Comprehensive guide to a Designated Activity Company (DAC) in Ireland

When considering the various types of companies and corporate forms available in Ireland, it's essential to understand what a limited company is and the specific characteristics of each company type. This guide focuses on the Designated Activity Company (DAC), a unique corporate structure defined in Part 16 of the Companies Act 2014.

What is a designated Activity Company (DAC)?

A Designated Activity Company, or DAC, is a type of Irish limited company with specific features that set it apart from other company types. But what does DAC stand for, and what is its meaning in the context of Irish corporate governance?

A DAC is defined as:

1. A private company limited by shares with the capacity, including the power, to do only those acts or things set out in its constitution (memorandum of association).

2. Or a private company limited by guarantee and having a share capital with the capacity, including the power, to do only those acts or things set out in its constitution.

In essence, a DAC company will have certain regulations in its constitution, detailing specific objects or articles of association which are not specified in the template LTD company constitution.

Features of the DAC include:

Understanding the key features of a DAC is crucial for those considering this company structure:

• DACs have a memorandum in their constitutions that states the objects for which the company is incorporated.

• The constitution document includes both a memorandum and articles of association.

• It has limited liability and has a share capital or is a private company limited by guarantee.

• A DAC must have at least two directors, all of whom must be over eighteen.

• It can pass majority written resolutions but cannot dispense with the need to hold an AGM where there are 2 or more members.

• The company name must end in "Designated Activity Company" or "Cuideachta Ghníomhaíochta Ainmnithe" unless exempted.

• DACs can claim eligibility for audit exemption and dormant company audit exemption.

• A DAC limited by shares has a constitution in the format set out in Schedule 7 to the Companies Act 2014, while a DAC limited by guarantee follows Schedule 8.

Certain organisations are specifically envisaged as being DACs, including charities, management companies, companies limited by guarantee, and companies incorporated for a specific purpose where shareholders wish the company's capacity to be clearly defined.

The Difference between a DAC and LTD company 

To better understand the DAC structure, it's helpful to compare it with the more common LTD company model. Both are types of limited companies in Ireland, but they have distinct characteristics:

LTD Company Model

• It may have just one director (but it must have a separate secretary if it has only one director).

• It can have between 1 and 149 members.

• It does not need to hold an AGM.

• It has a one-document constitution.

• It does not have an objects clause because it has unlimited capacity to carry on any legal business, subject to any restrictions in other legislation.

• It can claim eligibility for audit exemption (and dormant company audit exemption).

• It has limited liability and has a share capital.

• It can pass the majority of written resolutions (special and ordinary).

• The name must end in “Limited” or its Irish/Gaelic translation “Teoranta”

Designated Activity Company limited by shares

• It must have at least two directors.

• It can have between 1 and 149 members.

• It needs to hold an AGM with 2 or more members.

• It has a constitution document that includes a memorandum and articles of association.

• It has a memorandum in its constitution that states the objects for which the company is incorporated.

• It can claim eligibility for audit exemption and dormant company audit exemption.

• It has limited liability and has a share capital.

• It can pass majority written resolutions unless the constitution states otherwise.

• The name must end in “Designated Activity Company” or its Irish/Gaelic translation “Cuideachta Ghníomhaíochta Ainmnithe” unless exempted.

Registering a Company in Ireland

If you're interested in setting up a DAC or converting your existing company to a DAC, it's important to understand the company registration process in Ireland. The Companies Registration Office (CRO) is the central repository of public statutory information on Irish companies and business names.

When registering a company in Ireland, whether it's a DAC, LTD, or another company type, you'll need to consider several factors:

1. Choosing the appropriate company structure

2. Selecting a unique company name

3. Appointing directors and a company secretary

4. Preparing the necessary documentation, including the constitution

5. Submitting the application to the CRO

It's crucial to ensure compliance with all legal requirements and to maintain proper corporate governance throughout the company's lifecycle. This includes filing annual returns, preparing financial statements, and adhering to all relevant regulations.

The Designated Activity Company (DAC) is a unique corporate form in Ireland that offers specific advantages for certain types of businesses. Whether you're considering registering a company in Ireland or looking to convert an existing entity, understanding the nuances of different company types is essential.

If you need assistance with company registration in Ireland or have questions about the DAC structure, don't hesitate to reach out to our team of experts. We can guide you through the process of setting up your Irish limited company and ensure compliance with all necessary regulations.