This article looks at the different types of companies that are incorporated in Ireland, with a particular focus on the characteristics of the most common type of company, the private company limited by shares.
Private Company Limited by Shares (“Limited Company”)
This is by far the most common type of company in Ireland. The most obvious advantage of a Limited Company is the fact that the liability of the members is in general limited to the amount, if any, of the unpaid shares held by that member. The Companies Act 2014 (the “Act”) allows for a Limited Company to have as few as one director and one member (who may be the same if the member is a natural person) and as many as 149 members. Every Limited Company must also have a secretary. If there is only one director, the secretary must be a different person, however, if there are two or more directors, one of the directors may also be the secretary. It is necessary for at least one director to be resident within the European Economic Area. In the event that there is no such director, a bond must be held in place to the value of €25,000 (for more information please see our previous article on this matter at this link.There is no minimum capital requirement so a Limited Company may be incorporated with a share capital of €1.00. The Act removed the previous requirement for the constitution of a Limited Company to distinguish between authorised and issued share capital, thereby limiting the maximum level of authorised share capital. As such, the authorised share capital can remain unlimited. The Act also removed the requirement for a Limited Company to list all objects and activities which the Limited Company is entitled to carry out. Credit institutions or insurance undertakings cannot be set up as a Limited Company, and must instead be incorporated as Designated Activity Companies.A Limited Company can be incorporated and registered by the Registrar of Companies within a period of 5-10 days. It involves filing a Companies Registration Office Form A1 and constitution in the Companies Registration Office (the “CRO”), following which a certificate of incorporation will be issued. The registered office address of the Limited Company must be a physical address located in Ireland. There are some annual filing requirements which must be complied with, most notably the requirement to file an annual return and financial statements each year with the CRO.There has also been a recent development with the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the “Regulations”) which require companies to hold adequate, accurate and current information on their beneficial owners who directly or indirectly hold a shareholding of 25% or more in an internal beneficial ownership register. This information will then be provided to a central register known as the Register of Beneficial Ownership of Companies. This applies to all “relevant entities” as defined in the Regulations and includes Limited Companies.
Designated Activity Company Limited by Shares (“DAC”)
Similar to a Limited Company, the liability of the members is generally limited to the amount, if any, remaining unpaid on the shares held by that member. Again, there is no minimum capital requirement and a company can be incorporated with a share capital of €1.00. However, much of the simplified legislation introduced by the Act is not available to a DAC. A DAC must have an objects clause within its constitution which sets out the activities which the DAC is entitled to carry out. The constitution of a DAC includes a memorandum and articles of association. There must be a minimum of two directors and a secretary, and there can be up to 149 members. The name of a DAC must end with the suffix “Designated Activity Company”. Credit institutions and insurance undertakings must be incorporated as DACs rather than as Limited Companies.
Designated Activity Company (limited by Guarantee)
This is a slightly different variation of a DAC whereby the members have liability under two headings. Firstly, the members will have liability on the amount, if any that is unpaid on the shares they hold. Secondly, the members will be liable for the amount they have undertaken to contribute to the assets of the company in the event that it is wound up.
Company Limited by Guarantee not having a Share Capital (“CLG”)
The liability of members of a CLG is limited to the amount they have undertaken to contribute to the assets of the company in the event of a winding-up, which does not exceed the amount specified in the memorandum. The members are not required to buy any shares in a CLG as there is no share capital. A CLG must have at least two directors and a secretary. The constitution of a CLG contains a memorandum and articles of association and there must be an objects clause set out in the constitution. The name of a CLG must end with the suffix “Company Limited by Guarantee” unless a specific exemption is obtained. A CLG can avail of an audit exemption, however, any one member of a CLG may object and require that an audit be performed.Generally, this type of company is suitable for charities and sporting bodies as it allows them to secure the benefits of separate legal personality and of limited liability but it does not require members to raise capital. A CLG which enjoys a charitable exemption from the Revenue Commissioners is required to comply with the Charities Act 2009 and must be registered with the Charities Regulatory Authority. It is an offence to describe a company as a charity if it is not registered with the Charities Regulatory Authority.
A Public Limited Company (“PLC”)
The liability of members of a PLC is limited to the amount, if any that is unpaid on shares held by them. There must be at least two directors and a secretary. A PLC can have as few as one member and there is no maximum number of members. The name of a PLC must end with the suffix “Public Limited Company”. The nominal value of the allotted share capital of a PLC must not be less than €25,000, at least 25% of which must be fully paid up before the company commences business or exercises any borrowing powers. A PLC is the only type of company that can have shares listed on a stock exchange.
A Public Limited Company (“PLC”)
The liability of members of a PLC is limited to the amount, if any that is unpaid on shares held by them. There must be at least two directors and a secretary. A PLC can have as few as one member and there is no maximum number of members. The name of a PLC must end with the suffix “Public Limited Company”. The nominal value of the allotted share capital of a PLC must not be less than €25,000, at least 25% of which must be fully paid up before the company commences business or exercises any borrowing powers. A PLC is the only type of company that can have shares listed on a stock exchange.
Unlimited Company (“UC”)
The liability of members of a UC is unlimited. If a UC is being wound-up, the members will be liable to make good any shortfall that may exist. There must be at least two directors and a secretary. A UC can have as few as one member and there is no maximum number of members. The name of a UC must end with the suffix “Unlimited Company”. While the risks of incorporating a UC are obvious, one of the significant advantages is the absence of a requirement to file financial statements in the CRO each year.
Why Choose Ireland?
Ireland has the second lowest corporate tax rate in Europe with all Irish corporate trading profits being taxed at 12.5%. Further, according to recent figures released by BDO, Ireland is the fifth most attractive country in the world for Foreign Direct Investment. Incorporating a company in Ireland will provide access to the EU single market, while also providing a gateway to the United Kingdom by virtue of their proximity to each other. Ireland also has a legal system and culture comparable with the United Kingdom which will provide a level of comfort and familiarity to any company looking to re-locate or set up their base in Ireland.This note is for general information purposes and does not constitute legal advice. Legal advice must be obtained for all individual circumstances. Each case must be assessed on its own merits.
