- by Ian Finnie on 26/09/2016

Over the past year, three times the number of companies have opted to switch their company type to Unlimited compared to the same period the previous year.

Over 300 companies have re-registered as Unlimited companies in the past 12 months. This is a significant rise from the 103 companies who changed to Unlimited in the previous period. When compared to the same period two years ago, 160 companies re-registered as Unlimited, so the figures appear to be spiking in the past 12 months, but why?

The majority of companies in Ireland operate as a private company limited by shares. However since 2010 there has been a steady increase in the number of unlimited companies being formed. According to the latest statistics from Vision-net.ie - August 2016, the number of unlimited companies currently registered in Ireland totals 4,476 companies - approximately 2.23% of the total number of companies registered. As well as the rise in existing companies converting to Unlimited, the number of new company incorporations as Unlimited has also increased over the past five years. The average number of Unlimited companies formed per year since 2010 has moved from 155 companies to 230 companies - a 48 % increase. Although it should be noted this growth slightly fell back in 2014 and 2015 which had 205 and 206 Unlimited companies formed respectively.

For the members of an unlimited company there are certain risks in incorporating or converting to a Unlimited company. For example, members of an unlimited company shall be directly liable, without limitation as to the amount, for an unlimited company's debts upon insolvency. However it appears more and more companies are weighing up this risk against the requirement to disclose financial accounts and information they may deem as commercially sensitive as part of their annual filing requirements.

Although an unlimited company is obliged to file an annual return, it is in certain circumstances, relieved of the obligation to file accompanying accounts. The position of the company's financial affairs does not, as a result, become a matter of public record. In summary confidentiality reasons appear to be the principal driver to incorporate or convert to an unlimited company. However Unlimited companies may also be more suited to those who wish to undertake capital reductions and in carrying out share redemptions or buy-backs, where the Unlimited company option offers slightly more flexibility.

In addition, Unlimited companies no longer have the same restrictions governing the payment of dividends. This gives unlimited companies additional freedom to make distributions of payments to shareholders without the need to have distributable profits, within solvency requirements. While the accounting implications of any such distribution need to be considered, this extra freedom is likely to be of significant benefit to unlimited companies, particularly those within a group structure.

For further details visit www.Vision-net.ie or call our specialists today on Tel: 01 903 2660.

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