Startup specialist firm Beauchamps Solicitors join us to answer startup legal queries.
This months query comes from Dublin-based MedTech outfit Restored Hearing:
What are the options for startups in converting their private companies under the Companies Act 2014? What should they expect from the process and what should it cost?
The Companies Act 2014 (the Act) came into effect on 1 June 2015.
The Act created two new forms of private limited company: the standard form private limited company (known as an LTD) and the designated activity company (known as a DAC). The LTD is the new simplified model form of private limited company. The DAC is closer in form to the existing private limited company. The vast majority of companies will be LTDs and it is expected that DACs will be the exception. In the period 1 June 2015 28 February 2016 approximately 6,000 companies re-registered and of these, less than 200 re-registered as a DAC.
LTD vs DAC
LTDs and DACs have a number of different features, including:
The Act provides for a transition period until 30 November 2016. During the transition period, all companies will be treated as DACs, unless they have re-registered as a LTD (see below). At the end of the Transition Period, all companies will be deemed to be LTDs unless they have re-registered as a DAC.
Re-registration as LTD
The most straightforward way to convert to a LTD during the transition period is to prepare a new constitution (which replaces the memorandum and articles) in the form required by Schedule 1 to the Act, and to adopt this by passing a shareholders special resolution (with approval of 75%). The new constitution is then filed in the CRO, with a form N1.
If the company has bespoke regulations in its articles of association (for example, particular rights attaching to particular shares) these should be replicated in the new constitution.
What costs can I expect?
There are no CRO filing fees for re-registrations or conversions during the transition period. Any conversions after the transition period will attract the standard CRO filing fees. With regard to legal fees, this will vary from company to company, depending on the amount of changes (if any) to the companys articles.
Typically a company will re-register if it is in the course of carrying out another transaction (for example, taking in Enterprise Ireland funding) and the costs of re-registration will be included in the overall costs of the transaction.