Your Company has converted to Limited (‘LTD’) by default – Is your Memorandum and Articles obsolete?
If your Company has converted under the default provisions of the Companies Act 2014 (the “Act”) you should consider updating/replacing the current Memorandum & Articles, now a “Constitution” to provide clarity and certainty for the Company going forward.
- LTD’s will not have a physical Constitution until they actually adopt one. Their Constitution will be a “deemed” document made up of their existing Articles (i.e. no Memorandum) with any provisions that conflict with the mandatory provisions of the Act taken out.
- Lack of a Constitution could lead to missed opportunities (for example, inability to provide documents required for financing discussions, investor negotiations, submitting tenders, etc).
- Confusion may arise as to what directors have the authority to do as they will have no clear regulations (document) to work with.
- Under the Act directors had a duty to prepare a Constitution and deliver it to the Companies Registration Office (“CRO”) and its members prior to 30 November 2016. Directors who have not done so are technically in breach of a statutory duty.
- Companies may not be able to avail of the flexibilities included within the CA2014 if their existing Articles specifically provide otherwise (one typical example is the provision within the Act which permits LTDs to have a sole Director, however, if that company’s existing Articles of Association specifically state the minimum number of directors as 2, then this flexibility cannot be availed of until the Constitution is amended).