Monthly Archives: November 2016

The Companies Act 2014 (the “Act”) came into effect in Ireland on 1 June 2015 and has introduced significant reforms to Company Law in Ireland.

Under the Act, an existing private company limited by shares (EPC) has to decide, within a transition period of 18 months from 1 June 2015 (ending on 30 November 2016), whether to opt into the new regime for private companies limited by shares (LTD) or to opt out by 31 August 2016 by becoming a designated activity company (DAC).Alternatively the EPC may become some other type of company that the Act permits.

A DAC is a new type of private company and is the company type under the Act that most closely resembles the existing private company limited by shares.

This limited company type is applicable to those companies who wish to outline and define a specific type of business in their Constitution, rather than have unlimited powers as per the LTD company type. Consequently, the doctrine of ‘Ultra Vires’ still applies. DAC ‘s retain Memorandum & Articles of Association as part of an overall Constitution document.

It is important to note that Part 16 of the Companies Act 2014 governs Designated Activity Companies, however most of parts 1 to 15 of the Act also apply with certain provisions disapplied, modified or supplemented by part 16.

The principal points applicable to this company type making it different from the LTD company are as follows:

Key Features:

• The DAC is a private limited company
• The constitution of a DAC comprises of two separate documents namely a memorandum of association and articles of association (ie it retains a constitution document that contains a Memorandum & Articles of Association)
• The memorandum of association must set out the objects of the DAC and that the DAC has the capacity to do any act or thing stated in the objects
• The name of a DAC must end in “Designated Activity Company” (ie to replace what would currently be “Limited” at the end of the company name) or the Irish language equivalent but it may apply for an exemption
• The DAC must have a minimum of two directors and a person may not be a director of more than 25 companies
• The DAC can have from 1 to 149 members
• The Act allows for the DAC to have debentures admitted to trading and all private companies that were previously permitted to list debentures can continue to do so by converting to a DAC
• A DAC can be Limited Liability with a Share Capital or a Company Limited by Guarantee
• A DAC with one member has the right to dispense with an AGM but if the DAC has two or more members it does not have that right (ie unlike the New Limited Company Type, it cannot dispense with the requirement to hold an AGM unless it only has one shareholder/member)
• The law relating to DACs applies to all existing private companies limited by shares until they re-register as another company type or up to the end of the transition
•  A DAC can file and obtain audit exemption and dormant company audit exemption
• Must have an Authorised Share Capital

The companies that will likely avail of the DAC format of company are:

• Companies Incorporated to complete a specific or sole purpose that for legal reasons wish to have the company powers restricted (e.g. a Joint Venture)
• Existing Limited Companies that fall under regulation to trade in specified markets (e.g Financial Regulation) & Companies that have published an offering document and list securities
• Companies that wish to be Limited by Guarantee whilst having a share capital
• Certain Trustee companies and Special Purpose Vehicle (SPV) Companies
• Companies with shareholders that have a strong preference to be incorporated as a DAC

A new IBC Act has just been passed in Seychelles. It will come into force on signing by the President and publication in the Gazette. The Seychelles government brought forward the enactment of the new legislation because it is currently being assessed by the FATF (Financial Action Task Force) and the assessment will only cover legislation in place as at end July.

New Act commencement will be deferred for some time (we await clarification), to allow a grace period for CSPs to update their IBC standard template memorandum and articles, etc. A final copy of the Act is yet to be released – though we understand minimal changes have been made to the last draft circulated to all CSPs (version 30.6.2016).

Main changes affecting clients under the new Act include:

• A new requirement for an IBC to keep a Register of Beneficial Owners at its registered office in Seychelles (alongside its Register of Directors and Register of Members) – 1 year compliance grace period;
• A new requirement for an IBC to file a copy of its Register of Directors with the Registrar – 1 year compliance grace period;
• Obligatory requirement, if an IBC has created a charge over any of its assets, for the IBC to keep a Register of Charges at its registered office in Seychelles – 1 year compliance grace period;
• While registration of a charge over an IBC’s assets will remain optional, registration under the Act will determine the ranking of creditors having security over the same secured assets; therefore (as in BVI) lenders will typically insist on registration of charges created on or after the Act commencement date.

Retention of key attractive features from the former Act

• Cost-effectiveness – No change to the low ($100) Seychelles government IBC incorporation and annual fees;
• Privacy – no filing with Registrar and no public access to details of shareholders or beneficial owners; and
• Ease of administration – no requirement to prepare or file annual accounts and no requirement to appoint an auditor.

Transitional

• With effect from the Act commencement date every IBC incorporated under the IBC Act 1994 (former Act company) is deemed to be automatically re-registered as a company under the new Act. The Registrar is required to issue a certificate of re-registration to the company if the company, acting through its Registered Agent, makes a written request to the Registrar for the issue of a certificate of re-registration. No fee is payable to the Registrar in relation to a certificate of re-registration.
• It will not be mandatory for a former Act company to amend or replace its memorandum or articles to comply with the new Act but to the extent of any inconsistency between a former Act company’s memorandum or articles and the new Act, the new Act shall prevail.
• While it is not mandatory it is nevertheless desirable to replace the memorandum and articles of a former Act company so that its memorandum and articles is fully up-to-date and compliant and reflects the requirements of the Act. To encourage voluntary replacement of IBC memorandum and articles, FSA have waived memorandum and articles amendment / replacement filing fees for 2 years.

In the UK there are four types of limited companies that you could form . These are:

• A Private Limited Company (limited by shares)
• A Private Limited Company (limited by guarantee)
• A Private Unlimited Company
• A Public Limited Company

The difference in name of each Limited Company suggests their distinct features. Other forms of business set-ups such as the Sole Trader and General Partnership are not called ‘companies’ because they are not legal entities.

A Private Company Limited by Shares:

• Only 1 member (ie shareholder) is needed
• Liability is limited to amount owed on unpaid shares (if any)
• Issues shares
• Is legally distinct/separate from members
• Is managed by a Board of Directors

A Private Company Limited by Guarantee:

• Only 1 member (ie shareholder) is needed for Limited Liability Company Corporation
• Members serve as guarantors and contribute to the Company’s assets in the event of winding up
• Is legally distinct/separate from members
• Does not issue shares

A Private Unlimited Company:

• Liability of members is unlimited

A Public Limited Company:

• Is authorised to sell shares to the general public
• May be listed on a/the stock exchange after limited liability company formation
• Liability is limited to value of unpaid shares of each member
• May or may not have share capital for limited liability company registration

As regards which kind of UK Company you should form that depends largely on your commercial goals. If you’re not 100% sure as regards which kind of UK Company you should form you should seek (ideally UK + local) legal and or financial advice.