Updating Your Client’s Company Constitution
Businesses are generally formed under a set of circumstances that dictate the most appropriate company type adopted. The most common company model is the Company Limited by Share Capital, but, under the Companies Act 2014, there are variations such as Unlimited Companies, Designated Activity Companies and Companies Limited by Guarantee.
Over time, circumstances change and the requirements of the company change accordingly. In Ireland, there has been seismic change to financial reporting requirements since the introduction of Companies Act 2014, the Companies (Accounting) Act 2017 and, of course, FRS 102.
Increased disclosure requirements for directors’ remuneration, key management remuneration and profit reconciliation have prompted many directors to review their company’s corporate form and ultimately re-register to an Unlimited Company type, as such companies, provided they are truly unlimited, do not have to file financial statements.
For other entities, it becomes apparent, over time, that the company type adopted is not best suited to purpose. This is particularly an issue for certain charity and property management companies that were established as Limited by Share Capital when a Company Limited by Guarantee would have been far better suited to the operations of the company.