We have had many queries from groups who are Companies Limited by Guarantee, or who wish to become one. There seems to be great confusion around the requirements of the Companies Act 2014 (caused not by groups themselves, but by other advisors). I thought it might be useful to clarify the actual position.
The situation is as follows. A Company Limited by Guarantee is not obliged to change its Memorandum and Articles of Association under the Companies Act 2014. If it does nothing, these documents simply continue as the governing documents. There are many people out there saying otherwise and saying that companies must have a new constitution. This is not so.
There are two main reasons why a company would adopt a new constitution:
- To avail of audit exemption. This is available to Companies Limited by Guarantee for the first time under the 2014 Act. This is only available if the company’s annual income is less than 100,000.
- To ensure its legislative references are current and that no company law conflict can arise. This is not likely to be an issue for many Community Councils, I would think.
Some companies are converting to a constitution voluntarily because they are using the opportunity to review their governing document anyway.
There is an added complication for registered charities in that any changes must be approved by them (in advance for Revenue). The sample constitution prepared by the Charities Regulator doesn’t allow for audit exemption and they did not seem to be aware of this, but are now looking into it.
We have prepared a sample Constitution taking into account the legislative changes and also incorporating the Muintir principles, and have submitted it to both Revenue and the Charities Regulator for approval. While we do not anticipate any problems, it would be best for groups to wait until approval is received, before making the change. If you are not already a Company Limited by Guarantee and need to become one urgently (ie before we have the approval) you can use the standard with the caveat that some changes may be required subsequently.
So, my advice would be to do nothing for the moment. When the sample Constitution is fully approved you can then adopt it if you wish, without endangering your charitable status.
If you require any further information or clarification please do not hesitate to contact me.
Muintir na Tire