Introduction (DACs)

Part 16 – Designated Activity Companies

There are two types of Designated Activity Companies (“DAC”): a private company limited by shares (“CLS”) and a private company limited by guarantee. (Practitioners should note that a DAC limited by guarantee is different from a company limited by guarantee, which is dealt with in Part 18 of the Act).

The main thing about a DAC is it continues to have an objects clause. (The new CLS has no objects clause in its constitution).

When the new regime comes in fully, the DAC will be the type of company closest to the private limited company, as we knew it until the Companies Act 2014 came along. If an existing company wishes to stay exactly as it is, it should convert into a DAC during the transition period (which runs for 18 months after the commencement of the Act).

Current private companies either decide to become DACs, and take steps to do that; or they decide to convert to the CLS, and take steps to do that; or they decide to do nothing, in which case, after the 18 month transition period has run, they are automatically converted into a CLS.

It is open to any existing company to become a DAC, but the people who drafted the Act thought that, in particular, special purpose companies (i.e. companies set up to finance a transaction, or set up for joint ventures) might prefer to retain their objects clauses and retain their limited liability status, and that it would be these kinds of companies which would elect to be DACs.

In general, Parts 1 to 14 of the Act apply to DACs. There are times when this is not the case, and they are flagged here: Section  964.