Conversion of Existing Private Companies – the LTD and DAC

The Companies Act 2014 is expected to commence on 1 June 2015 and there will be a transition period of 18 months after the commencement during which existing private companies must make a decision whether to become an LTD, DAC or other form of private company.

Private companies have a number of options. The company may ‘opt in’ within the 18 month transition period to become an LTD. Alternatively the company may ‘opt out’ within 15 months from the date of commencement of the Act to become a DAC.

Where a company defaults and fails to either ‘opt in’ or ‘opt out’, the company will be deemed to have become an LTD at the end of the transition period. Until the end of the transition period, such a company will be governed by the rules applicable to DAC’s.

A company which has converted to one type may also re-register as another type at any time by passing a special resolution and complying with the statutory requirements under the Act.

Principal features of the LTD

Under existing legislation, private companies may have no more than 99 members, whereas under the new Act an LTD may now have anywhere between 1 and 149 members. Previously every private company had to have at least 2 directors whereas an LTD may have only 1 director. An LTD must also have a company secretary, and if the company has only one director then that person may not act as both secretary and director.

One of the most notable changes under the 2014 Act is that the LTD will now have a single document constitution which replaces the existing memorandum and articles of association. The constitution must state the company’s name, that the company is a private company limited by shares, that the liability of its members is limited, the division of its share capital into shares of a fixed amount (it may state an amount of authorised share capital but is not obliged to do so), the number of shares taken by its subscribers and any supplemental regulations altering or dis-applying any of the optional provisions under the Act.

The constitution of an LTD will not contain an objects clause, and an LTD will have full and unlimited capacity to carry on and undertake any business or activity or to do any act or to enter into any transaction. Members of the Board of Directors and any other registered person will be deemed to have full authority to bind the company irrespective of actual authority and irrespective of any limitations in the company’s constitution or ancillary agreements. This in effect means that third parties will no longer need to be concerned with the doctrine of ultra vires in transactions with LTD’s.

LTD’s with two or more shareholders may dispense with the holding of an AGM where all the members entitled to attend and vote at the AGM sign a written resolution to this effect. The written resolution must acknowledge receipt of the company’s financial statements and must deal with any other business which would otherwise arise at a formal AGM.

Under the new Act, a reduction in a company’s share capital no longer requires High Court confirmation and can be effected using the Summary Approval Procedure. This procedure involves the passing of a special resolution by the shareholders together with board of directors making a declaration setting out the prescribed details and confirming that they have inquired into the company’s affairs and having done so they have formed the opinion that the company will be in a position to meet all of its debts as they fall due for a period of 12 months following the reduction of capital.

Conversion to an LTD

There are three ways in which existing private limited liability companies can become an LTD:-

  • Shareholder Approval

The Shareholders may pass a special resolution (75% shareholder approval) adopting the amended constitution in an approved form.

  • Director’s Resolution

Alternatively, the directors may prepare and file an amended constitution in the approved form based on the company’s existing memorandum and articles of association.

  • Automatic Conversion

Where a company defaults and fails to either ‘opt in’ or ‘opt out’, the company will be deemed to have become an LTD at the end of the transition period. In this instance, the existing memorandum and articles of association will continue to have effect, with the exception of the objects clause.

Principal features of the DAC

The DAC closely resembles the existing private company limited by shares and by its nature is more suitable for companies who wish to confine their activities to those designated in its constitution or carry on an activity not permitted to an LTD, such as joint ventures, financial services and charities.

Where a company wishes to convert to a DAC, the existing memorandum and articles of association must be presented as a single document and the constitution must reflect the company’s new status as a DAC.

By contrast to the LTD, a DAC is permitted to retain its objects clause. Notwithstanding this fact, the doctrine of ultra vires has been modified so that the validity of an act carried out by a DAC cannot be questioned on grounds of lack of capacity.

A DAC, unlike an LTD, is still required to have at least two directors and unless it is a single member DAC, it must hold an AGM.

The company’s registered name must end in “designated activity company” which may be abbreviated to “DAC”, “d.a.c.” or other Irish alternative.

Financial institutions, insurance undertakings and any company whose debentures are listed are prohibited from registering as LTD’s and therefore will be required to re-register as a DAC or a plc.

Conversion to a DAC

An existing private company can convert to a DAC within 15 months from the date of commencement to a DAC by passing an ordinary shareholder resolution (50% approval). A company may still re-register after the expiration of this period; however a special resolution (75% approval) will be required to do so.

A private company must re-register as a DAC if a re-registration notice has been served on it by members holding over 25% of voting rights or if members or creditors holding more than 15% of the issued share capital or debentures have obtained an order from the court directing that the company convert to a DAC.

Contact Mark Roberts for more information.


This publication is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Ogier Leman for any action taken or not taken in reliance on the information set out in this publication. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. Any and all information is subject to change.

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