As we approach 2020, lending activity across all business sectors remains at a heightened level and the demand for credit in the Irish market remains very strong.
The Irish lending market itself comprises of banks and non-bank lenders, the latter which varies from funds to smaller private equity houses and the sector has also seen a noticeable growth in peer-to-peer lending, in addition to the more traditional forms.
In terms of the popular sectors for lending activity, the last year has witnessed a lot of real estate finance activity as well as project finance activity. There has also been a noticeable increase in acquisition financing as M&A has made a significant returned as Ireland continues to see increased recovery and regeneration following the financial crisis. Re-financing remains popular and this reflects some of the competitive trends in this area not just in Ireland but in Europe as a whole.
Trends in the Irish lending market are inextricably linked to political developments ongoing in Europe and especially in the UK. Brexit has brought a certain element of the unknown to the industry, and the repercussions of Britain’s exit, with or without a deal, remain to be seen. However, Ireland's relatively steady political platform has provided much needed certainty to lenders and borrowers alike. It has also become apparent that Irish law is beginning to be used more heavily as the governing law for international finance transactions.
Irish entities in various industry sectors may be involved in high-yield bond transactions; often as borrowers and guarantors, and in certain circumstances as high-yield bond issuers.
Irish incorporated special purpose vehicles (SPVs), often referred to as "section 110 companies", are normally used as high-yield bond issuers in certain European high-yield transactions, often to avoid covenant breaches or local law restrictions on guarantees of securities. Section 110 companies are named as such because section 110 of the Taxes Consolidation Act 1997 allows for special tax treatment for "qualifying companies". Favourable tax laws allow these structures to be, in most cases, tax neutral (with no annual minimum profit or "spread" required at the SPV level) and a "quoted eurobond" exemption. This, together with numerous double taxation treaties, allows interest on securities to be paid gross. A minimal share capital requirement makes incorporating an Irish SPV an easy and attractive process.
European high-yield bonds are normally marketed as private placements, primarily to attract US investor interest as well as participation from European investors. These transactions are usually led through London or the US, and New York law or English law are typically the governing laws of such transactions. We are unaware of any high-yield bonds which have been governed by Irish law to date.
Whereas lenders in loan financings would tend to be traditional banks and other financial institutions, investors in high-yield bonds would typically be institutional investors (including investment banks, insurance companies, pension funds, hedge funds, investment managers and mutual funds) looking for higher rates of return through more aggressive lending practices.
There has been a continued increase in the prominence of alternative credit providers in the Irish market since the financial crisis. The alternative credit providers group include a diverse collection of direct lenders, debt funds and debt arms of hedge funds and buyout houses. This allows borrowers to be more selective when choosing lenders and results in greater liquidity as well as more competitive pricing and terms.
There was a continued growth in the asset-based lending market in Ireland during 2018 which continued into 2019.
The growth evidence in asset-based lending in Ireland in 2018 has continued into 2019 and shows no sign of abating even with Brexit on the horizon. As the need for more commercial and residential properties in Ireland (particularly in Dublin) shows no signs of slowing down, this form of finance has not only benefitted borrowers by providing competitive pricing, but also lenders, by offering a lower credit risk. With increased regulation for lenders (for example, the capital requirements regulations), some lenders consider this a sensible form of lending from the perspective of capital adequacy.
Real Estate Investment Trusts (REITs) are recognised as important vehicles for property investment in over 30 jurisdictions throughout the world. Irish incorporated REITs can be listed on the main market of a recognised stock exchange in an EU member state and have the effect of attracting fresh capital into the Irish property market. The Irish market has seen the recent move from secured to unsecured debt being advanced to REITs. From the REITs perspective, the better the unsecured debt rating of the REIT, the better the balance sheet strength. Lenders can, however, take comfort from a covenant package that limits the amount of secured debt it can issue.
To enable the maintenance of the Central Credit Register (the “Register”) lenders have an obligation to report to the Central Bank of Ireland (the “Central Bank”) as per the provisions of the Credit Reporting Act 2013 (the “Act”).
Following the financial crisis, it is intended that the Register will ensure transparency and diligence in lending. Both consumers and lenders have access to a credit report, which gives a snapshot of a consumer’s lending position at any given time. Phase 1 of implementing the Register began on 30 June 2017 and from this date, information on all consumer loans of EUR500 or more is to be submitted to the Register. Phase 2 of implementing the Register will focus on business lending and began on 31 March 2018. Importantly, it is not just regulated lenders who must report to the Register, but all provisions of credit.
The Central Bank of Ireland is responsible for prudential regulation and supervision of credit and financial institutions. Wholesale lending to companies generally does not require authorisation, provided the lender does not take deposits, carries on investment services or provides services to consumers. Traditional banks, those which create securities and fall within the definition of a banking business, are required to hold a banking licence.
A bank authorised in another EEA member state (the home state) can passport its services through establishing a branch in Ireland, or by providing its services in Ireland (the host state) on a cross-border basis.
At a high level, there are no restrictions on the granting of loans in Ireland by foreign lenders, however, as the loans become more specific, there are limitations and requirements to observe when lending to consumers and mortgage lending.
There are no specific restrictions under Irish law, but there may be restrictions under the specific guarantee limitations.
There are no restrictions, controls or other concerns on and regarding foreign currency exchange, save that a person (legal or natural) shall not operate as a Bureau de Change Business in the absence of an authorisation from the Central Bank of Ireland under Part V of the Central Bank Act 1997 (as amended from time to time).
Generally, the borrower is required to use the proceeds from loans or debt securities for the “purpose” as set out in the relevant credit agreement. If a borrower uses the proceeds of financing for any purpose other than that set out in the credit agreement, this would result in an event of default (however so defined), allowing the lenders to accelerate any outstanding loans and terminate unused commitments (and if necessary, to enforce any available collateral).
The agent concept is well recognised and established in Ireland. In a syndicated loan arrangement, the borrower usually grants a mandate to a “lead bank”, which then arranges for a syndicate of banks to be set up to provide the necessary finance to the borrower. The liability of the agent is usually limited by the underlying documentation appointing the agent.
The concept of a trust (and trusts created under the law of another jurisdiction) is also recognised in Ireland. A security trustee can enforce its rights in the courts in Ireland, usually in accordance with the terms of the relevant security document. However, the rights of the security trustee may also be subject to legislative or other public policy considerations.
Secured debt is traded in Ireland, usually by means of assignment, transfer or novation. An assignment of security should be notified to the security provider (or in accordance with the terms of the underlying security document). A transfer or novation can be effected with the security provider as a party to the transfer or novation. In the case of a transfer or novation, appropriate registrations should be carried out in the Irish Companies Registration Office and/or Land Registry and/or Registry of Deeds (as applicable). Typically, Loan Market Association standard documentation is relied on, which contains standard language in relation to novation and transfer.
This will depend on what is commercially agreed between the lender(s), borrower(s) or sponsor(s), but there is no restriction under Irish law to agree terms relating to the buy-back of debt.
Certain funds provisions in credit agreements originate from the requirements of the Irish Takeover Rules which govern the takeover of any public limited company incorporate in Ireland. The Irish Takeover Rules require that a bidder must announce a bid only after ensuring that It can fulfil in full any cash consideration (if any is offered) and after taking all reasonable measures to secure the implementation of any other type of consideration. A financial advisor also must stand behind any bid and confirm that the relevant bidder has certain funds – ie, that the funding will be available on the completion of the acquisition of the securities to pay the full amount due. This position must be confirmed in the Rule 2.5 announcement and the offer document.
Certain fund provisions are specifically negotiated for the relevant public acquisition finance transaction and tend not to be standard provisions contained in other acquisition finance transactions. Whether short or long form documentation is to be used will normally depend on the credit requirements of the relevant lenders. Although the main provisions of finance documents are set out in the offer document, such details are not required to be publicly filed or registered in Ireland.
A company making a payment of yearly interest which has an Irish source is subject to withholding tax at a rate of 20%. There are, however, a number of exemptions under Irish law with respect of withholding tax, which would need to be assessed on a case-by-case basis.
Stamp duty for mortgage deeds executed on or after 7 December 2006 is now abolished.
With the introduction of the Companies Act 2014 the registration of a Form C1 (Registration of a Mortgage or charge created by Irish company) must be completed online. The registration cost (this includes the registration of Forms C1A and C1B) is EUR40.
In the case of registered external companies, the cost of registering Form e-F8 and Form e-F8A (Registration of particulars of a charge on property in the State created by a company incorporated outside the State)(there is no cost to register Form e-F8B) is EUR40.
The registration of a Form C6 (Declaration of satisfaction of a charge) or Form C7 (Declaration of Partial satisfaction of a charge) with the Irish Companies Registration Office costs EUR15 and there is no e-filing option available for these forms.
Registration at the Circuit Court usually amounts to no more than EUR1 for each registration. The registration cost at the High Court is stamp duty of EUR15.
In relation to intellectual property, as trade mark attorneys are used to make the registrations, their costs differ quite substantially depending on whether local as well as international filings are to be made.
The cost of registering the security in the Registry of Deeds is EUR50 for each deed registered.
The cost of registering security in the Land Registry is now EUR175, following the introduction of the Land Registry Fees Order 2012, which came into effect on 1 December 2012.
There is no set fee for the services of a notary in Ireland. A proper professional fee is usually paid dependent on the time spent, the skill of the notary in question and the level of responsibility.
Protection against excessive interest rates in Ireland is afforded to borrowers and consumers by the Consumer Credit Act 1995, as amended by section 35 of the Central Bank and Financial Services Authority of Ireland Act 2003.
Lenders should be aware of the treatment of default interest under Irish law. The judgments handed down by the Court of Appeal in July 2018 (Sheehan v Breccia/Flynn and Benray v Breccia) address whether under Irish law an obligor’s agreement to pay default interest was unenforceable because it was not a “genuine pre-estimate of loss caused by such default”. Essentially, the Court held that if a default interest provision is contained in the lender’s standard terms and conditions, it will be considered to be a penalty and therefore unenforceable. It would, therefore, be pragmatic for lenders to include a tailored, negotiated term in the credit agreement relating to default interest (rather than relying on the default interest provisions contained in the standard terms and conditions) in order to give the lender the best chance of such provisions not being considered a penalty.
A. Real Estate
Real estate includes real property as opposed to personal property. It includes:
Common forms of security
The following forms of security can be taken over real estate:
It is generally agreed that registration is the “operative perfection mechanism in respect of security interests in land”. The specific formalities in relation to real estate in Ireland depend on whether the land is registered or unregistered. There are no specific time limits in respect of registration in the Registry of Deeds or Land Registry. The 2009 Act introduced compulsory first registration in respect of sales of interests in unregistered land, applicable to all counties as of 1 June 2011.
Registration requirements with the Companies Registration Office also exist in respect of Irish corporate bodies. If a company has created a mortgage or charge over real estate, a relevant filing must be lodged with the Companies Registration Office within 21 days of the creation of the security. Section 412 (3) of the Companies Act 2014 provides that the priority of a charge will be determined by the date and time of receipt by the registrar of a fully filed charge submission, not the date of the creation of the charge, ergo there is now significant importance placed on timely filings. Further failure to register the charge, by delivering details to the Companies Registration Office within 21 days of the creation of the charge, or notice to create the charge, will result in making the charge void against a liquidator of the company and any creditors.
If a company has failed to comply with section 409 of the Companies Act 2014, an application can be made under section 417 of the Companies Act 2014 to the High Court for an order requesting an extension of the time afforded to effect registration of the charge. If the registration requires amending, based on an omission or misstatement, an order of rectification can be applied for under these provisions too.
When the Companies Registration Office is satisfied that the statutory requirements have been met, a certificate of charge is issued. The certificate is conclusive evidence that the requirements of the Companies Act 2014 have been complied with.
B. Tangible Movable Property
Tangible movable property in Ireland could include trading stock (inventory), agricultural stock, goods, plant, machinery and vessels such as aircraft or ships.
Common forms of security
The following forms of security can be taken over tangible movable property:
Note that floating charges have certain weaknesses, including:
In relation to general registration requirements, see above.
Specific formalities apply in relation to different categories of assets:
C. Financial Instruments
Financial instruments are defined in Directive 2002/47/EC on financial collateral arrangements (Financial Collateral Directive), as amended by Directive 2009/44/EC and Directive 2014/59/EU, which has now been transposed into Irish law as including:
Common forms of security
Common forms of security are:
Note that there are certain advantages (and disadvantages) of creating a legal mortgage as opposed to an equitable mortgage in the creation of security under Irish law.
In general, note that any ancillary documentation should be sought in connection with any security over shares. This may include stock transfer forms and the original share certificates. It is market practice to register the creation of security over shares (in a foreign company only) at the Irish Companies Registration Office. An affidavit and stop notice can also be served on the company whose shares are being charged to put them on notice that the shares have been charged.
D. Claims and Receivables
The most common types of claims and receivables under Irish law over which security is granted include bank accounts and rent.
Common forms of security
It is generally not common to take security over receivables in Ireland except by way of floating charge. However, security can also be created by way of a:
The parties must ensure that the contract creating the trade receivable does not contain a prohibition on assignment. A security assignment over receivables is registrable as a fixed charge over book debts and must be registered with the Irish Companies Registration Office within 21 days. Note that a section 1001 filing should be made with the Irish Revenue Commissioners within this 21-day period, in accordance with the terms of section 1001(3) of the Taxes Consolidation Act 1997.
E. Cash Deposits
Common forms of security
The most common forms of security over cash deposits are:
Where a fixed charge or assignment has been created by a company, a section 1001 notice in relation to book debts must also be filed with the Irish Revenue Commissioners, under section 1001(3) of the Taxes Consolidation Act 1997. The Irish Revenue Commissioners must be notified of the creation of the charge over book debts within the same 21-day period, and acknowledgement received from the Irish Revenue Commissioners that they have received the notification and updated their records accordingly.
For a security assignment, to create a legal as opposed to an equitable security interest, a notice of the assignment of the bank account must be served on the account holding bank informing it that the account has been assigned. There is no timeframe within which this notice must be served and the bank need not acknowledge the notice for it to be valid.
Fixed charges on bank accounts can be re-characterised as floating charges if the requisite prohibition on dealing with the account and the monies in the account is not adequately provided for in the security document notice to the account bank.
Under the Companies Act 2014, a charge created over an interest in cash or money credited to an account of a financial institution or any other deposits does not require registration with the Irish Companies Registration Office.
F. Intellectual Property
The most common types of intellectual property over which security is granted in Ireland include:
Common forms of security
The most common forms of security granted over intellectual property are:
For example, in relation to patents, a mortgage and/or charge may be taken.
Registration is required at the Irish Companies Registration Office within 21 days of creation. Registration can also be required with the following entities, where relevant:
Certain local laws may take precedence over Irish law when it comes to fulfilling registration requirements. In addition, note that both patents and trademarks can be registered, however copyright arises automatically and is not registerable.
A floating charge over all present and future assets is a commonly accepted by lenders as a form of security in Ireland.
It is possible for an Irish incorporated entity to provide such guarantees, provided that the provision of such guarantee does not breach any constitutionally enshrined terms or limits on guarantees Section 239 of the Companies Act 2014 (Prohibition of loans, etc, to directors and connected persons) or Section 82 of the Companies Act 2014 (Financial assistance).
In respect of any constitutionally enshrined terms or limits on guarantees, a shareholder’s special resolution must be executed amending the constitutional prohibition/limit and filed in the Companies Registration Office with a Form G1 (Amending the Constitution). In respect of Sections 239 and 82 of the Companies Act 2014, the relevant obligor will need to conduct a “Summary Approval Procedure” (“SAP”). SAP is discussed below in more detail.
Under Irish law, it is not lawful for a company to give any financial assistance for the purpose of an acquisition made or to be made by any person of any shares in that company, or, where the company is a subsidiary, in its holding company (section 82 of the Companies Act 2014). The statutory prohibition is broadly drafted, with the main rationale being the preservation of a company’s capital and shareholder/creditor protection.
Financial assistance may only be given in limited circumstances, such as where it falls within one of the legislative exceptions or where a SAP has been followed under section 202 of the Companies Act 2014.
SAP replaces the “whitewash” procedure (involving the swearing of a statutory declaration by a majority of the directors of a company as to the solvency of the company) that was previously available as an exception to a breach of section 60 of the Companies Act 1963. SAP is a means by which companies can engage in certain restricted activities by ensuring that the persons those restrictions protect, consent. There are seven “restricted activities” for which the SAP can be used to validate otherwise prohibited transactions, including financial assistance. The directors’ declaration no longer takes the form of a statutory declaration and therefore it does not need to be witnessed by a solicitor. In addition, the directors are required to set out the circumstances in which the transaction or arrangement is entered into and the benefit that will accrue to the company. Failure to deliver the directors’ declaration to the Companies Registration Office within 21 days invalidates the activity in question and in addition, the Companies Act 2014 has removed the requirement for an auditor’s report from the whitewash procedure.
The Companies Act 2014 has amended the previous regime in relation to financial assistance in that the prohibition against it has been narrowed, such that the giving of financial assistance is not prohibited if the acquisition of shares is not the principal purpose of the financial assistance. The Companies Act 2014 also provides for the giving of assistance for the purpose of acquiring the shares where it is only an incidental part of some larger purpose of the company, and the assistance is given in good faith and in the interests of the company.
The various restrictions (and related costs, if any) in relation to the granting of security or guarantees has been set out above.
In the case of fixed security, the chargee executes a deed of release. In the case of floating security, the security giver can deal with the secured assets in the ordinary course of business until such time as the floating security crystallises into a fixed charge.
A Form C6 (full release) or Form C7 (partial release) needs to be registered with the Irish Companies Registration Office. This can be completed by the chargor and on receipt of this, the Companies Registration Office practice is to notify the person(s) entitled to the charge that a memorandum of satisfaction has been received for registration. The person(s) entitled to the charge then has 21 days to lodge an objection to the registration of the memorandum of satisfaction. If no objection is received, the satisfaction is registered and the security released. Alternatively, Form C6 or Form C7 can be completed by the chargee and no notification is necessary, and the satisfaction is simply registered.
If security was granted over real estate located in Ireland, it will also be necessary for the charge to execute a Land Registry discharge document, in addition to the deed of release, in the form of a Form 57A. This discharge document is then registered with the Property Registration Authority to release the security over underlying real estate.
Contractual subordination is possible and common in Ireland. It occurs where the senior lender and the subordinated lender enter into an agreement as a result of which the subordinated lender agrees that the senior debt will be paid out in full before the subordinated lender receives the payment of the subordinated debt, creating a contractual subordination.
Structural subordination is also possible depending on the particular terms of a transaction. Structural subordination arises where one lender (the senior lender) lends to a company in a group of companies which is lower in the group structure than another lender (the subordinated lender).
Inter-creditor arrangements are common in Ireland. Typical parties include a senior lender, a junior lender, inter-group lender and a borrower. Typical terms in an inter-creditor agreement include provisions as to priorities, standstill, representations and warranties, covenants and other standard clauses.
The circumstances in which a lender can enforce its loan, guarantee or security interest under Irish law are largely dependent on the terms of the underlying loan and as set out in the security documentation. Typical events of default that are often contained in loan agreements in Ireland might include:
The normal methods of enforcement are for the security holder to appoint a receiver, pursuant to the terms of the charge deed, or for the charge-holder to become a mortgagee in possession of the charged asset. Generally speaking, court order is not necessary to appoint a receiver, although in the case of real property, it may be necessary to obtain a court order for possession if the security holder intends to go into direct possession. Once possession is obtained it is not generally necessary to get a court order for sale.
Enforcement may be prevented by the appointment of an examiner to the company (that has created the security). The examiner is appointed by the court where a creditor, shareholder or the company petitions the court and the court is satisfied that there is a reasonable prospect of the company’s survival as a result of this appointment.
The examiner is typically appointed for 70 days (but this may be extended to 100 days in exceptional cases), during which time the examiner will endeavour to put a scheme of arrangement, subject to approval by the interested parties and the court, in place where the company’s creditors write off part of the amounts owing to them and the company continues to trade. Under the Companies Act 2014, the proposed examiner must be qualified for the purposes of Section 519 of the Companies Act 2014.
Choice of Foreign Law
The Rome I Regulation and Rome II Regulation have force of law in Ireland and the purpose of both regulations is not to harmonise the actual law of EU states that applies to contractual and non-contractual obligations respectively, but to harmonise the rules that determine what law applies to contractual and non-contractual disputes, with the aim of ensuring that the courts in the European Union are uniform in their application of laws in international disputes, thereby reducing the risk of forum shopping. The choice of foreign law as the governing law of the contract, will therefore be upheld by the courts of Ireland, provided that the relevant contractual or non-contractual obligation is within the scope of the relevant regulation.
Submission to a Foreign Jurisdiction
Pursuant to the provisions of the Brussels Regulation Recast (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast)) the submission by an Irish natural person, or a company incorporated in Ireland to the jurisdiction of the courts of another EU member state, will be upheld in the Irish courts.
Waivers of immunity are effective under Irish law.
Provided that neither Article 45 (Refusal of recognition) or Article 46 (Refusal of enforcement) of the Brussels Regulation Recast is applicable, and subject to general compliance with the Regulation, any judgment given by a foreign court or an arbitral award against a company would be recognised and enforced in Ireland, without a retrial of the merits of the case.
There are no other matters under Irish law which might impact a foreign lender’s ability to enforce its rights under a loan or security agreement.
As mentioned above, there are two main company rescue procedures: examinership and company voluntary arrangements (CVAs).
Examinership is the main rescue procedure for companies nearing insolvency. The emphasis is on introducing a scheme of arrangement that assists the survival of the company as a going concern. To aid this process, the company is granted court protection so that, in effect, the rights of the creditors and other third parties against the company are frozen for a period of time (which is a maximum of 100 days, plus the time required by the court to make the decision). It is commenced by a petition to the court by any of the directors, creditors or shareholders.
The Companies (Miscellaneous Provisions) Act 2013 was signed into law on 24 December 2013 and has introduced what has become colloquially referred to as “examinership-lite”. Section 2 of this act gives jurisdiction to the Circuit Court for examinership petitions for small private companies that meet certain criteria. Small private companies can apply directly to the Circuit Court to have an examiner appointed, rather than applying to the High Court. This measure is intended to make examinership more accessible and cost effective for small private companies. This procedure has been incorporated into Part 10 of the Companies Act 2014.
A CVA is a court-sanctioned procedure to enable a company in financial difficulty to reach a compromise or arrangement with its creditors and avoid liquidation. It is rarely used in practice as a secured creditor is free to enforce its security while the CVA is pending.
Security may be set aside in certain circumstances at the beginning of insolvency procedures. There will also be a stay of execution concerning the appointment of an examiner.
The priority in which claims are paid is generally as follows:
Within each ranking, all claims in one category receive full payment before any remaining proceeds are distributed to creditors in the following category. When proceeds are insufficient to meet claims of one category in full, payments thereon are paid pro-rata.
Note that it is possible for the secured creditors to agree among themselves, where desired, the order of application of the proceeds of the enforcement of their security so far as their secured claims are concerned.
We do not have this concept in Ireland. It is almost exclusively a US doctrine, although it has been adopted in other jurisdictions in the EU in special situations, including, but not limited to, Austria and Germany.
The following are some potential risk areas from the Lender’s perspective, should a borrower, security provider or guarantor become insolvent.
This was previously discussed in 5.4 Restrictions on Target.
As part of their fiduciary duties the directors of an Irish company have an obligation to act in what they consider to be the best interests of the company they direct. The transaction must be for the company’s commercial benefit and these requirements should be recorded in the board minutes of the company.
Directors must ask whether they can justify their company providing security for another company’s obligations (in terms of corporate benefit). The risk of giving third party security must be balanced against the actual or potential rewards. A parent company might justify giving security for a subsidiary’s borrowings (downstream security) because it will, directly or indirectly, hope to receive dividends from the subsidiary or will benefit from any enhanced commercial value in their role as shareholder.
Alternatively, a subsidiary might justify supporting its parent (upstream security) because of the support it receives from its parent in, for example, its marketing terms.
However, there are authorities to suggest that:
Additionally, the granting of security, and the liability incurred in respect of which the security was given, must be within the objective of the company as set out in its memorandum of association, otherwise it will be ultra vires and therefore void. However, this is no longer a requirement for limited companies under the Companies Act 2014, which has abolished the ultra vires doctrine in respect of such companies.
It is now also a requirement for the directors of an Irish company to consider the interests of its employees (Section 224, Companies Act 2014). Under Section 1112 of the Companies Act 2014, there is an obligation on the directors of private limited companies to ensure that the person acting as company secretary has the necessary skills and resources to discharge his or her statutory duties.
Under the Companies Act 2014 the duties of a director have been codified to reflect common law principles. The principal fiduciary duties have been listed in Section 228 of the Companies Act 2014. Under Section 233 a director is now required to make a statement acknowledging their duties under the law and Section 225 requires a director to make a compliance statement when the company’s balance sheet total for the year exceeds EUR12.5 million and the amount of its turnover for the year exceeds EUR25 million.
Loans to Directors
Under Section 239 a company is prohibited from providing security in favour of a person who makes a loan (or a quasi-loan) to, or enters into a credit transaction with, a director of that company or its holding company, or a person connected to that director (as defined in Section 220). There are a number of exceptions, including where the transaction occurs with a member of the same group. These transactions can sometimes be summarily approved, but caution must be exercised as the Summary Approval Procedure is limited and is not intended to be deployed as a ‘catch-all’ mechanism.
The outcome of the Breccia case was discussed above.
Other laws to consider include:
Project finance as a financing technique has been used to finance large capital-intensive energy and infrastructure projects in Ireland since the early 1970s. Project finance is a loan arrangement whereby finance is raised on a non, or limited, recourse basis by a special purpose vehicle, with the repayment of the financing dependent on the cash flows generated from the project post-completion. It is underpinned by a robust legal framework in which sponsors, lenders and government parties rely on both the appropriate level of regulation as well as certainty regarding contract law. Ireland has recently seen a large amount of interest from investors on both the sponsor and equity side.
Such financing is now being offered by non-bank lenders thus making the availability of credit to fund such projects more accessible. Project finance in Ireland is not subject to any specific legal framework, but will primarily depend on the sector within which the project falls (different regulations for healthcare, education, highway construction, etc).
The public-private partnership (“PPP”) is the most widely used project finance infrastructure model in Ireland. Essentially, this involves a public service or asset being funded and operated by the private sector under a long-term concession granted by the relevant public authority.
The government or public authority may provide certain advantages to the project company by way of a guarantee, a grant or use of a state asset for free or below market value. It should be noted that in certain circumstances, such arrangement may be prohibited by the State Aid Rules.
The relevant government approvals, licences and statutory controls required for a project will depend on the specific nature of each project. The tax regime governing project finance transactions is generally the same as for other commercial loan transactions. Certain tax exemptions do apply in respect of certain sectors, but again this is based on the specificity of the transaction.
The transaction documents do not need to be registered or filed with any governmental body, save to the extent that such documents create security. In that instance, the relevant security filings will need to be made (as outlined above). The governing law of the transaction documents will, in the vast majority of cases, be the laws of Ireland, however, depending on who the lending pool are, the transaction documents may be governed by English law.
With respect to natural resources, the Natural Resources Section (“NRS”) of the Department of Communications, Climate Action & Environment is the relevant authority in Ireland. There is specific primary legislation in Ireland regarding mining, including, but not limited to, the Planning and Development Act 2000, the Minerals Development Act 1940 and the Minerals Development Act 1979. As regards oil and gas, the primary legislation is the Petroleum and Other Minerals Development Act 1960, the National Oil Reserves Act 2007 and the Petroleum (Exploration and Extraction) Safety Act 2015.
A project finance deal will normally involve a number of lenders that provide funds to the project. Any potential issues which may arise will be dependent on the type of project that is being financed, so any risk should be assessed and allocated between the parties involved.
The project company will be required to adhere to both Irish and EU laws and regulations (including, but not limited to, competition law) which are specific to the sector in which the project is centred. There are no particular restrictions on foreign investment in Ireland, however restrictions may apply to foreign investors in relation to certain regulated sectors, but this would need to be assessed on a case by case basis.
The typical source of financing for PPPs in Ireland would be bank financing and bond issuances.
As mentioned previously, the NRS is the relevant authority in Ireland which deals with natural resources and any policies relating to the acquisition and export of natural resources. The objective of the NRS is to sustainably exploit and manage Ireland inland fisheries, geological resources and oil and gas reserves. Any potential issues or considerations would need to be assessed on the basis of which natural resource is being extracted and comply with the primary legislation outlined at 8.4 The Responsible Government Body.
The Health and Safety Authority is the main body in Ireland responsible for health and safety laws. The primary legislation would be the Safety, Health and Welfare Act, 2005 (as amended from time to time), Chemicals Acts, 2008 and 2010, Safety Health and Welfare (Offshore Installations) Act 1987, Safety in Industry Act, 1980, Factories Act, 1955, and the Dangerous Substances Act, 1979 and 1972. The Health and Safety Authority also ensure that various regulations and orders are adhered to and have issued various codes of practice (for example, in relation to chemical agents, working on roads, safety in roof work).
As regards the environment, the national statutory body in Ireland is the Environmental Protection Agency (“EPA”). The EPA is an independent public body established under the Environmental Protection Agency Act, 1992. The other main instruments from which the EPA derives its mandate are the Waste Management Act, 1996, the Protection of the Environment Act, 2003, and the Radiological Protection (Miscellaneous Provisions) Act, 2014.
The Irish government continues to build on the steps contained in the Finance Act 2010 to support and provide equivalent taxation treatment for Shari'a compliant transactions. Implementation of the International Financial Services Strategy (IFS 2020) launched in 2015, of which Islamic finance is a part, is well underway with specialised subcommittees established and due to report to the government shortly on the progress and implementation of the action points. In April 2018, Matheson advised on the first issuance and listing of a Sukuk bond that complies with the Sharia'afinancing provisions of Irish tax law. The Sukuk bond, issued by an Irish special purpose company, marks the first Islamic finance issuance pursuant to section 267N of the Irish Taxes Consolidation Act 1997 (as amended) and raised over USD150 million.
In 2010, Irish tax legislation was amended to introduce the concept of "specified financial transactions" into Irish law. The amendments, set out in section 267N of the Irish Taxes Consolidation Act 1997 (as amended), were intended to facilitate financial transactions structured to be Shari'a compliant, thereby encouraging the use of Irish companies when structuring cross-border Islamic finance issuances.
The Irish Government and the Central Bank of Ireland have not yet created a framework in relation to the use of Shari'a compliant products and transactions.
The Irish Government and the Central Bank of Ireland have not yet created a framework in relation to the use of Shari'a compliant products and transactions.
There has been no substantial case law on this matter in Ireland of which we are aware.