Types of Companies in Ireland

Posted on 16th August 2022
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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.

Companies Act 2014

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.

Types of Companies in Ireland:

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.

Private Company Limited by Shares (LTD):

This is the most common business structure in Ireland and has the following characteristics:

  • The company is a distinct legal entity (separate from the executives/director(s) who run it);
  • The company must file an Annual Return every year with the Company Registrations Office (regardless of whether the company has traded or not);
  • A small/medium-sized company may file abridged accounts, with limited information, at the Companies Registration Office (CRO);
  • In cases where turnover is less than €8,300,000, the company can avail of Audit Exemption;
  • Shareholders own their shares;
  • Shareholder liability is limited to the number of shares owned by the shareholder;
  • A Single Member Company is where the company belongs to a single individual (the sole shareholder);
  • An LTD can have just one director, but must have a separate company secretary;
  • The constitution of a limited liability company (LTD) does not include a memorandum of association or a statement of purpose;
  • It follows that an LTD can operate in any business sector;
  • Members’ liability, in the event of dissolution, is limited to the amount unpaid on their shares;
  • A limited liability company (LTD) cannot engage in the activities of lending money or providing insurance; and
  • The maximum number of members is 149. 

Designated Activity Company (DAC):

Companies that qualify as Designated Activity Companies are:

  • private companies limited by shares; or
  • private companies which have a share capital and are limited by guarantee.

The fundamental characteristics of a DAC are:

  • As the name implies, DACs can only carry out their designated activities;
  • The Memorandum of Association details these operations;
  • The constitution of a DAC consists of a memorandum of association and articles of association;
  • A DAC must have at least two directors and a company secretary to operate legally;
  • Limited liability;
  • The maximum number of members is 149; and
  • A DAC is the most suitable company type for joint ventures and businesses with designated activities such as insurance companies.

Company Limited by Guarantee (CLG):

Company Limited by Guarantee (CLG) having a Share Capital (“DAC limited by guarantee”)

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.

Company Limited by Guarantee (CLG) not having a Share Capital (“CLG”)

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.

Public Limited Company (PLC):

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:

  • Lists shares on a stock exchange and sells them to the public;
  • A PLC must have a minimum share capital of €25,000, of which at least 25% must be fully paid up before the business starts trading or borrowing;
  • Its memorandum of association specifies the activities in which it may engage;
  • A PLC requires a minimum of two directors and a company secretary;
  • It must have a minimum of seven members, and there is no maximum limit on members;
  • A Public Limited Company is a company whose liability is limited by shares; and
  • The liability of members is limited to the amount, if any, unpaid on shares held by them.

Unlimited Company:

The three types of unlimited companies are:

  • A private unlimited company with a share capital (ULC);
  • A public unlimited company with a share capital (PUC); and
  • A public unlimited company not having a share capital (PULC)

The main features of an unlimited company are as follows:

  • It has unlimited liability, i.e. the founders of the company are liable for the company’s debts;
  • It has a Company Constitution document which includes a memorandum and articles of association;
  • It must have at least two directors and one member;
  • There is no limit to the number of members;
  • An Unlimited Company must hold an Annual General Meeting if it has two or more members;
  • The company name must end in “Unlimited Company” or “Cuideachta Neamhtheoranta”; and
  • There is no requirement to file annual accounts with the CRO.

Incorporated Versus Unincorporated Company Types:

When registering a company in Ireland, it is useful to know the difference between incorporated and unincorporated companies:

  • An incorporated business is a separate legal entity and considered distinct from its owners. Consequently, this protects them from some liabilities incurred while running the company; and
  • An unincorporated business does not have such protection; however, the limitation of liability does not apply in situations where the owners and directors have made personal guarantees or in instances where they have managed the business improperly.

Overseas Companies: Branch Company

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:

  • Have an element of permanence and financial independence;
  • File an annual return each year along with the parent company’s financial statements within 30 days of the date they are published in the parent company’s jurisdiction;
  • Reflect any changes of the parent at branch level, e.g. any changes of directors, share capital etc. (i.e. the external company should always mirror the parent company), and
  • A branch must have a separate management structure that allows it to negotiate contracts with third parties.

The EU has implemented regulations requiring branches to follow the same registration process as local companies.

Investment Funds:

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:

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:

Company with Variable Capital:

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.

Fixed Capital Investment Company:

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.

Irish Collective Asset-Management Company (‘ICAV’):

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:

  • This company type is specifically for investment funds;
  • It is exempt from the rules and requirements that govern other forms of a company (thereby reducing administrative burden and cost);
  • In the same way that shareholders govern and own an investment company, shareholders own the ICAV and the board of directors governs it;
  • However, unlike an investment company, ICAVs can choose to be treated as “pass-through” entities for US tax purposes, even though they are corporations;
  • There must be a minimum of two directors; and
  • By notifying all the ICAV’s shareholders in writing, the board of directors may decide not to hold an AGM.

Societas Europaea:

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:

  • It has its own legal framework;
  • It can operate as a single entity throughout the EU;
  • It facilitates cross-border activities in the EU;
  • It requires a minimum subscribed capital of €120,000; and
  • The head office and the registered office must share the same address.

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:

  • Company Formations & Associated Tax Implications
  • Business Planning
  • Company Secretarial Services
  • Accounting & Bookkeeping Services + Annual Financial Statements & Related Compliance
  • Outsourced Payroll Services

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.

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