06 Jul 23
Considerations when incorporating a company in Ireland
Ireland has long been established as one of Europe’s locations of choice for setting up a company. Over the past five decades, many of the world’s most successful companies have opted to base operations in Ireland, with the pro-business environment, favourable corporate tax regime and highly educated workforce acting as key draws for companies.
For any business contemplating setting up a company in Ireland, there are a number of factors to be considered:
What is the name of the company you want to register in Ireland?
Every company established in Ireland must register a unique name as part of the incorporation process. The Companies Registration Office (CRO) may refuse a name if:
it is the same as or is deemed to be too similar to an existing company on the register (unless the companies are related);
the proposed name is offensive; or
the name insinuates state sponsorship.
Some words may require approval from a relevant body; for example, the word ‘Bank’ may only be used if approval is sought from the Central Bank of Ireland.
Every company name must end with the correct legal ending denoting the type of company is it (i.e. LTD, DAC, PLC etc.), unless exempt from doing so.
What is the company type?
The type of company which should be incorporated depends on the purpose of the establishment of the company. Some of the most commonly used company types in Ireland are:
Private Company Limited by shares (LTD)
A private limited company is the most frequently used in Ireland for commercial trading. The members' liability, if an LTD is wound up, is limited to the amount, if any, unpaid on the shares they hold and the maximum number of members permitted is 149. Unlike other company types, an LTD company is only required to have one director if it chooses, but if so, a separate individual or corporate body must be appointed as the company secretary. An LTD company is not required to state its objects in the constitution which affords it greater flexible with regard to the activities it engages in.
Designated Activity Company (limited by shares) (DAC)
A DAC is another form of private limited company where the members’ liability, if wound up, is limited to the amount, if any, unpaid on the shares they hold and the maximum number of members permitted is 149. A DAC must have two directors and a company secretary but one of those directors can also be named as the company secretary. The constitution of a DAC is comprised of a Memorandum and Articles of Association which must include an objects clause which sets out the activities the DAC may engage in. While the requirement for an objects clause can restrict the range of activities a DAC can engage in, in practice such objects clauses are broadly drafted to include as much potential activity as possible to avoid a situation where a DAC is acting outside of the scope of its constitutional documents.
Public Limited Company (PLC)
A PLC is another form of limited liability company. Unlike LTDs and DACs, a PLC is permitted to have its shares listed on the stock exchange and offered to the public and are therefore typically established for companies planning a listing on a stock exchange. The nominal value of a PLC’s allotted share capital must not be less than €25,000, at least 25% of which must be fully paid up before the company commences business or exercises any borrowing powers. A feature of a PLC is that it can be incorporated with a minimum of one shareholder, but unlike other company types there is no maximum limit on the number of shareholders. PLCs are required to have at least two directors and a company secretary. The constitution of a PLC must contain an objects clause and is comprised of a Memorandum and Articles of Association.
What is the constitution of your company?
The constitution of a company sets out the name and objective of the company and the rules governing it. It acts as a contract between the company and its shareholders.
What is the registered office address?
Every company incorporated in Ireland must have a registered office address in the state where the activities of the company are proposed to be carried out.
Who are the directors of the company?
All company types, with the exception of an LTD, are required to have at least two directors and a company secretary.
The company secretary has a significant role assisting the directors of the company to ensure that it complies and operates within the parameters of local company law legislation. The company secretary may be a corporate body or an individual.
Individuals consenting to act as directors must be over the age of 18 and cannot be a person disqualified from acting as a director or be an undischarged bankrupt. There is a residency requirement that at least one director must be resident in the European Economic Area (EEA). Alternatively, a Section 137 bond can be put in place, or an application to the Irish Revenue proving that the company has a real and continuous link with Ireland can be submitted.
All directors and the company secretary must provide certain details to the CRO including names, nationality, date of birth, PPS number/Identified Person Number and details of any other companies they have been a director of in the past five years.
What is the authorised and issued share capital?
Every company type, with the exception of a LTD, is required to have an authorised share capital, which is the amount of share capital a company is permitted to raise through the issue of shares. There is no restriction on the amount or the currency of the authorised share capital of a company and the company may increase or decrease its authorised share capital if the shareholders so resolve.
Who are the shareholders?
The shareholders of a company can be natural persons or corporate bodies. Details of the first shareholders, including each shareholder’s name, address and details of their shareholding in the company must be submitted to the CRO when seeking to incorporate a company. Companies are also required to provide details of their shareholders on an annual basis as part of the annual return.
Have you considered tax residency status?
A company incorporated in Ireland will automatically be considered tax resident in Ireland and should be registered for Irish taxes. This will not apply if the company is considered tax resident in another country under a double taxation agreement. It is important for a company looking to maintain their Irish tax residency that the company is managed and controlled in Ireland, which can be demonstrated by ensuring board meetings are held in Ireland.
When the above points have been considered, the executed statutory form A1 needs to be delivered to the CRO, together with an executed copy of the company’s constitution.
Contact Ronan Donohoe, Head of Company Secretarial for further information regarding the setting up of a company in Ireland, company law and/or corporate governance.