The Designated Activity Company (DAC)

 

31st August 2016 - Last chance to pass ordinary resolution to convert to DAC

Only companies registered under the new Companies Act will be Designated Activity Companies (DAC).

A Designated Activity Company (DAC) is determined in Part 16 of the Companies Act 2014 and defined as a private company limited by shares with the capacity, including the power, to do only those acts or things set out in its constitution (memorandum of association) or a private company limited by guarantee and having a share capital with the capacity, including the power, to do only those acts or things set out in its constitution. So, a DAC company will have certain regulations in its constitution, detailing certain objects or articles of association which are not specified in the template LTD company constitution.

Private Guarantee companies are deemed to be DACs under Part 16 of the Companies Act 2014 on commencement of the Act - 1st June 2015.

Private companies (limited by shares), incorporated under the old Companies Acts, can convert under the new Act to a DAC limited by shares and unless during the transition period ,(18 months from commencement on 1st June 2015), they undertake the conversion process to become a DAC, they will be deemed instead to become a LTD company, private company limited by shares under Part 2 of the Act.

Any existing private company (limited by shares) (EPC) which has not completed the conversion process to a DAC will be deemed to be a LTD company instead. So it is important, that a company that was incorporated under the previous Companies Acts  which wishes to be a DAC undertakes the conversion process. Where a company has not passed the necessary resolution and wishes to still convert to a DAC, such a company can re-register as a DAC by using Part 20 of Companies Act 2014 or under section 57 court order.

Please see Leaflet no. 31 on conversions 

The postal address for submissions on conversions is: The Companies Registration Office, O'Brien Road, Carlow R93 E920.

Documents to accompany DAC conversion applications:

N2
Conversion to DAC Company
+

 G2

Ordinary/Directors Resolution

+ 

New Constitution

(with change of name only)

Please note: List of Subscribers must be the Original Subscribers as submitted to the CRO on incorporation. The most up-to-date authorised share capital should be stated in the constitution.

 Features of the DAC include:

• Designated Activity Companies have a memorandum in their constitutions which state the objects for which the company is incorporated.
• It has a constitution document which includes a memorandum and articles of association.
• It has limited liability and has a share capital or is a private company limited by guarantee
• It must have at least two directors. All directors must be over eighteen.
• It can pass majority written resolutions but cannot dispense with the need to hold an AGM.
• The name of the company must end in "Designated Activity Company" or "Cuideachta Ghníomhaíochta Ainmnithe" unless exempted
• It can claim eligibility for audit exemption and dormant company audit exemption.

Certain companies are specifically envisaged as being DACs. Examples include charities, management companies, companies limited by guarantee and companies which are incorporated for a specific purpose for which the shareholders wish the capacity of the company to be clearly defined. Certain companies are obliged to convert to a DAC - an existing private limited company that has published an offering document or obtained an admission to trading on a regulated market for its debentures.

(Debentures means debenture stock, bonds and any other debt instruments of a company or any forms of securitised debt, including depositary receipts in respect of such securities, whether constituting a charge on the assets of the company or not).

All Designated activity companies' names shall end with ‘Designated Activity Company’ or “Cuideachta Gníomhnaíochta Ainmnithe”. There is an exception to this as there is a power to dispense with DAC in the name of charitable and other companies under section 971 and section 1180 (guarantee companies without share capital). (References old section 24 Companies Act 1963). 

Conversion to DAC - Designated Activity Company

From Date of Commencement (1st June 2015) to End of Transition Period (18 months later, 30th November 2016), existing private limited companies, which are limited by shares, (EPCs) can convert to this company type. Conversion to this company type will require a change in name of the company as all Designated Activity Companies must include their company type at the end of their name. 

EPCs may wish to convert to this company type if they wish to have or retain specific objects for which the company was incorporated. Certain companies are obliged to convert to a DAC - an EPC that has published an offering document or obtained an admission to trading on a regulated market for its debentures. (Debentures means debenture stock, bonds and any other debt instruments of a company or any forms of securitised debt, including depositary receipts in respect of such securities, whether constituting a charge on the assets of the company or not).

Under section 56, an EPC may convert to a DAC, Designated Activity Company. There are time constraints involved in the conversion process.

Time Constraint
In order to convert to a DAC, a private company (limited by shares) can pass an ordinary resolution within the 15 month transition period after the commencement of the Companies Act 2014 on 1st June 2015 and submit the new constitution and resolution together with the form N2 to the CRO.  Please include a copy of the original list of subscribers as submitted to the CRO at the incorporation of the Company, (NOT the current list of shareholders).   There are no filing fees required with this submission.

Other means of re-registration before the expiry of the transition period are:
• if, three months before the expiry of the transition period,  a notice in writing requiring the company to do so is served on the company by a member or members of the company, who hold shares that confer, in aggregate, more than 25% of the total voting rights.
• if, where anything is done by an existing private company, being something that which would not be in compliance with section 68 - limitation on offers of securities to the public- the company must re-register as a DAC before the expiry of the transition period.
• if, instead of re-registering as a DAC, the company may by passing a special resolution, re-register as another type of company, meeting the requirements of that particular re-registration.

Form N2 is submitted to the CRO together with the resolution to alter the company type as well as the company’s new constitution (memorandum and articles of association). The constitution will be in the format of Schedule 7 to the new Companies Act 2014 (DAC limited by shares). Now, if it is the case that the company does not have articles but relies instead on the regulations of Table A from the 1963 Act, then the new constitution should state that the articles comprise those regulations.

Despite the repeal of the previous companies acts, the regulations of Table A will continue in force where the company did not have registered articles in its constitution or where the M&A was governed in part by the regulations contained in Table A but
• These regulations will not have force where they are inconsistent with a mandatory provision of the new Companies Act.
• The regulations may be altered or added to by means of a special resolution.
• Where Table A makes reference to any provision of the previous Companies Acts, that reference shall be read as being to the corresponding provision of the new Companies Act. 

Registration of Documents

Once the N2 form and associated documents are registered, a new certificate of incorporation will be issued by the Registrar of Companies. The company becomes the new company type only on the issue of this certificate.

Change to Company Name Required

All Designated Activity Companies, whether limited by shares or guarantee, must have the words “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” at the end of their name.  The words “designated activity company” may be abbreviated to “d.a.c.” or “dac” (including either such abbreviation in capitalised form) in any usage after the company’s registration by any person including the DAC. The words “cuideachta ghníomhaíochta ainmnithe” may be abbreviated to “c.g.a.” or “cga” (including either such abbreviation in capitalised form) in any usage after the company’s registration by any person including the DAC.

Exemption from use of the Company Type in Name of Company

EPCs which were exempted under section 24 of the Companies Act 1963 as amended, will continue to be allowed to apply the exemption regardless of the fact that the Acts have been repealed - section 971(8) and section 1180(8) refer. Where reference was made in the previous exemption to “limited”/”teoranta” this now applies to the requirement to display the new company type.

Under the new Act, the phrase “Designated Activity Company” or “Company Limited by Guarantee” may be dropped from the company’s name where the company is a Designated Activity Company or a Company Limited by Guarantee and the constitution of the company states that the objects will be the promotion of commerce, art, science, education, religion or charity. In addition, the company’s constitution must state that

(a) the profits of the company (if any) or other income are required to be applied to the promotion of the objects;
(b) payment of dividends/distributions to its members is prohibited;
(c) all assets which would otherwise be available to its members are required to be transferred on its winding up to another company whose objects are the promotion of commerce, art, science, religion or charity.

Such companies file a form G5 together with the application to incorporate. Companies which are converting to DAC status must submit the form G5 together with their application to convert to the new company type. It should be noted, however, that a company which is exempted from the obligation to use the words as part of its name, is still obliged to show on its letters and order forms the fact that it is such a company.

Companies incorporated under statute law such as semi-state bodies, after consultation with their relevant Minister, should convert to Designated Activity Company status. Such companies if they were incorporated without the requirement to include "limited" or "teoranta" as part of their name, will be exempt from the requirement to change their name but will still file a form N2.

What happens after the Transition Period?
Under section 57, where a company failed to convert to a Designated Activity Company (DAC), the following people may apply to the High Court for an order directing that it should re-register as a DAC.

The people who may apply are:

  • one or more members of the company who hold, or together hold, not less than 15 per cent in nominal value of the company’s issued share capital or any class thereof; or 
  • one or more creditors of the company who hold, or together hold, not less than 15 per cent of the company’s debentures entitling the holders to object to alterations of its objects.

Companies can always re-register from one type to another using Part 20 of the Companies Act 2014.

Under Section 61 of the Companies Act 2014, if the private company has failed to convert by End of Transition Period (30th November 2016,18 months after commencement on 1st June 2015), the Registrar of Companies will apply the deeming provisions of the Act, the company will become a LTD company, a private company limited by shares registered under Part 2 of the new Act. The registrar will then issue a new certificate of incorporation to the company. The memorandum and articles of association of the company will then exist as a constitution and the constitution will comprise the existing memorandum, other than the provisions that contains its objects or provide for, or prohibit, the alteration of all or any the provisions of its memorandum or articles and the provisions of its existing articles

 Features of the new Company Models - LTD and DAC

New LTD Company Model Designated Activity Company
It may have just one director (but it must have a separate secretary if it has only one director). It must have a least two directors.
It can have between 1 and 149 members. It can have between 1 and 149 members.
It does not need to hold an AGM. It does need to hold an AGM where it has 2 or more members.
It has a one-document constitution which replaces the need for a memorandum and articles of association. It has a constitution document which includes a memorandum and articles of association.
It will not have an objects clause because it has full unlimited capacity to carry on any legal business, subject to any restrictions in other legislation. It has a memorandum in its constitution which states the objects for which the company is incorporated.
It can claim eligibility for audit exemption (and dormant company audit exemption). It can claim eligibility for audit exemption and dormant company audit exemption.
It has limited liability and has a share capital. It has limited liability and has a share capital or is a private company limited by guarantee with a share capital.
It can pass majority written resolutions (special and ordinary). It can pass majority written resolutions unless constitution states otherwise.
Name must end in "Limited" or "Teoranta" Name must end in "Designated Activity Company" or "Cuideachta Ghníomhaíochta Ainmnithe" unless qualified for an exemption.