Unlimited Company Ireland: Avoid Filing Financial Statements

What is an Unlimited Company in Ireland

An Unlimited Company in Ireland operates much like a regular private company limited by shares but is gaining popularity. It must use the suffix "Unlimited Company" (ULC). Unlike a Limited company, shareholders in an Unlimited Company do not enjoy limited liability, exposing their personal assets to risk in case of insolvency. This type of company requires an objects clause in its constitution, limiting its trading activities to those specified in the clause. AGM requirements can be dispensed with only for single-member companies, unlike Limited Companies. Additionally, an Unlimited Company can opt not to submit financial statements under certain circumstances, offering greater confidentiality compared to a Limited Company.

Types of Unlimited Companies in Ireland

There are three types of Unlimited Company in Ireland:

1. Private Unlimited Company (ULC) with a share capital - A private company with a share capital. 

2. Public Unlimited Company (PULC) without a share capital - A public company with a share capital. 

3. Public Unlimited Company (PUC) with a share capital - A public company without a share capital. 

What are the requirements of an Unlimited Company?

An Unlimited Company must adhere to the following requirements:

1. It must have a minimum of two Company Directors.

2. It must appoint at least one Company Secretary.

3. It should have at least one Shareholder.

4. It must include an objects clause in its Constitution.

What are the Filing Requirements of An Unlimited Company?

As per the Companies Accounting Act 2017, Irish registered unlimited companies linked to a limited liability holding company, whether directly or indirectly, are obligated to submit annual accounts. Therefore, all unlimited companies with such structures must make an annual filing with the CRO.

What is a 'pure' Unlimited Company in Ireland?

Under Section 1274, so-called 'non-designated' Unlimited Companies (ULCs) without any limited liability subsidiaries and whose direct and indirect shareholders do not solely comprise limited liability undertakings will remain exempt from filing their financial statements.

In simpler terms, if a company is a 'pure' unlimited company with no ultimate protection of limited liability in its group structure, it can still be eligible for the exemption from submitting financial statements.

However, these companies will be required to file an auditor's report along with the Annual Return, confirming that the auditors have conducted an audit of the company's financial statements for the relevant financial year in accordance with sections 336 and 391. (Source: CRO Auditors report)

Advantages and Disadvantages of an Unlimited Company?

Here's a breakdown of the main advantages and disadvantages of an Unlimited Company in the Irish context:

Advantages of an Unlimited Company:

1. Financial Privacy / Reduced Public Disclosure:

   • This is often the primary reason for choosing an unlimited structure. Certain Irish unlimited companies may be exempt from the requirement to file their full financial statements (including profit and loss accounts and balance sheets) publicly with the Companies Registration Office (CRO). This allows the company's financial performance and position to remain private from competitors and the general public.
   • However, these exemptions are subject to specific conditions. For example, if an unlimited company has a limited company as one of its members at any time during the financial year, it may lose these filing exemptions for that year. The nature of its ultimate parent undertaking can also affect its filing obligations.
     
     

2. Perceived Greater Security for Creditors (Historically/Niche Cases):

   • In some limited circumstances, the fact that the members' liability is unlimited might be seen by certain creditors as offering greater security, potentially making it easier to obtain credit. However, this is less of a significant factor in modern finance compared to the robust credit assessment of the company itself and is heavily overshadowed by the risks to members.
     
     

3. Suitability for Specific Structures:

   • Unlimited companies are often used within certain corporate group structures, such as holding companies or for specific investment vehicles, where the risk of insolvency is considered very low and financial privacy is highly valued. They can also be favoured by long-established family businesses with significant assets, where the owners are comfortable with the liability aspect in return for privacy.
     
     

4. Simpler Capital Maintenance Rules (Historically):

   • Historically, unlimited companies faced fewer restrictions regarding capital maintenance (e.g., distributing profits, reducing capital) compared to limited companies. While the Companies Act 2014 has harmonised many rules, some residual flexibilities might exist, though these are less pronounced than they once were.
     
     

Disadvantages of an Unlimited Company:

1. Unlimited Liability of Members:

   • This is the most significant and often prohibitive disadvantage. If the company becomes insolvent and cannot pay its debts, creditors can pursue the personal assets of the members to satisfy those debts. This risk is not capped at the amount of their investment in the company.
     
     

2. Less Attractive to External Investors:

   • The unlimited liability feature makes this structure generally unsuitable for attracting external equity investment. Investors typically seek the protection of limited liability to safeguard their personal assets from the company's debts.
     
     

3. Potential for Misunderstanding or Negative Perception:

   • As unlimited companies are less common than limited companies, some third parties (suppliers, customers, potential partners) may be unfamiliar with the structure or perceive it negatively due to the liability aspect, potentially leading to more scrutiny or caution in dealings.
     
     

4. Conditional Nature of Benefits:

   • The key advantage of financial privacy is dependent on meeting and maintaining strict criteria set out in the Companies Act. Changes in the company's shareholding structure (e.g., a limited company becoming a member) or changes in company law can impact these exemptions.
     
     

5. Not Suitable for High-Risk Trading Activities:

   • Given the personal liability risk for members, an unlimited company structure is generally ill-advised for businesses involved in significant trading activities or those operating in high-risk sectors where the potential for substantial debts or liabilities is higher.
     
     

6. Audit Requirements:

   • While filing exemptions for financial statements might be available, an unlimited company may still be required to have its accounts audited, depending on its size and nature, similar to limited companies. The conditions for audit exemption must be met independently.

Can you still have Limited Liability and not have to file accounts?

In certain circumstances, this might be possible. It is worth noting that this involves complex offshore structures and is both time-consuming and expensive.  If you need help in deciding which Company Type best suits you and your company’s needs, contact us using the form below, and a member of our team will be in touch. The Nathan Trust team are here to assist you with all of your company formation needs.