Part 19 – Unlimited Companies

9 Chapters – Sections 1227 to 1282

Part 19 Chapter Overview

Chapter 1 – Preliminary and definitions

Chapter 2 – Incorporation and consequential matters

Chapter 3 – Share capital

Chapter 4 – Corporate governance

Chapter 5 – Financial statements, annual return and audit

Chapter 6 – Winding up

Chapter 7 – Examinerships

Chapter 8 – Investigations

Chapter 9 – Public offers of securities etc

Part 19 Summary

The features of the 3 types of unlimited companies set out under the Act and how the legislation treats them differently from the LTD as set out in parts 1 to 15 of the legislation.

Key Features of Unlimited Companies

Name:	The name of all three types must end in “unlimited company” or “UC”.
Constitution:	It must have an objects clause and a 2 two document constitution comprising of a Memorandum and Articles of Association. The Memorandum of an ULC and a PUC must state the share capital of the company while the Memorandum of a PULC must state that the company does not have a share capital.   The articles may contain regulations regarding the internal running of the company or it may simply contain a statement to the effect that the provisions of the Act are adopted. Where the articles do not expressly exclude or modify an optional provision in the Act the provision will be deemed to apply.  A special resolution can be passed to alter an unlimited company’s objects.   Although an unlimited company must have an objects clause, persons dealing with it will not be prejudiced if the company is acting beyond its capacity and any person doing business with a company is no longer bound to inquire as to whether the activity is within the company’s capacity. However the directors may be held to account for causing the company to act in such a manner. An ultra vires act can be ratified by special resolution. A separate resolution can absolve the directors from any liability arising.   The articles can be amended or added to by special resolution. Debenture holders shall be entitled to object to the alteration of the objects clause and must be given notice of the meeting where the resolution to alter the objects is to be passed.
Corporate Governance:	An unlimited company must have at least 2 directors.   New members must be approved by the directors. Membership ceases on de-registration or death.   A single member unlimited company may dispense with the requirement to hold an AGM. A multi-member unlimited company may not.
Share Capital:	A ULC cannot list securities but a PUC and a PULC may list debt securities.   Unlimited companies will be able to reduce their share capital and also make distributions other than out of distributable profits.   A share transfer instrument for an unlimited company must be signed by both the transferor and the transferee.
Filing Requirements:	An unlimited company will be exempt from filing accounts at the CRO (unless there is a limit on the liability of all of the members.)   An unlimited company can avail of audit exemption.   Director’s compliance statements are not necessary for unlimited companies.   Where there are changes in the interests of the members of a PULC in the financial year to the particulars must be given in the notes to the financial statements.

What is new?

There are 3 distinct types of unlimited company under the Act. These are the private unlimited company with a share capital (ULC), the public unlimited company with a share capital (PUC) and the public unlimited company without a share capital (PULC). The Minister has been given a statutory power to exempt an unlimited company from the requirement that its name must end in the word “unlimited company”.

Unlimited companies can avail of the audit exemption under Sections 358 and 359 and an audit exempt unlimited company that meets the requirements may not have to file anything in the CRO other than the Form B1.

What is different?

An unlimited company will be required to have an objects clause but any act done by the company will not be prejudiced by the doctrine of Ultra Vires. The law applying to a LTD will apply to unlimited companies save to the extent it is dis-applied, modified or supplemented by Part 19. A UC may have its debentures listed. A ULC or a PUC may reduce its share capital by special resolution. A single member unlimited company may dispense with the requirement to hold an AGM but a multi-member unlimited company may not under S.1262.

What are the Key Points?

• 3 distinct types of unlimited company
• Retain objects clause
• Can list debentures
• Single member unlimited company may dispense with holding an AGM
• Unlimited companies can avail of the audit exxemption
• Reduction of share capital possible in certain cases

What do accountants need to do?

Accountants should familiarise themselves with the requirements in relation to preparation of financial statements for unlimited companies and any filing exemptions that may apply. Accountancy firms that are incorporated may consider becoming unlimimted companies as they may be able to avail of the exemption and also not have to file any financial information or accountants report with their annual return

What do companies need to do?

Companies should be aware of the governance requirements relating to unlimited companies and the provisions regarding the names of the various types of unlimited company. Despite the fact that unlimited companies and the use of non filing structures companies that are using non filing structures need to be aware of the possible changes on the horizon for non-filing structures under the 2013 EU directive which is expected to be enacted in Ireland in 2015.