What is a DAC and when is re-registration as a DAC appropriate?

What is a DAC?

The Companies Act 2014 (the “Act”), which is expected to come into effect on 1 June 2015, requires all existing Irish private companies limited by shares (Private Companies) to re-register as one of two forms of Private Company, (i) the new model form of private limited company (“LTD”) or (ii) a designated activity company (“DAC”). The LTD is the centrepiece of the Act. It is designed as a simplified form of company and can have a brief one-page constitution, unlimited objects, one director and a simplified corporate governance structure.  For further information on LTDs and when to convert to an LTD, please read our publication entitled "What is an LTD and when is re-registration as LTD appropriate?” 

The DAC more closely resembles the current Private Company structure in that it has a two document constitution akin to the current Memorandum and Articles of Association and its capacity is limited by a defined set of objects. Also, while most of the provisions governing LTDs apply equally to DACs, not all of the simplified corporate governance innovations are available to a DAC. For instance, it must have a minimum of two directors and it is not entitled to dispense with physical AGMs unless it is a single-member company.   The company name of a DAC will be required to end with the words “DAC” or “Designated Activity Company” (with potential knock-on effects for company stationery, website, signage, seals, packaging etc).

Why register as a DAC?

While the expectation is that a significant number of existing Private Companies will re-register as LTDs to avail of the simplified requirements, it will not be appropriate or, in some cases, possible for all Private Companies to re-register as LTDs.  

For certain companies, the position will be clear. A Private Company which lists or trades debt securities cannot re-register as an LTD and must re-register as a DAC. Similarly, a Private Company which holds a banking or insurance license will be required to re-register as a DAC. 

For others, the directors will need to assess the appropriate corporate structure. Where there is a commercial agreement that a company must have restricted objects, e.g. a joint venture company, such companies are likely to re-register as DACs as the objects of an LTD cannot be restricted.  Additionally, certain companies with investors on board, complex share capital and/or corporate governance structures, or an M&A reflecting a negotiated position which they wish to retain, may decide on balance that there is no significant benefit to them in re-registering as an LTD and may, for various reasons, choose to re-register as a DAC.  

How to convert to a DAC?

All existing Private Companies will be treated as DACs for a “transition period” of 18 months from commencement unless and until they re-register as LTDs.  To re-register as a DAC, a Private Company must pass a members’ ordinary resolution within 15 months of commencement and file its new constitution in the Companies Registration Office. A certain proportion of members and/or debenture holders can require re-registration as a DAC in certain circumstances. On expiry of the 18 month transition period, all Private Companies which have not re-registered as either an LTD or DAC will automatically be deemed to be an LTD pending re-registration as another form of company.  

Next Steps 

If you require guidance in determining the most appropriate corporate structure for your company post-commencement of the Act or would like advice in relation to any other aspect of the Act, please contact Gillian O'Shaughnessy, Partner, Corporate Dept on +353 (0)1 691 5286, Eileen O'Connor, Head of Corporate Secretarial on +353 (0)1 691 5300 or your usual contact in the ByrneWallace Corporate Department. 

For further information on the Companies Act 2014, please read our relevant publications below:

• Companies Act, 2014 - Preparing Your Company for a Smooth Transition
• Companies Act, 2014 - Frequently Asked Questions
• Companies Bill 2012 - Landmark Reform of Irish Company Law

Alternatively we will be posting a series of topical e-bulletins on the ByrneWallace website and Linkedin page during the lead-in period to commencement of the Act, as well as post-commencement, which will assist companies navigating the new company law regime and assessing its practical impact.   If you would like to receive these e-bulletins directly, please register here. 

Otherwise please, monitor our website or Follow us on Linkedin.