It is finally here. After 15 long years of speculation, debate, consultation, drafts and redrafts, Companies Act 2014 commenced on 1st June 2015.
Existing private limited companies will have to decide whether to become a Company Limited by Shares (new simplified entity) or a Designated Activity Company. During the course of the 18 month transition period, companies will have to convert and factors to consider include reviewing existing Articles of Association and the provisions of the Companies Act 2014 to determine what provisions your company’s new constitution will or should contain. The necessary conversion steps then need to be taken for each company, which may include a change of name. Failure to take action may be deemed to be a breach of directors’ duties and may result in a corporate form not suitable to the activities of your company. Our diagram sets out some of the factors to consider to assist you in the decision making process. Other company types may also be required to change their name or their constitutional documents within the transition period. See the attached illustrations:
The Act is a lengthy document containing over fourteen hundred sections and twenty-five parts. Key features of the Act include:
- Creation of new company types
- Codification of directors’ statutory and fiduciary duties
- A new requirement to register, on public record, persons authorised to bind a company
- The use of service addresses by directors and secretaries in lieu of residential addresses
- Allowing mergers and acquisitions of private companies
- Expanding audit exemption
- Introduction of a summary approval procedure to ease prohibitions on certain restricted activities.
The Act commenced on June 1st and so the 18 month transition period has now begun. During this time, companies should take steps to ensure compliance with the Act.
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