Incorporation, etc.

Part 16 – Designated Activity Companies

Rules relating to the incorporation of a DAC

The main rules regarding the incorporation of a DAC are as follows:

1. Single member DACs are permitted.

2. The maximum number of members of a DAC is 149.

3. DACs must carry on business in the State (Section 966).

4. A DAC has the capacity to do anything in its objects clause, which includes anything that is “requisite, advantageous or incidental to, or to facilitate” the attainment of that object (Section 972).

5. If a DAC acts ultra vires, the transaction may result in the directors being found liable to account, but the validity of the transaction will not be disturbed, and any party to a transaction with a DAC is not bound to enquire whether that transaction is permitted by the DAC’s objects (Section 973). This means that there is no doctrine of constructive notice and the old formula which modified the ultra vires doctrine, and was found in Section 8 of the 1963 Act, has been done away with.

6. Ultra vires acts can be ratified by a special resolution of the DAC (Section 973(3)).

7. The objects clause of a DAC can be changed by special resolution. This is provided for in Sections 974 and 975.

8. The DAC’s constitution takes the form of two separate documents, the memorandum and articles of association (Section 967). The Model constitutions can be found here (Schedule 7 of the Act) and here (Schedule 8 of the Act).

9. The constitution must be signed by each subscriber in the presence of at least one witness (Section 19) or authenticated in accordance with Section 888.

10. The name of the DAC must end with the lowercase letters “d.a.c.” or “dac”, or, if the name is in Irish, the abbreviation is “c.g.a.” or “cga” (which stands for cuideachta ghníomhaíochta ainmnithe”. It is a Category 3 Offence to trade under a misleading name (i.e. to trade as a DAC when the company is not one).

11. If the DAC is a charity, or a company where all the profits are applied to the promotion of the company’s objects, that kind of DAC doesn’t need to have “dac”, etc, in the title (the company might exist to promote religion, art, science, and so on). (Section 971).

12. Any provision in a DAC that would allow a non-member to participate in the divisible profits of a DAC is void (this re-enacts Section 26 of the 1963 Act).

13. DACs which are limited by guarantee are restricted in how they may amend their constitution (Section 977), unless the amendment concerns the amount that each member undertakes to contribute in the case of a winding up.

14. Any change to the articles of a DAC must take place by special resolution (Section 977).

15. The liability of members to contribute in the case of a DAC being wound up is set out in Section 997 and is a re-enactment of Section 207 of the 1963 Act).

16. The examinership regime set out in Section 510 of the Act applies also to DACs (Section 998).