The first and most important step in setting up a company is to understand the options for the different types of companies in Ireland. Choosing the right company type can be a confusing and complex process. Nonetheless, it is key to determining your business’s most efficient tax structure and a vital contributor to longevity and financial success. The Companies Act 2014 governs all companies in Ireland.
Designed to reform legislation regarding commercial companies, the Companies Act 2014 provides a legal framework for registering and dissolving different types of companies in Ireland, such as limited companies, unlimited companies, and investment companies.
It also establishes guidelines for companies on issues concerning share capital and its protection, dividends, the duties of directors, and the publication of financial statements, as well as providing guidance on how to run and manage companies.
When considering the question of “What type of company is best for my needs?” the answer will depend on your circumstances, the business needs and goals and the industry in which you operate. Therefore, it is wise to consult a professional such as an accountant or business advisor who will offer objective guidance on the pros and cons of different company types and their associated tax implications. o’donnell+co’s expertise can save you time by cutting through the complexities to ensure you choose the most beneficial structure for your needs.
We have compiled this helpful guide to provide you with a clear understanding of Ireland’s most common types of companies.
This is the most common business structure in Ireland and has the following characteristics:
Companies that qualify as Designated Activity Companies are:
The fundamental characteristics of a DAC are:
This is a private company in which the shareholders may be liable in two ways: firstly, the unpaid amount, if any, on the shares they hold, and secondly, the amount they have agreed to contribute to the company’s assets in the event of its dissolution, which is not less than €1. A CLG must have a minimum of two directors, and it can only engage in the activities outlined in its memorandum of association.
A CLG is a public company. In this structure, shareholder liability is limited to the amount they have agreed to contribute to the company’s assets, in the event of its dissolution, not exceeding a specified amount but greater than €1. This structure is ideal for non-profit and professional organisations that wish to have a separate legal personality and limited liability but do not need shareholder funds. A CLG can only engage in the activities specified in its memorandum of association. A CLG must have at least two directors and a company secretary. CLGs are typically non-profit organisations like Charities, Trade Unions and Clubs. As the name suggests, they have neither shareholders nor share capital.
A Public Limited Company is a company which intends to offer its shares to the public on a Stock Exchange.
The main characteristics of a PLC are:
The three types of unlimited companies are:
The main features of an unlimited company are as follows:
When registering a company in Ireland, it is useful to know the difference between incorporated and unincorporated companies:
Many global companies have used a branch structure when setting up in Ireland as it allows them access to the EU market through a secure legal framework. CRO defines a branch as “an extension of the parent company performing the same business operations”. However, the Irish operation must operate in Ireland to meet corporate law requirements. It must submit basic information to the Registrar of Companies (CRO) within 30 days of its establishment in the State, including certified copies of the constitution of the company and details of the company directors.
Following registration, the branch must meet the following requirements:
The EU has implemented regulations requiring branches to follow the same registration process as local companies.
An investment fund is an organisation that pools investors’ money and offers investment management expertise in return. An investment fund sells its shares and invests the proceeds to meet its investment goals. Shareholders receive the net income, and net gains realised on the sale of the investment. The economies of scale associated with investment funds are attractive as they enable individual investors to diversify their investment risk while benefitting from lower broker costs.
The legal structure of a fund can take one of several forms and may include the following company types:
Investment companies are a type of PLC established under Irish law and are either a Company with Variable Capital or a Fixed Capital Investment Company, as explained below:
This type of investment company states that the company’s capital is always equal to the net value of its assets. At the request of the shareholders, the company has the unrestricted right to redeem its shares. The company owns the fund’s assets, therefore, there must be a separate custodian to hold those assets.
A fixed capital investment company has a limited number of shares sold at the fund’s launch. However, the company can only trade the shares on an exchange or over-the-counter, i.e. they are not redeemable from the fund.
Like an investment company, the ICAV is a collective investment vehicle for UCITS funds and Alternative Investment Funds (“AIFs”). The Irish Collective Asset-Management Vehicles Act 2015 governs ICAVs (not the Companies Act 2014). The characteristics of an ICAV are as follows:
Our review of company structures in Ireland would not be complete without a brief mention of the Societas Europaea (SE). This is a European public limited company formed under EU Regulation. There are many ways to create SEs, for example, by merger, as a holding company or subsidiary or by conversion from a PLC. The following principal characteristics define an SE:
One of the advantages of the Societas Europaea is that it simplifies legal and practical issues in the complex business environment of the EU, where 28 different legal systems are in operation.
By now, you should have a clearer understanding of the various company types in Ireland and the complexities associated with each one. There are a host of considerations to weigh up from legal and fiscal to risk and liability. These are the key factors influencing your final decision, so it is essential to do your research thoroughly. As always, seeking expert advice will help you navigate this challenging phase with ease, confident in the knowledge that you have done your utmost to minimise risk and maximise the success of your business.
Our experienced team has spent over 25 years advising clients on company structure and formation. We can advise you on the best type of structure to meet your needs as well as provide a host of related startup services, including:
If you are considering starting a new business and need sound advice on the most appropriate company structure, don’t hesitate to get in touch with us at info@odonnellaccountants.ie or call us on +353 61 317500.
