16 April 2015

Companies Limited by Guarantee and the Irish Companies Act 2014

Irish charities are facing a whirlwind of change in 2015 with the implementation of the Charities Act 2009, and all small charities are also wondering how the new Companies Act 2014 will affect them. Irish charities tend to be companies limited by guarantee and we've outlined below certain issues to watch for when the new act is implemented in June 2015.

As a result of the many changes in the new Companies Act, the regulations concerning companies limited by guarantee (CLG) have been streamlined and clarified, and in some cases certain restrictions have been relaxed. The act will come into effect from the 1st of June 2015, with a transition period lasting 18 months (thus ending 31st November 2016). As an existing or prospective director or member, here are some of things you may need to know:
Company Limited By Guarantee
New CLG Company Limited by guarantee
  • The company name must end with ‘Company Limited by Guarantee’ or ‘Cuideachta faoi Theorainn Ráthaíochta’ (which can be abbreviated to CLG/C.L.G. or CTR/C.T.R.), unless an exemption is obtained from the CRO (existing exemptions will be upheld).
  • Such an exemption is obtainable where:
    • The objects of the company (its intended activity or purpose) are “the promotion of commerce, art, science, education, religion, charity or any other prescribed object”
    • The constitution requires that profits or other income be applied to the promotion of its objects and not distributed to its members
    • And, on the winding up of the company any assets must be transferred to another company with similar objects
  • Existing CLG with names ending in ‘Limited’ or ‘Teoranta’ will retain these for the transition period, but will have them changed by the CRO afterwards (31st November 2016) to end with ‘Company Limited by Guarantee’ or ‘Cuideachta faoi Theorainn Ráthaíochta’ respectively.
  • A single document Constitution will replace the Memorandum and Articles of Association of the company. However, in the case of existing CLG, the new form of Constitution contains the Memorandum and Articles of Association within it, and it will not be necessary to create a new Constitution so long as the existing Memorandum and Articles of Association does not conflict with any of the provisions of the new act.
  • The objects of the company must still be stated in the Memorandum section of the Constitution, but there is no longer a need to state every potential activity. It is sufficient now to amend the following statement to its primary objects: “…and the doing of all such other things as are incidental or conducive to the attainment of the above object.”
  • A CLG must have at least two directors, a person cannot be director of more than 25 companies, and all directors must be over 18 years of age. (The Companies Act 2014 allows single director companies for the first time with the "New Limited Company" structure).
  • Unless otherwise stipulated in the Constitution, all directors must retire at the first AGM and new ones be elected (retiring directors are immediately eligible for re-election). A third of the Directors must retire at every subsequent AGM (by order of those longest in office).
  • A CLG may now have just one member/subscriber
  • A CLG still must hold an AGM if it has two or more members
  • The articles must state the number of members to be registered; where this number increases, the particulars of this must be delivered to the CRO within 15 days.
  • Only members can participate in the divisible profits of the company
  • A CLG can now, if it meets certain criteria, apply for audit exempt status
  • A CLG may, if it is a charitable organisation meeting certain criteria with the Charities Regulatory Authority, be exempted from filing financial statements with their annual return to the CRO.
Further Reading:

Should you require further information on the act, and how it may affect your charity or company limited by guarantee, please contact us at office@nolanassociates.ie.