The Companies (Miscellaneous) Provisions Bill 2009 has now been passed by both Houses of the Oireachtas and is expected to be signed into law by the President in the coming days.
Migration of fund companies into Ireland
As anticipated, the Bill was amended in the Dáil to include provisions to facilitate the migration of fund companies (wherever domiciled) into Ireland. These new provisions will provide an alternative to entering into a formal scheme of amalgamation (which has, up until now, been the preferred way for fund companies to move jurisdictions while preserving the existence of the migrating entity from a legal perspective). The provisions will enable unregulated non - Irish fund companies to reregister as Irish regulated fund companies (subject to the requirements of the Irish Financial Regulator).
The new procedure will help to address a number of challenges encountered in such moves, such as:
- ensuring there is no chargeable event for investors, so that no capital gains tax arises by virtue of the migration.
- minimising stamp duties and other costs relating to the transfer of the relevant assets (as there is no transfer in such a migration).
- minimising delays and unnecessary paperwork by streamlining procedures.
The following are key elements of the process:
- Any migrating fund company will have to comply with the requirements of the Irish Financial Regulator.
- Any migrating company must be solvent with no action to wind up or appoint a liquidator, must have served a notice of redomiciliation on its creditors, must have obtained any necessary consents, and must file a schedule of charges and security interests granted by it which would have been registrable in Ireland.
- The process will be subject to appropriate legislative provisions in the country of origin of the migrating fund company and to compliance with the requirements of that legislation and the constitution of the migrating fund company.
- From the date of registration the migrating company shall be deemed to be a company formed under the Irish Companies Acts.
- The migrated company must apply to be deregistered in its country of origin.
- The migration of fund companies (whether UCITS or non UCITS) out of Ireland is also provided for.
On a twin track we understand that refinements to relevant Irish taxation provisions are also in hand.
A&L Goodbody have, of course , been involved in a significant number of corporate migrations in the recent past as well as very many fund migrations achieved by way of formal schemes of amalgamation and we welcome this new development.
The other provisions of the Bill are as follows:
The use of US GAAP in Ireland
On a transitional basis, US Generally Accepted Accounting Principles (US GAAP) may be used in Ireland by certain US companies in the preparation of their accounts to give a true and fair view of the state of affairs and profit and loss of the relevant company, to the extent that such use does not contravene any of the provisions of the Irish Companies Acts or related regulations.
This arrangement will apply only to "relevant parent undertakings". Such undertakings are defined as parent undertakings which do not have securities admitted to trading on a regulated market in the EEA, whose securities are registered with or subject to reporting to the US Securities and Exchange Commission (SEC) and which have not already incurred an obligation to file their accounts with the Registrar of Companies in Ireland. As such, the category of qualifying undertakings is very limited. One species of entity which will benefit from these provisions is a US holding company which is a public company and which is incorporating in Ireland for the first time.
We understand that these provisions have been introduced in order to facilitate the migration to Ireland of US enterprises. The number of corporate migrations to Ireland in recent times has increased significantly, due primarily to our favourable tax regime for holding companies. This means that relevant undertakings will no longer be required to incur the considerable expense and time required to prepare two sets of accounts and may instead prepare one set only in accordance with US GAAP. It is noteworthy however that no similar favourable treatment is being proposed for enterprises which are subject to the accounting standards applicable in other jurisdictions, although the Bill does expressly stitch in the potential to include other internationally recognised accounting standards in the future. The accounting arrangement will apply for a maximum of four financial years after the undertaking's incorporation in Ireland and the arrangement will expire on 31 December 2015 at the latest. The reasoning behind this four-year transitional period is not stated but it could be related to the current drive by the SEC, among others in the US, to introduce the use of IFRS by US listed companies over the course of the next 4 to 5 years.
Recognised stock exchange / market purchase
Currently, an Irish public limited company can only avail of the "market purchase" regime under Section 215 of the Companies Act 1990 to buy back its shares where the shares are admitted to trading on the Main Market of the ISE or on IEX (this is because a "market purchase" of shares is defined in Section 212 as being a purchase of shares on a "recognised stock exchange" and, up to now, the only "recognised stock exchange" has been the Main Market of the ISE and IEX.) The Bill amended the definition of "recognised stock exchange" for the purposes of the Companies Act 1990, which sets out the provisions relating to market purchases by a company on a recognised stock exchange. The definition has been amended to include exchanges outside the State, as well as individual markets outside the State. This provision is dependent on the Minister prescribing exchanges and there is no indication yet of which exchanges or markets, if any, he will prescribe.
Overseas market purchase
A new type of purchase called an "overseas market purchase" has been created. This type of purchase will require the same authorisation as a market purchase and will be required to be notified to the Companies Registration Office. However, since the stock exchanges on which the purchase is made will be outside the jurisdiction, a new notification requirement has been introduced. There will be an obligation on the company to publicise its purchase of own shares on the company website for not less than 28 days, beginning on the day following the purchase. In this regard, the requirement in Section 226A of the Companies Act 1990 to publish the price of shares purchased is being expanded to include an alternative option, which is that companies will be required to publish the highest and the lowest prices paid only. The requirement to publish the time of each purchase is being removed to avoid the necessity for a lengthy list of times. Only the date of the purchase will be required.
Costs of Company Investigations
The area of investigations into companies by court-appointed inspectors under Sections 7 to 13 of the Irish Companies Act 1990 has also been included in the Bill. The upper limit on the amount of costs and expenses incurred in such investigations towards which applicants under these sections (and/or the companies under investigation) can be asked to contribute has been removed. Specifically, the Bill amends (by deleting the upper limit in each case):
- Section 7(3) which allows the court to require an applicant to give security for the costs of an investigation under Section 7(1); and
- Section 13(1) which allows the court to require an applicant, or any company which is the subject of the investigation, to reimburse the relevant Government Minister who is responsible at first instance to defray the expenses of an investigation under Section 7 and subsequent sections.
This provision puts applicants applying to court under these sections on an equal footing with other parties initiating court proceedings, in that they can be held liable for all costs if the court in its discretion so decides.
IAASA committees of enquiry
Finally, a provision has been included to ensure continuity of membership by directors of committees of inquiry established by the Irish Auditing and Accounting Supervisory Authority, IAASA. Section 27 of the Companies (Auditing and Accounting) Act 2003 sets out the manner in which committees of inquiry of IAASA are constituted. The amendment provides that a person who is a director at the time of the formation of a committee of enquiry will be entitled to continue on that committee until the inquiry is completed. This will ensure the membership of the committee does not change during an inquiry and, therefore, due process and fair procedures will be observed in this regard.