot represent itself so it
must seek the services of a solicitor or
barrister to make the application to the
Court.
• The company must make the application at
the District Court where the registered office
is situated.

7. District Court Application
• A company will have to weigh up the cost of
paying the late filing penalties in addition to
the cost of an audit to be carried out for the
current financial statements and the next
financial year against the cost of making the
application to the District Court.
• For group companies that now can avail of
audit exemption, the district court
application will be the cheaper option.

8. District Court Application
• Advantages
• No loss of audit exemption or audit for 2 years
• No late filing penalties
• Certainty that our legal team that will make a swift
application ensuring that the order is issued as soon as
possible
• Fixed fee for the application
• Disadvantages
• Cost of making the application
• Change of registered office address

9. COMPANY CONVERSIONS

10. Company Types
• Existing Private Limited by Shares (EPC)
company type must choose to convert to one
of these two new company types:-
– Private Company Limited by Shares (“LTD”)
– Designated Activity Company (“DAC”)
• No need to convert to avail of audit exemption

11. LTD V DAC
Company Limited by Shares (“Limited”) Designated Activity Company (“DAC”)
Must end in the suffix Limited or LTD Must end in the suffix Designated Activity
Company or DAC
Minimum of 1 director Minimum of 2 directors
1 – 149 shareholders 1 – 149 shareholders
No objects clause – full and unlimited
capacity
Capacity limited to the objects clause in
the Memorandum
Company Secretary cannot be the sole
director
Secretary may be one of the directors
May dispense with holding the AGM Cannot dispense with holding the AGM
No requirement for an authorised share
capital
Must have an authorised share capital
Cannot list debts or securities Can list debts & securities
Cannot be a credit institution or an
insurance undertaking
Can be a credit institution or an insurance
undertaking

14. Questions to Ask Before Choosing
a Company Type
• If you answered Yes to any of the above, you
should consider converting into a Designated
Activity Company.

15. Conversion Options
1. “Opt in” to a new LTD company in transition
period
2. Directors obliged to prepare & file a
constitution
3. “Opt out” within 15 months and become a
DAC
4. “The Irish” and wait until transition period
has elapsed and be automatically converted
into a LTD

16. How companies can convert to a LTD
or DAC
1. S 59 – “Opt In” to new LTD company
• An existing private company may, on the passing of a special
resolution, adopt a new constitution complying with section 19
of the Act.
• New constitution should be sent to the Registrar with Form N1
• Constitution may dis-apply some of the optional provisions in the
Act (e.g.pre-emption rights)
• Upon registration, the company shall become a private company
limited by shares “LTD” governed by Parts 1 to 15 of the Act.
• Upon registration of the new constitution, the Registrar will issue
a new certificate of incorporation to the company.
• Review Memo & Arts in advance of conversion

17. How companies can convert to a LTD
or DAC
2. S 56 (1)— “Opt Out” and convert to a DAC
• Joint venture companies, company that lists debt securities
or wishes to retain objects clause will opt out into a DAC,
property management companies
• An existing company can convert to a DAC by passing an
ordinary resolution, not later than 3 months before the
expiry of the transition period
• resolving that the company be so registered and the
provisions of Part 16 will apply to it accordingly.
• Members holding more than 25% of voting rights can serve
notice on company requiring it to re-register as a DAC or
• 15% of members or creditors holding 15% of debentures
can apply to court seeking order to convert into a DAC (Sec
57)

18. How companies can convert to a LTD
or DAC
• Name must change to include DAC or
Designated Activity Company
• File a Form N2 & new constitution with CRO
• New Certificate of Incorporation issued
• Conversion to a DAC after the transition period
has expired must be by special resolution –
Part 20 of Act

19. How companies can convert to a LTD
or DAC
3. S 60 – Obligation on directors to adopt a new
constitution
• Directors obliged to prepare & file a new constitution
where one has not already been adopted by the
members or where the company has not re-
registered as a different company type.
• Cant change anything other than remove objects
clause
• Must deliver a copy of new constitution to every
member
• File Form N1 and new constitution with CRO
• New Certificate of Incorporation issued by CRO

20. How companies can convert to a LTD
or DAC
4. S 61 – Default provisions if no action is taken.
• Unless an existing company re-registers as a DAC or
other company type, or doesn’t complete steps 1 or
3, it will become a LTD after the expiry of the
transition period (18 months)
• It will have a deemed constitution where it retains
the provisions of its existing constitution, with the
exception of its objects clause, and also with
exception of any provisions of its constitution which
would be inconsistent with a mandatory provision of
the Act.
• Deemed to have become a new LTD
• New Certificate of Incorporation will be issued by
CRO

21. How companies can convert to a
LTD or DAC
• Will be governed by Parts 1- 15
• Memorandum & Articles will still be listed in
CRO
• Inconsistency with the Companies Act 2014 &
the constitution and will refer to Table A that
will continue to exist unless its inconsistent
with mandatory provisions in the Act

22. What happened to the other
company types
• PLC’s – no major changes
• DAC – as previously discussed

23. What happened to the other
company types
• CLG – May file an N3 and an amended
constitution or CRO will change name of
company and issue a new certificate of
incorporation after transition period has
ended.
• May amend its Articles of Association to reflect
the new provisions of the Act

24. What happened to the other
company types
• Unlimited Company – May file an N3 and
amended constitution or CRO will change
name of company and issue a new certificate
of incorporation after transition period has
ended
• May amend its Articles of Association to reflect
the new provisions of the Act

25. New Constitution
• Schedules in the Companies Act 2014
• LTD
– one document constitution – supplementary
regulations
– Wont be issued new constitution if automatically
converted
• Other company types
– Two document constitution – Memorandum &
Articles of Association

26. Conversion Figures
• N1: 4,080 forms filed
• N2: 90 forms filed
• N3: 190 forms filed

27. New Incorporations
• LTD – 8,209
• DAC – 355
• CLG – 209
• ULC - 72

28. How to Prepare for conversions
• Complete our pre-conversion checklist
– Advise clients of the new Act
– Review companies
– Focus on companies with different shareholder or
unique provisions
– Advise of the appropriate company type
– Engage a provider or draft conversion
documentation & constitution

29. UNLIMITED COMPANIES

30. Unlimited Companies
• More interest due to requirement to disclose
directors remuneration in abridged fin stats
• Name must end in Unlimited Company or UC
• May have 1 member
• ULC may avail of audit exemption
• Non-designated unlimited company
– May be exempt from filing financial statements

31. Unlimited Companies
• Sec 1274 provides for the exemption from
filing financial statements and defines a
designated unlimited company:
– All the members are Co’s limited by shares or
guarantee registered in or outside the State or
other member states
– Unlimited companies who’s members are made
up of the above
– Limited partnerships

32. Unlimited Company – Time to
Convert
• Limited opportunity a company has to convert
to unlimited if they are seeking to keep their
financial statements private
• The company must have filed their financial
statements in the previous three months or file
them first before the company can convert to
unlimited.

33. Unlimited Company – Time to
Convert
• Companies that have a 30 September 2015
annual return date, file the annual return on
28th October 2015, that are considering
converting to unlimited will have to convert to
unlimited by the 28 January 2016.
• Otherwise they will have to file their next
financial statements first and then convert to
unlimited.

34. Unlimited Company – Time to
Convert
• The purpose of this provision is to stop
companies converting into an unlimited
company before the ARD and then
converting back without filing financial
statements as there is now no limit on the
number of times you can convert a company.
• Duty to disclose the directors’ remuneration
in the abridged financial statements is driving
more companies into Unlimited
The purpose of this provision is to stop companies converting into an unlimited
company before the ARD and then converting back without filing financial
statements as there is now no limit on the number of times you can convert a
company.
Duty to disclose the directors’ remuneration in the abridged financial
statements is driving more companies into Unlimited

35. Unlimited Company – Time to
Convert
• Extension of audit exemption to unlimited
companies. Private unlimited companies (ULC’s)
may avail of the audit exemption if the company
satisfies the conditions of audit exemption.
• If the company can avail of audit exemption and is
not classed as a designated ULC (all the members
are limited companies) then the company is only
required to file an annual return with the
Companies Registration Office.
• If it is above the audit exemption thresholds it must
annex a special auditors report to the annual return

36. AUDIT EXEMPTION

37. Audit Exemption
• Sec 333 - The directors of a company are
required to arrange for the financial
statements of the company to be audited
unless the company is entitled to and
chooses to avail itself of the audit
exemption
• Sec 358 - Small company can avail and now
has to satisfy 2 out of 3 conditions for
current & preceding financial year

38. Audit Exemption
• 10% of members (1 member CLG) may object
• Statement on the balance sheet
• Satisfy 2 out of 3 conditions for current &
preceding financial year
Small Medium
Turnover €8.8m €20m
Balance Sheet €4.4m €10m
Average number of
employees
50 250

39. Audit Exemption
• Small Companies that can avail-
• Company Limited by Shares (LTD) that is a small
company
• Designated Activity Company (small)
• Company Limited By Guarantee (small)
• Small Groups
• Dormant companies that have no significant
accounting transactions or permitted assets &
liabilities
• Private Unlimited Company (ULC) (small)

40. Audit Exemption
• Companies that cannot avail
– PLC’s
– Certain Unlimited companies
– A company, holding or subsidiary company that falls within
Schedule 5 or is a credit institution, insurance undertaking,
relevant securitisation or body with securities admitted to
trading
– Late filing the current or preceding annual return with financial
statements annexed
– Late filing the first annual return
– A notice is received 1 month before the end of the financial year
by one or more members holding 10% or more of the voting
rights or for Companies Limited By Guarantee 1 member may
object.

41. Creation of a Group
• Definition of a group - Sec 7 of the Act
• More than half of the issued share capital or
voting rights
• Golden Share
• Ensure rights are in accordance with Sec 7
• Dominant influence or control contract

42. Checklist to Avail of Audit
Exemption
• Templates on CLS Store
• Does audit exemption apply to your company
type?
• Are you required to have an audit by other
means? Bank funding, Enterprise Ireland,
regulated entity etc?

43. Checklist to Avail of Audit
Exemption
• Are you under the 2 out of 3 conditions for current
year for a single company?
• Are you under the 2 out of 3 conditions for current
& proceeding financial year for a group?
• Have you filed on time this years and last year’s
annual return on time?
• If this is your first financial year, have you filed your
first annual return on time?

44. DIRECTORS LOANS

45. Directors Loans
• Part 5 LTD - Chapter 3 Sec 236 – 248
• Extended definition of a connected person to
include the directors civil partner and child of
the director’s civil partner
• Company controlled by a Director still includes
a connected person
• Category 2 offence – reportable offence

46. Directors Loans
• Terms of all loans, given from or to a company
regardless of size, must be approved in writing
• Loan given to a director or connected person
– is repayable on demand
– has borne interest at the appropriate rate

47. Directors Loans
• Loan given to a company
– Is not a loan
– bears no interest
– is not secured
– is subordinate to all other indebtedness of the
company

48. Rules & Exceptions
• Sec 239 – A company shall not make a loan, quasi-
loan, enter into a credit transaction, enter into a
guarantee or provide any security
• Exceptions:-
– Less than 10% of relevant assets
– Reduced below 10% within 2 months
– Summary Approval Procedure to permit loan
– Inter group transaction
– Directors expenses
– Business transactions

49. Personal Liability for company debts
• If a company is being wound up and is unable to
pay its debts and court considers that any
arrangement has contributed to company’s inability
to pay its debts or has substantially impeded the
orderly winding
• Declaration made that any person who benefited
from the arrangement shall be personally liable
without limitation of liability
• Court will have regard for the extent of the
outstanding liabilities and impact on winding up of
company

50. CRO FILING ISSUES

51. CRO Filing Updates
• Web browser – Internet Explorer or Firefox
• Demo Video’s on filing different forms
• Fixing financial periods – fixed on first annual
return after 1st June 2015
• Abridged Financial Statements
• Originally signed or type signed with certificate
signed by director and secretary
• 2 stage process to register charges

52. More Information
• www.clscharteredsecretaries.ie/blog & CLS
Newsletter
• https://www.cro.ie/Companies-Bill/Overview
• www.icsacharteredsecretaries.ie

53. How Can we help with the
Companies Act 2014?
• Advise of the appropriate company type
• Draft the conversion documentation
• Draft a new constitution
• Review existing minutes and procedures
• Provide training and guidance on
implementation of the Act
• Provision of a Company Law Query Service

54. How We Can Help You?
• Drafting Company Secretarial documentation
• Answering company law queries
• Company Formations - €251
• Corporate Governance – Advice and drafting
Governance Manuals for Boards & Charities
• Company Law Training

55. About CLS Chartered Secretaries
• CLS Chartered Secretaries are a firm of chartered
secretaries specialising in advising on company
secretarial and company law
• Providing company formation and company
secretarial services to accountants, solicitors and
tax advisors throughout Ireland
• For more information and to receive our monthly
newsletter click on www.clscharteredsecretaries.ie

56. Conor Sweeney Profile
• Conor Sweeney is Past President of the Irish Region
of the Institute of Chartered Secretaries and
Administrators (ICSA).
• Conor is Managing Director of CLS Chartered
Secretaries.
• Conor is an experienced speaker in the area of
Company Law and Company Secretarial practice
and has presented on behalf of all the Accounting
Institutes, The Law Society and the ICSA.

57. Contact Details
Conor Sweeney –
conor@clscharteredsecretaries.ie
Amy Brennan – amy@clscharteredsecretaries.ie
info@clscharteredsecretaries.ie
059 9186776
www.clscharteredsecretaries.ie
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