On the 23rd of December 2014 the President signed the Companies Act 2014 into law.  The bulk of the new Act commenced in the summer of 2015 and now replaces the Companies Act 1963-2013.  The Act is the largest single piece of legislation in the history of the State with over 1400 sections and runs to over 1100 pages.  Notwithstanding this, the purpose of the Act is to simplify the law for private limited companies with shares, and to simplify a number of procedures and to up-date and codify matters such as directors’ duties.

The Act provides for the adoption of a new model constitution for the vast majority of companies however even companies which retain a memorandum and articles of association (eg companies limited by guarantee) will still be required to up-date their constitutional documents to take account of the new Act, so all existing companies will be impacted to some extent.


All existing private companies limited by shares will now have to choose what format they wish to adopt under the new Act.  Existing private companies limited by shares may choose to become either a Private Limited Company (LTD) or a Designated Activity Company (DAC).  Companies that do not elect which model they wish to become within the 18 month transition period will, in most cases, be deemed to be Private Limited Companies (LTDs) at the end of the transition period.  The DAC model will be required for certain companies required to restrict their activities to those set out in the company’s constitution or those that wish to list debentures.

Although the form of the Designated Activity Company closely follows existing private companies limited by shares, it is anticipated that the greater flexibility afforded by the new and simplified private limited company means that many companies are likely to choose this limited (LTD) format.  The principal features of the LTD and DAC models is set out in the chart below.DIFFERENT COMPANY MODELS

Guarantee Companies (CLGs)

The key feature of a Guarantee Company is that it has members, not shareholders, and this is the format most often adopted by management companies, charities, and sports clubs.  Guarantee Companies will continue to have a memorandum and articles of association together with an objects clause.  Currently, such companies must have 7 members but in future CLGs may opt to have 1 member, although they will still require 2 directors. Guarantee companies must change their name to include the words “Company Limited by Guarantee” at the end of its name or the letter “CLG”.

Unlimited Companies and Public Limited Companies

The Act also provides detailed provision for Unlimited Companies (“UCs”) and Public Limited Companies (“PLCs”). UCs and PLCs will have a constitution but this will comprise both a memorandum of association and articles of association and will be required to have an objects clause and state the authorised share capital.

  • Private Company Limited by Shares (LTD)
  • Minimum of 1 director plus a company secretary
  • Ultra vires does not apply
  • Single document constitution

  • No requirement for AGM

  • Company secretary must have appropriate skills or access to such skills
  • Cannot list debt securities
  • Need not have authorised share capital if so desired
  • Designated Activity Company (DAC)
  • Minimum of 2 directors of whom 1 may be the company secretary
  • Ultra vires will apply
  • 2 document constitution
  • May dispense with holding AGM where it has only one member but not if multi-member
  • Retains objects clause
  • Will not be prevented from having debentures admitted to trading or listed
  • Must state authorised share capital


The 2014 Companies Act now codifies the responsibilities and duties of directors in S.228.  These duties are owed to the company and are based on the old common law rules relating to directors’ duties which were not on a statutory basis.  The new statutory duties are as follows :-

  • Directors must act in good faith and in the interests of the company
  • Directors must act honestly and responsibly in relation to the conduct of the affairs of the company
  • Directors must act in accordance with the company’s constitution and exercise those powers only for purposes allowed by law
  • Directors must not use the company’s property, information and opportunities unless expressly permitted by the company’s constitution or unless approved by a resolution of the members
  • Directors must not fetter their independent judgment
  • Directors must avoid conflicts of interest
  • Directors must exercise care, skill and diligence
  • Directors must have regard to the members’ interestsBreach of the directors’ duties may result in the director being required to personally indemnify the company for any loss or damages caused by the breach.


We have become familiar with the restrictions on companies making loans in favour of directors or connected persons.  There is a new simplified procedure for approving or whitewashing such loans.  However, it is important that properly drafted loan agreements are put in place because under new rules, undocumented loans between a company and a director/connected person, or loans which contain ambiguous terms, are to be interpreted contrary to the interests or rights of directors or persons connected to directors.  It is important to note that these provisions may also extend to inter-company loans and so checks should be made to ensure that all of a company’s loans are sufficiently recorded in writing.


Each director will be required to confirm in the directors’ report that all relevant audit information of which they are aware (having made reasonable enquiries) has been conveyed to the auditors.  This is a significant additional responsibility and it will be an offence to knowingly or recklessly make a false statement.   Directors will need to take advice on what steps they need to take to ensure they comply.


The directors have a duty to ensure that the person appointed as secretary has the skills necessary to maintain (or procure the maintenance of) non accounting records which have to be kept under the Act and to ensure that the secretary has the skills or resources necessary to discharge the statutory and legal duties to which the secretary is subject and such other duties as may be delegated.


The directors of a company with a balance sheet total of €12.5m and turnover of €25m will have new obligations for securing the company’s compliance with, firstly, certain company law provisions imposing serious penalties (being category 1 and 2 offences) for non-compliance and, secondly, tax law.  These include the directors drawing up a compliance policy statement and reporting on what has been done to secure compliance.  For even larger companies (balance sheet total €25m, turnover €50m), the directors must consider the establishment of an audit committee and address the issue in their directors’ report.

If you think any of this applies to you, please talk to us about what needs to be done


There are new arrangements which will make it easier to merge companies or to split the business of an Irish company.   This may be a useful device in dealing with family succession or in the disposal of part of the business conducted by a company and will also operate as a potential means of tidying up unwanted subsidiaries in a group structure.


There are some changes in insolvency law in that for the first time liquidators must have an appropriate qualification.  It is also possible for an Examination to be conducted in the Circuit Court for companies that fall within the audit exemption criteria (this change is already in place).


  • If your company is a private company limited by shares you should decide whether or not you are happy to convert to an LTD or a DAC, and remember some companies may be obliged to convert to DACs – we can advise further if required
  • Directors should review the existing company memorandum and articles of association and consider with your advisers how the standard constitution should be adjusted to suit your requirements
  • Consider whether the company secretary has the necessary skills or resources to allow the Directors to fulfil their duties when appointing a company secretary
  • Put proper agreements in writing in place to document directors’ loans to or from the company or loans with connected persons.  These may include inter-company loans and such arrangements should be checked
  • Put in place a system to show that directors have made proper enquiries to identify relevant audit information and to disclose that information to the auditors
  • Check your agreements to see if changing the company’s constitution will require the consent of other parties
  • Check if there has been any breach of the obligations under Section 53 of the 1990 Companies Act to disclose interests in shares as the Act usually provides a transitional period of 18 months to remedy an inadvertent default
  • Directors should review directors and officers insurance arrangements for the company.
  • Consider whether you are up to speed on your duties as a director or owner of a company and contact us if you need an update

Our above memo is prepared for general information purposes; it does not purport to provide legal advice. O’Connor solicitors accept no responsibility for losses that may arise from reliance on information contained in this post. It is intended to identify general issues on which you may require legal advice. Full legal advice should be taken from a suitably qualified professional when dealing with particular circumstances.

If you have any queries in relation to any aspect of the new legislation we are happy to discuss these with you

John O’Connor

John O’Connor

Managing Partner

T: 676 4488
E: john.oconnor@oclegal.ie

Peter Benson

Peter Benson


T: 676 4488
E: peter.benson@oclegal.ie

Gail O’Keeffe

Gail O’Keeffe


T: 676 4488
E: gail.okeeffe@oclegal.ie