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This practice note deals with the preparation and registration of a new constitution by the members of a private company limited by shares (an LTD).

How do Members prepare their new constitution? 

The following is a checklist of actions to be taken:

Delete: -

1. the objects from the memorandum of association; and
2. any provisions which allow for or prohibit the alteration of any part of the memorandum or articles of association.

State: -

1. the company’s name in the form “[COMPANY NAME] Limited”;
2. that the company is a private company limited by shares registered under Part 2 of the Companies Act, 2014;
3. that the liability of the members is limited;
4. the authorised share capital and the division of that capital into shares of a fixed amount to be specified in the constitution;
5. the number of shares taken by each subscriber; and
6. the new supplemental regulations (see below).

The constitution must: -

1. be in a form as near as circumstances permit to that shown in Schedule 1 of the Act;
2. be divided into paragraphs and numbered consecutively; and
3. comply with the provisions of Part 16 of the Act with respect to the variation of rights and obligations of members (s. 59(1)(b)).

Is there an example document showing these changed?

The Business Law committee has prepared a draft model constitution which is available on the Forms and Precedent section of the Committee’s webpage (see document 2.2). A case study that details the methodology used in the conversion of a sample set of articles of association to the draft model constitution is also available under Forms and Precedents (see document 2.3).

What are the basic considerations when drafting a new constitution?

Parts 1-15 of the Act relate to the LTD company. The Act contains 151 optional statutory default positions applicable to the LTD that may be varied or amended (Courtney, Bloomsbury Professional’s Guide to the Companies Act 2014, p. 46). Fortunately, these optional default provisions were drafted to reflect the standard positions adopted by the majority of companies in their memorandum and articles of association prior to enactment of the Act. These optional provisions may be dis-applied or modified and companies may draft their own bespoke alternative provisions. 

Please note, however, care should be taken with respect to introducing bespoke provisions, as actions taken that are not in accordance with various sections of the Act may constitute an offence.

The mass disapplication of optional provisions described above is particularly likely to occur in the case of large companies or in the case of joint ventures or similar where the specifics of the company require greater control by way of the constitution.

For a smaller or simpler company, there are still a number of statutory default provisions that it may be considered appropriate to vary. Examples of such provisions are listed below: -

• s. 69 (6)-(12) – Pre-emption rights
• s. 144(3)(c) – Disapplication of automatic retirement of director appointed by directors at next annual general meeting
• s. 148(2) – Vacation of office of director
• s. 160 (9)-(12) – Powers of committees
• s. 160(4) – Notice to directors temporarily absent from the state
• s. 161 (1) – Written resolutions
• s. 165 – Powers of alternate directors

Provisions relating to these sections are included in Document 2.2, the draft model constitution, which can be found in the precedents section of the Business Law Committee's webpage.

There are also a limited number of provisions to which a company must “opt in” if it wishes to avail of the benefits of the provision. A company may opt in by permitting the action in the constitution or by other means listed in the relevant clause such as special resolution. Consideration should be given to whether to make express provision for these matters in the constitution. 

The following is a list of opt-in provisions to be considered when drafting a new form constitution. This list does not purport to be comprehensive: -

• s. 44(2) – power of a company to have official seal for use abroad
• s. 69 (1)* – power of a company to allot shares
• s. 105 (4)*– power of a company to acquire its own shares
• s. 108 – power of a company to redeem preference shares issued by company before 5 May 1959
• s. 181(1) – provision for a notice period for general meetings greater than 21 days
• s. 228(1)(d)(i)*– to permit a director to use the company’s property, information or opportunities.
• s. 228 (1)(e)(i) – to permit a director to agree to restrict the director’s power to exercise an independent judgment.
• s.235* – indemnity for officers of the company

Provisions relating to the items marked with an asterisk* above are contained in the draft model constitution.

Can the authorised share capital limitation be removed in the same process as adopting the new constitution?

Under the Act, a LTD can dispense with the limitation of having an authorised share capital (s. 19(1)(d)(ii)). This may be done by way of special resolution as described in s. 32 and with the amendment to the constitution as described in s. 19(3) of the Act.

Is there a requirement for the original subscribers to sign the amended constitution?

When submitting a new company’s constitution to the CRO, s. 19(2)(c) of the Act states that a constitution shall either be signed by each subscriber in the presence of at least one witness or be authenticated “in the manner referred to in s. 888”. Pursuant to s. 888, a document may be authenticated in the manner prescribed by ministerial regulation (s. 12(1)).

With respect to the amended constitution, current practice when submitting an amended memorandum and articles to the Companies Registration Office is to include the list of original subscribers and their holdings but such subscribers are not required to sign the revised memorandum and articles. It is expected that this practice will continue with respect to the submission of the constitution adopted by members of an existing private company to convert to an LTD. 

Further, in the case of single member companies, the current practice of the Companies Registration Office is that the wording “we, the several persons” does not have to be amended to the singular and we understand that this will continue to be the case.

The constitution is prepared, what next? 

To adopt the new constitution the company should take the following steps: -

1. in accordance with the requirements of its existing memorandum and articles, pass a special resolution adopting the new constitution (the Business Law Committee has prepared suggested form resolutions which are available on its webpage - see document 5.1); and
2. deliver the new constitution with Form N1 to the Companies Registration Office for registration. Please consult guidance from the Companies Registration Office on the requirements for completion of this form.

Once registered, the Companies Registration Office will issue a new certificate of incorporation stating that the company is registered under Part 2 of the Act.