In the modern business world, incorporating a company and the legal structure that an entity takes is a critical decision. When assessed correctly, the correct structure can provide substantial advantages for those undertaking commercial affairs. These advantages include limited liability, separate corporate personality, and possible advantageous taxation. With substantial advantages available, the new Companies Act 2014 provides for a number of distinct corporate entities.
Private Company Limited By Shares
The new “Ltd” replaces the old type of ‘Ltd’ from previous Irish company law, and is one of the centre pieces of legislative change in the new act. The ‘Ltd’ continues to be the most popular corporate formation in Ireland; the simplified ‘Ltd’ has a number of unique features that make it simple and appealing:
- The need for a Memorandum and Articles of Association has been removed and companies wishing to form an ‘Ltd’ can register a simplified one document Constitution.
- The new Constitution removes the statement of an “objects clause”, meaning a new “Ltd” can benefit from pursuing any activities it may wish within the parameters of Irish law.
- Under the new Act, an “Ltd” may have only one director, however they must maintain a secretary, consequently there must be a minimum of two officers.
Designated Activity Company
“DACs” as specified under the new Act bear considerable similarities to that of the old “Ltd”; a number of key features will thus be observed:
- The constitution of a “DAC” must include a two part document consisting of a Memorandum and Articles of Association.
- The Constitution consequently includes an ‘objects clause’ outlining the business’s specific function. This clause thus limits the company to operating within this specific area and consequently the doctrine of ‘Ultra Vires’ applies.
- A “DAC” is however not completely restricted to its original objects clause. The company can alter this clause by means of a special resolution as outlined by 980 of the Companies Act 2014.
Public Limited Company
The new Act does not significantly alter PLCs, they remain as the only entity in Ireland allowed to publicly list shares, and this can provide beneficial avenues for raising capital. Small changes have however been introduced, the most notable perhaps being the requirement to maintain a minimum share capital of €25,000 and provide a certificate of proof.
Unlimited companies can be either private or public companies. The unlimited company is a unique form in itself providing distinct characteristic:
- UCs as the name suggests provide no limited liability for their members. Subsequently, members of a company are fully liable for any debts that may be due in cases of insolvency.
- In forming the company it is a requirement to file a Memorandum and Articles of association that comprise the constitution of the company and define its activities.
- UCs may be single member companies but must maintain at least two directors within the company.
Companies limited by guarantee do not maintain a share capital and can be private or public. This type of entity remains popular with charities and sports clubs and share distinctive features including:
- Guarantee companies are governed by a constitution that includes a Memorandum and Articles of Association, which outline the objects of the company.
- Liability is strictly limited to the amount the members specify to contribute to the assets of the company as defined in the constitution.
- Can now opt to be one member companies, rather than the previous requirements of seven members; however the company must have two directors and maintain this requirement.
Incorporating a company can be a critical decision and should be well planned. The above is a brief description of corporate entities within Ireland and is not intended to be exhaustive; subsequently one may wish to consider additional factors when incorporating.
Given the importance of such decisions, and the possible benefits that can accrue from incorporating, consultation with professionals may be advisable before incorporating, and substantial considerations should be observed when forming a corporate entity in Ireland.