The Companies Act 2014
Companies Limited by Guarantee
June 2015
What has happened?
The Companies Act 2014 (the “Act”) which
consolidates all old legislation into 25 parts and over
1400 sections, was enacted on 23 December 2014 and
commenced 1 June 2015
The Act is structured in two volumes:
• parts 1 to 15 - model private company limited by
shares; and
• parts 16 to 25 - all other companies.
A Company Limited by Guarantee (CLG)
The CLG is a company most commonly used for
charities, social clubs and property management.
The CLG will have a constitution which will be in the
form of a Memorandum and Articles of Association.
It will continue to have an objects clause. The
Memorandum and Articles of Association of a CLG
registered before the commencement of the relevant
provisions of the Act, shall continue in force save to the
extent that they are inconsistent with the mandatory
provisions of the Act.
Generally, the law relating to a private company limited
by shares will apply to a CLG with certain exceptions
and some additional provisions which are set out over
nine chapters in Part 18 of the Act:
1 preliminary and definitions;
2 incorporation and consequential matters;
3 share capital;
4 corporate governance;
5 financial statements, annual return and audit;
6 liability of contributories in winding up;
7examinerships;
8 investigations; and
9 public offers of securities.
Hereinafter, we set out a short synopsis of some of the
principle matters for a CLG to be aware of.
Chapter 1 – preliminary and definitions
Chapter 1 deals mainly with various definitions relating
to a CLG and how the legislation in Part 1 to 15 applies
except as dis-applied or modified in chapters 2 to 9 of
Part 18 of the Act.
Chapter 2 – incorporation and consequential
matters
A CLG:
1 cannot have a share capital;
2 can have just one member, and no maximum number
of members (previously seven minimum);
3 will have an objects clause (although the Act seeks to
oust the operation of the doctrine of ultra-vires by
providing that the validity of an act done by a CLG
shall not be questioned on the ground of lack of
capacity); and
4 name must end with “Company Limited by
Guarantee” (or CLG, C.L.G, clg or c.l.g.) or the
Irish equivalent, save where application made to
dispense with this requirement.
Chapter 3 – share capital
It is provided that a CLG will not be prevented from
having its debentures admitted to trading or listed.
Chapter 4 – corporate governance
A CLG:
1 must have at least two directors;
2 may not dispense with holding an AGM unless it has
only one member;
3 unless constitution provides otherwise:
-- the directors shall retire by rotation;
-- directors’ remuneration (if any) must be
determined by the members in general meeting;
-- directors may not vote in respect of any contract,
appointment or arrangement in which he or she is
interested and shall not be counted in the quorum;
and
-- cannot use the majority members’ written
resolution.
Chapter 5 – financial statements and audit
exemption
In what is seen as a significant change, a CLG can
now avail of audit exemption once they satisfy the
criteria set-out in the Act. It should be noted that any
one member can object to the CLG claiming audit
exemption.
Small company conditions for audit exemption
The qualifying conditions for a company to claim audit
exemption are satisfied where it meets two or more of
the following requirements in the current and preceding
financial year:
• the amount of the turnover of the company does not
exceed €8.8 million; and/or
• the balance sheet total of the company does not
exceed €4.4 million; and/or
• the average number of employees of the company
does not exceed 50.
Procedure
It is suggested that the decision of the directors should
be recorded in the minutes and the members notified of
the company’s intention to avail of the audit exemption.
Once the directors have chosen to avail of audit
exemption, they should terminate the appointment of
the auditor.
The auditor must then serve notice on the company
within 21 days of receipt of a letter from the company
informing them of the directors’ decision. A copy of the
notice should be filed with CRO. Accounts must still
be filed in the CRO, these can be abridged accounts.
Transition period
A transition period of 18 months from 1 June 2015
allows companies make any changes which are
necessary as part of the commencement of the Act.
During the transition period CLGs’ have an option to
change their name so that their name ends in“Company
Limited by Guarantee” (or CLG, C.L.G, clg or c.l.g.)
or the Irish equivalent, save where application made to
dispense with this requirement.
Companies incorporated under the previous
Companies Acts which were exempted under Section
24 of the Companies Act 1963 from displaying their
company type and then only where the company met
specific requirements will continue to be allowed to
apply the exemption.
No fees will be charged for companies undergoing the
conversion process or meeting the name requirements
under the new Act if the change is made during the
transition period. Companies wishing to make the
change before the end of the transition period should
file a form N3 to effect the name change.
If at the end of the transition period the CLG has not
changed the name of the company and submitted an
amended constitution using a Form N3, the Registrar of
Companies will change the name of the company and
issue a new certificate of incorporation automatically
(unless the company already has an exemption).
Changes to the company name will affect company
letterheads, stationery and signage.
Practical considerations
Opportunity to review your Memorandum and Articles of
Association to ensure up to date with activities of company,
change any superfluous clauses/provisions, change/reduce
members etc.
All company letterheads, cheques, official paperwork etc. to
include “CLG” in the title of the company.
Additional responsibilities on directors that should be
communicated to any person acting as a director.
Ensure that “de-facto” and shadow directors are aware that
they are now bound by same duties as a formally appointed
director.
Any newly appointed directors or company secretary are
required to make a written declaration acknowledging role and
responsibilities on appointment.
All directors’ meetings must be minuted.
Compliance statements may be required to be prepared by a
CLG if certain financial thresholds are met which are:
• turnover of greater than €25m; and
• a balance sheet total of greater than €12.5m.
An audit committee may be required to be established by a
CLG if certain financial thresholds are exceeded which are:
• turnover of greater than €50m; and
• a balance sheet total of greater than €25m.
A CLG which is also a registered charity with the Revenue
Commissioners (the “Revenue”) will also need to comply with
the Revenue requirements and the Charities Act 2009.
CLGs that are setup for the purpose of property management
should also consider their requirements if any under the
Multi-Unit Developments Act 2011.
Summary – CLG main changes
A CLG does not have to convert or register under the Act
but continues in existence.
A CLG will have to change its name to include the words
‘Company Limited by Guarantee’ or ‘CLG’ for ‘Ltd’ at
the end of its name by the end of the transition period,
otherwise this will happen automatically.
A CLG may have one member but must have two
directors.
A CLG cannot dispense with the holding of an AGM
where it has more than one member.
The above information relates to CLGs and the rules
under the Act, it does not take account of other legislative
requirements.
Further detail on directors’ compliance statements and the
need for an audit committee can be found on our website,
www.grantthornton.ie.
Contact
If you require assistance or want to learn more about
the Companies Act 2014, please refer to our other
publications at www.grantthornton.ie or contact our
Companies Act 2014 team at
[email protected].
Jillian O’Sullivan
Partner
T +353 (0)1 680 5850
E [email protected]
Amanda-Jayne Comyn
Director
T +353 (0)1 680 5660
E [email protected]
24-26 City Quay, Dublin 2
@GrantThorntonIE
www.grantthornton.ie
Offices in Dublin, Belfast, Cork, Galway, Kildare, Limerick and
Longford.
#GTCompaniesAct
© 2015 Grant Thornton Ireland. All rights reserved. Authorised by Chartered Accountants Ireland (“CAI”) to carry on investment business.
“Grant Thornton” refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires.
Grant Thornton Ireland is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.
This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
Please visit www.grantthornton.ie for further details