Companies Act 2014 and its impact on companies operating in the Irish Investment Funds Industry
The Companies Bill 2012 has now been signed by the President of Ireland (on 23 December 2014), and has become the Companies Act 2014 (the Act). It is expected that most of the provisions of the Act will come into effect on 1 June 2015, although this date is subject to change. The Bill as passed by both Houses is available at the following links Volume 1 and Volume 2. The Act is not yet available. Companies remain subject to the Companies Acts 1963-2013 until the Act commences. The current citation remains the Companies Acts 1963 to 2013. The Act will replace the Companies Acts 1963-2013 and will not be a part of the current legislation.
The Act introduces reforms in company law in Ireland, which are summarised by A&L Goodbody in the material available through this link. This note looks at the impact of the Act on companies operating in the Irish investment funds industry.
UCITS Management Companies, AIFMs and some other service providers
Private companies incorporated under Irish company law such as UCITS Management Companies and AIFMs (as well as some other service providers) will need to decide whether to convert to one of two new types of company (Company Limited by Shares (CLS) or Designated Activity Company (DAC)) or another company type. It is anticipated that most will re-register as a DAC, which is the closest of the new company types to an existing private company. A DAC must have an objects clause and its name must end with "designated activity company". In addition and unlike a CLS, a DAC must have an authorised share capital and at least 2 directors.
The shareholders in such a private company will have to pass a resolution to convert within the 15 month period following the entry into force of the new Act. In many cases this resolution will be passed at the company's annual general meeting, in the interests of efficiency. The Memorandum and Articles of Association of the company will also need to be reviewed and converted into a new single "constitution" document although, other than making reference to the fact that the company is a DAC, the constitution does not otherwise need to change as a result of the new Act. It is likely that the new constitution will reflect improved procedures and flexibilities available under the new regime. If within 18 months, an existing private company has not re-registered, it will be deemed to be a CLS. By doing nothing the directors could be in breach of their duty to ensure that the new legislation is complied with and accordingly we would not recommend this approach.
Investment companies structured as public limited companies
Some changes will arise for investment companies structured as public limited companies too, but funds industry participants will be relieved to hear that the new Act amounts to more or less a restatement of existing company law as it applies to such companies. Some changes will arise but public limited companies will not need to convert as a result of the Act. It is likely that investment companies structured as public limited companies will adopt new articles of association to align themselves with the new regime.
Codification of director's duties
An aspect of the new Act that applies to all Irish companies is the introduction of a non-exhaustive codification of the principal fiduciary duties of the directors of an Irish company, whether private or public. A&L Goodbody has released a note focused on this point which is available here.
At A&L Goodbody, we can assist you in converting your private company and can advise on the most appropriate form of constitution which your company should adopt. We can also assist with providing a refresher course for directors on their fiduciary duties, as codified in the Act.
For more information please contact Brian McDermott, Michael Barr , Mary McKenna, Niamh Ryan, Elaine Keane, Nollaig Greene or your usual contact in the A&L Goodbody Asset Management & Investment Funds team, who will be able to assist you with the next steps.
Date published: 07 January 2015