What does the new Companies Act mean for Property Management Companies?

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Mark Butler CPA FCCA Partner, HLB Sheehan Quinn

The key changes for Property Management Companies introduced by the new Companies Act 2014 which commenced on the 1st of June 2014 are as follows:

  • Management Companies which are limited by guarantee or limited by shares will be treated differently in the changeover.
  • It is now possible for Companies Limited by Guarantee to avail of audit exemption.

"In my view the extension of audit exemption to management companies is very welcome and a necessary change. It did not make any sense that a company with its sole purpose of running the common services of a small apartment block were subject to the same audit regime as a large private or public company. In most cases there will no longer be a need for these companies to file accounts in the companies office. These changes should help in removing some of the compliance burden placed on property owners." said Mark Butler, Managing Partner, HLB Sheehan Quinn.

Companies Limited by Guarantee

  • They are required to change their name to include Company Limited by Guarantee in their title and use the designation CLG.
  • Various changes with regard to headed paper, registered office and any other documentation will have to be changed to reflect the new name.
  • The change can voluntarily be made or on the 1st of December 2016 the CRO will statutorily default the company and issue a cert of incorporation bearing the new entity name and designation.
  • The opportunity can be taken in the changeover period to update your existing memorandum and articles of association to reflect the provisions of the new legislation. These would be quite simple one page documents.
  • Where a CLG is already in existence and governed by regulations these regulations will continue in force (assuming they are consistent with the Act) and may be altered as permitted.
  • A CLG must have at least 2 directors. Retirement by rotation shall apply unless the constitution provides otherwise.
  • A CLG can have just one member and there is no maximum limit on the number of members. New members must be approved by the directors. Membership ceases on registration or death.
  • A single member CLG may dispense with the holding of an AGM but a multi-member CLG may not.

Companies Limited by Shares

Management Companies which are limited by shares will be changed to a Designated Activity Company and therefore will be subject to different provisions.

In that regard a revision of the memorandum and articles should be considered.

Audit Exemption

Companies limited by guarantee and unlimited companies may now avail of the audit exemption which is a significant change from existing legislation. Under the Companies Act 1963-2013, the audit exemption applied to private limited companies only. Since a company limited by guarantee was not a private company, it was not able to avail of the audit exemption. However, the Act contains no such qualification and therefore Companies Limited by Guarantee or CLGs as the Act identifies them, may now avail of the audit exemption. This has immediate implications for some entities such as; charities that are companies and property management companies.

With respect to charities, it is possible that the Charities Regulatory Authority (CRA) may require any charities formed as companies to have an audit.

Under the new legislation, a company will now only have to meet two out of the three criteria (below) thus potentially enabling more companies to benefit from audit exemption. In addition to meeting two of the three criteria, the company must also file the current and preceding year’s annual return on time with the CRO. Failure to submit the annual return on time will prevent a company from having the option to claim audit exemption. The requirement to meet these criteria is with respect to the current period only and the previous financial results do not have to be considered.

Audit exemption criteria (Now 2 out of 3):

  • the company has turnover of less than €8.8 million during its financial year.
  • the balance sheet total of the company is less than €4.4 million at the end of its financial year.
  • the company has an average of less than 50 employees for the year.

If one member for a public guarantee company – CLG, request that the company not avail itself of the exemption and serve notice in writing to this effect on the company in the financial year immediately preceding the financial year concerned or during the financial year concerned but not later than one month before the end of that year, the company must have an audit. (s.334, CA 2014).

If you wish to make this change, please contact us and we can assist you taking the necessary steps or explain the implications of not taking pro-active action.

If you have any questions, or want to discuss how the Companies Act 2014 impacts on you and your company, please feel free to give me a call. We would be delighted to assist you in any way that we can.

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