Financial services companies could potentially be in breach of their licence terms from Wednesday if they have not re-registered to comply with new legislation coming into force this month.
Part two of the Companies Act 2014 requires private companies to re-register as new private limited companies or, in the case of financial services, Designated Activity Companies (DAC), from November 30th.
According to Claire Lord, a partner and head of corporate governance and compliance with solicitor Mason Hayes and Curran, if regulated companies such as credit institutions and insurers have not re-registered as DACs by Wednesday, they risk being in breach of their licence terms.
However, she pointed out that most such businesses have re-registered as DACs ahead of the deadline, particularly as many of them are large organisations, such as banks and other institutions, which have their own compliance departments. The law was passed midway through last year and companies were given 18 months to comply.
Those wishing to re-register as DACs need to pass a special resolution to adopt a new constitution and submit the necessary forms to the Companies Registration Office (CRO) by Wednesday.
Along with the DAC classification, private companies limited by shares, which Ms Lord said is the Republic’s most common form of corporate entity, must also re-register as private limited companies.
While Ms Lord acknowledged that there was some red tape involved in this, she said that once it was done the new form would be “more streamlined and make life a bit easier” as it does away with some of the formalities that companies must fulfil in order to comply with the law.
Companies will no longer be required to have objects clauses and they will not need authorised share capital. In addition, they will need just one director and a company secretary, and will be able to dispense with annual general meetings.
Automatic
The CRO will automatically convert any companies that have not re-registered by the deadline. However, Mason Hayes and Curran points out that if such companies do nothing and the CRO converts them automatically, the directors are leaving themselves open to problems.
The company will be left operating with its old articles of association, which may not be suitable or may include provisions that conflict with the legislation.
Directors will be in default of a statutory duty. While the law specifies no offence for this, they would be leaving themselves open to adverse comment in some situations, such as a liquidation.
Shareholders could go to court if they felt that the directors’ failure to act prejudiced their rights in any way.
Mason Hayes and Curran found that just 9 per cent of companies had re-registered as either DACs or the new form of limited company last August.
Figures released by the CRO show that between June 1st last year and Thursday, November 24th this year, 30,374 companies converted to the new form of private limited company, while 1,801 had converted to DAC.
There are more than 200,000 companies on the Republic’s register. Last year, more than 103,000 were private limited by shares, while a further 60,000 were single-member private limited by shares. About 19,000 new companies registered with the office in 2015.
