5.1

GENERAL

Irish governments have been consistently receptive to foreign investment in Ireland and generally there are no restrictions intended to prevent foreign ownership of Irish companies or businesses, either of which may be wholly owned by overseas interests. Irish participation at shareholder or board level or in joint ventures is not normally a requirement. While most areas of economic activity are open to private enterprise, certain key functions such as the provision of telecommunications, postal services, power generation and certain transport services are generally restricted to government agencies.

This Section deals with the restrictions imposed in the banking, money-lending and insurance sectors, but inevitably specialised regulatory regimes apply to certain activities such as building societies and unit trusts. In the industrial sector, for example, mineral and offshore oil and gas exploration is a government controlled activity for which there is separate governing legislation. Obviously, specific legal advice should be sought for any contemplated investment.

5.2

BANKING

Banking in Ireland has experienced a significant change in recent years. EU and domestic legislation has led to the enhanced liberalisation of the banking services market and enabled a growing number of undertakings to expand their services. This expansion has been accompanied by increased regulation of internal banking procedures with a view to providing greater protection for both consumers and commercial undertakings that use the services of banks.

Banks and credit institutions carrying on banking business in Ireland are regulated by the Central Bank which derives its powers from the Central Bank Acts, 1942 to 1997 and from the Investment Intermediaries Act, 1995.

Banking business is defined by Section 70 of the 1997 Act as:

"The business of accepting, on own account, sums of money from the public in the form of deposits or other repayable funds whether or not involving the issue of securities or other obligations, howsoever described, or

The business aforesaid and any other business normally carried on by a bank, which may include the granting of credits on all account".

The Section then goes on to specifically exclude certain activities from the definition of banking business, e.g. receipt of premiums for life assurance policies, receipt of deposits or instalments in respect of leasing, hire purchase or credit sale agreements, and receipt of contributions in respect of pension schemes.

Any undertaking wishing to carry on banking business in Ireland must, subject to certain exemptions, be a holder of a licence from the Central Bank or be authorised in a member state of the EU pursuant to the Second Banking Directive 89/646/EEC.

To obtain a licence from the Central Bank an undertaking must possess a separate and adequate fund of its own and have its business directed by at least two persons. The undertaking will also have to meet a minimum capital requirement of IR£5 million. (For a credit institution already established outside the EU it would be necessary for it to establish a subsidiary in Ireland in order to obtain authorisation).

In addition to these strict requirements, the Central Bank has also issued certain guidelines that an applicant for a licence should satisfy:-

  • (a)it has an acceptable legal form;
  • (b)the corporate structure of the group of which the applicant is part, or its relationship with other undertakings under common control, is clear and transparent and is not such as may result in the bank being unable to effectively exercise its supervisory responsibilities;
  • (c)it has clearly defined and adequately researched objectives and proposed operations which are consistent with the safety of depositors' funds, prudent banking practices and fair trading in banking;
  • (d)it will be independent of dominant personal and commercial interest;
  • (e)there will be cohesion, continuity and consistency in the manner in which the business of the credit institution is directed by its owners;
  • (f)the beneficial ownership of the credit institution is such as will ensure a capacity to provide such new capital for the credit institution as may be required in the future;
  • (g)there is a willingness and a capacity on the part of the credit institution to comply with the bank's licensing and provision requirements on a continuous basis.

It should be pointed out that even where these guidelines are met, the Central Bank still has a discretion as to whether or not to grant a licence. Furthermore, the Central Bank must refuse authorisation if an undertaking has "close links" with certain persons and such links, or the laws applicable to those persons, or difficulties relating to the enforcement of such laws, may prevent the Central Bank from effectively exercising its supervisory functions. Consent to refuse the application must firstly be received from the Minister for Finance.

Under the Regulations which implement the Second Banking Directive, any credit institution authorised in accordance with the terms of that Directive by the relevant supervisory authority of a member state of the European Union is exempt from the licensing requirements of the Central Bank Acts. Nevertheless, such an institution must comply with certain rules before it is free to establish a branch with a view to providing banking services. It must lodge certain information with its own national supervisory authority which will be passed on to the Central Bank. The Central Bank must then inform the institution of the enactments and regulatory provisions that it must comply with upon establishing a branch providing services in Ireland. On receipt of this communication from the Central Bank, the credit institution is free to establish a branch and commence banking business in Ireland.

Irish credit institutions authorised by the Central Bank are required to manage their business in accordance with sound authorisation and accounting principles and to put in place internal control and reporting procedures to the satisfaction of the Central Bank. Credit institutions authorised by the Central Bank must also:

  • (a)where engaged in the business of accepting deposits or other repayable funds or granting credit for their own accounts, draw up and present accounts to a specified standard;
  • (b)lodge a deposit with the Central Bank. (This does not apply to credit institutions authorised in another member state pursuant to the Second Banking Directive);
  • (c)maintain certain funding levels;
  • (d)monitor and restrict the value of assets that may be employed with one single client or a group of connected clients.

5.3

MONEY-LENDING

Money-lending in Ireland is governed by the Consumer Credit Act, 1995. It is unlawful to carry on the business of moneylending without first obtaining a licence unless the proposed lender falls within the category of enterprises excluded from the provisions of the Act, they being subject to control under other legislation. These are:

  • (a)any pawnbroker in respect of business carried on by him in accordance with the provisions of the Pawnbrokers Act, 1964;
  • (b)a society which is registered as a credit union under the Industrial and Provident Societies Acts, 1893 to 1978, by virtue of the Credit Union Act, 1966;
  • (c)a registered society within the meaning of the Friendly Societies Act, 1896 to 1977;
  • (d)a credit institution;
  • (e)a person who supplies money for the purchase, sale or hire of goods at an APR which is less than 23% (or such other rate as may be prescribed);
  • (f)a mortgage lender.

Before applying for a Moneylender's Licence, an applicant must publish notice of his intention to carry on the business of money-lending in the national or local newspaper which circulates in the district in which he proposes to carry on that business.

The application is made to the Director of Consumer Affairs and the procedure is quite rigorous in that it must be in writing and contain the following details:-

  • (a)the true name and business name (if any) of the applicant, together with the name in which he proposes to engage, or engages, in the business of money-lending;
  • (b)the address of any premises in which he proposes to carry on his business and of the relevant District Court district;
  • (c)details of the total cost of the credit being offered including all charges;
  • (d)details of the applicant's terms and conditions;
  • (e)copies of the advertisement which he is required under Section 93(2) to publish; and
  • (f)any other information which the Director may reasonably require.

The application will be accompanied by a fee of £1,000 which, if the licence is granted, will entitle the applicant to carry on business in one District Court district. He will have to lodge a further fee of £500 with an application for each additional district.

The Consumer Credit Act also restricts the moneylender by prohibiting certain practices e.g. seeking repayments outside normal trading hours. In addition, any moneylender must keep proper records of the business and keep the borrower informed of his rights and of any outstanding liabilities.

5.4

INSURANCE AND REINSURANCE

Direct Insurance

General

On 29th November, 1994 the Third Non-Life Insurance Framework Directive and the Second and Third Life Insurance Framework Directives were implemented by means of the European Communities (Non-Life Insurance) Framework Regulations, 1994 and the European Communities (Life Assurance) Framework Regulations, 1994 respectively. The Regulations are effective from 8th December, 1994. However, the provisions concerning the filing of annual returns apply in respect of every financial year beginning on or after 1st January, 1995. In addition to implementing the Directives, the Regulations consolidate and amend some of the existing rules governing establishment and supervision of insurers.

It is important to note that although the new Regulations make substantial changes to the old insurance regulatory framework this has not been repealed. However, both the life and non life regulations provide that in the event of a conflict between the new provisions and the old, the new regulations shall apply.

The regulatory authority for insurers is the Minister for Enterprise and Employment ('the Minister').

EUROPEAN COMMUNITIES (LIFE ASSURANCE) FRAMEWORK REGULATIONS, 1994 (SI NO. 360 OF 1994)

Single Passport

The Regulators mean that it will be possible for an insurer with a head office in another European Union Member State to establish branches in Ireland with the minimum of formality subject only to a relatively straightforward notification procedure and to write business in the Irish market without having an establishment in Ireland. Similarly, insurance undertakings with a head office in Ireland may establish branches or write business in other Member States.

Authorisations

Insurance undertakings carrying on the business of life assurance must hold an authorisation from the Minister which shall be valid throughout the Member States.

The Regulations prescribe conditions for obtaining such authorisation and also the conditions for establishing a branch or for carrying on insurance business by way of services both within and outside the State. The identities of shareholders or persons who have "qualifying holdings", whether direct or indirect in that undertaking and of the amounts of such holdings must be disclosed to secure an authorisation. "Qualifying holding" means a direct or indirect holding in an undertaking which represents 10% or more of the capital or the voting rights or which makes it possible to exercise a significant influence over the management of the undertaking in which a holding subsists. Authorisations may be revoked on certain specified grounds.

Financial Supervision and Annual Returns

The financial supervision of an insurance undertaking, carrying on business either by way of services or through branches is the sole responsibility of the home Member State. Undertakings are obliged to maintain technical reserves, including mathematical reserves, in respect of all underwriting liabilities and adequate solvency margins and a guarantee fund in respect of its entire business in accordance with Annex II. Every insurance undertaking shall forward to the Minister for Enterprise and Employment ('the Minister') each year two copies of the accounts and returns laid before its annual general meeting.

Assignments

The Regulations clarify the procedures for assigning portfolios or policies written through an establishment or by way of services in Ireland.

Acquisitions and Disposals

The Minister has power to regulate the acquisition of significant shareholdings in insurers. Any person who proposes to acquire, either directly or indirectly, a qualifying holding in an insurance undertaking must notify the Minister. This obligation also arises where it is proposed to increase such qualifying holding so that the percentage level of the voting rights or capital which that person holds reaches or exceeds 20%, 33% or 50% so that the insurance undertaking would become that person's subsidiary. The notification obligation also applies to disposals of qualifying holdings.

General Good Requirements

Insurers carrying on business in Ireland whether through an Irish branch or from another Member State will have to comply with conditions imposed by the Irish regulatory authorities in the interests of the general good.

These provisions are specified in the Regulations and include complying with the following: provisions of the Consumer Information Act, 1978 and the Sale of Goods and Supply of Services Act, 1980, applicable to insurance contracts and the marketing and selling of insurance products; provisions related to the supervision and regulation of insurance intermediaries under the Insurance Acts and Regulations; provisions contained in consumer credit legislation; any other requirements which the Minister may prescribe by Regulations for the general good, and the Minister in so prescribing may have regard to provisions in Codes of Conduct and Practice related to the marketing and selling of insurance and to the content of insurance proposals.

Cooling Off Period

The Regulations set out information to be given to policyholders, establish a "cooling off" period of 15 days for life assurance sales and provide for the supervision and policing of insurers.

Advertising

Subject to any Irish rules on the form and content of advertising, insurers writing business in Ireland may advertise their services through all available means of communication.

Winding Up

The winding up of an insurance undertaking shall be conducted without discrimination on the grounds of nationality.

Third Country Branches

The Regulations set out conditions of admission and the application procedure for insurers whose head office is outside the European Union.

EUROPEAN COMMUNITIES (NON-LIFE INSURANCE) FRAMEWORK REGULATIONS, 1994 (SI NO. 359 OF 1994)

These Regulations provide a single passport for insurance undertakings carrying out non-life insurance business in the EU. Insurers with a head office in another European Member State will be able to establish branches in Ireland and write non-life insurance business in the Irish market without having an establishment in Ireland. Also insurance undertakings with a head office in Ireland may establish branches and write business in another Member State. Any distinctions between these Regulations and the Life Assurance Regulations discussed above are noted below.

General Good Requirements

Insurers carrying on non-life insurance business in Ireland whether through an Irish branch or from another Member State will have to comply with conditions imposed by the Irish Regulatory Authorities in the interests of the common good. These provisions are specified in the Regulations and include complying with certain provisions of the Health Insurance Act, 1994; the Road Traffic Act, 1961; the Consumer Information Act, 1978; the Motor Insurance Advisory Board (Establishment) Order, 1984; provisions related to the supervision and regulation of insurance intermediaries under the Insurance Acts and Regulations; provisions contained in consumer credit legislation; any other requirements which the Minister may prescribe by Regulations for the general good, and the Minister in so prescribing may have regard to provisions in Codes of Conduct and Practice related to the marketing and selling of insurance and to the content of insurance proposals.

Motor Insurance

The Regulations contain special provisions relating to motor liability insurance. These include obligations on non-established insurers to appoint a claims representative in Ireland, to become a member of the Motor Insurers Bureau of Ireland and to subscribe to the Bureau's guarantee fund. Motor insurers must also become parties to the Declined Cases Agreement. This is an agreement designed to ensure that motorists who have been refused cover by a number of insurers have access to cover.

Insurance Compensation Fund

Insurers providing services in Ireland from other Member States are required to participate in the Insurance Compensation Fund. This is a policyholder protection mechanism established in 1964. To-date it has only been used to meet the liabilities of the Insurance Corporation of Ireland and the Private Motorists Provident Association.

Reinsurance

The only regulatory requirements to be met by a pure reinsurer are (i) to notify the Minister of its establishment and (ii) to file accounts annually with the Registrar of Companies. There is no authorisation required and no returns have to be made.

However, a direct insurer can only accept reinsurance in the classes for which it has a direct writing authorisation.

5.5

INTELLECTUAL PROPERTY

Intellectual property rights are protected by Irish Trademark and Copyright Acts, 1963 - 1987. In addition to the usual protection afforded to literary and dramatic works, protection is afforded to the expression in any form of an original computer program as if it were a literary work. There is no definition of a program but it is expressed to include "proprietary design material" (e.g. flowcharts). The term "original" is used in the sense of being "the authors own intellectual creation" (i.e. not copied). The author of an original program has the exclusive rights to do or authorise the permanent or temporary reproduction of his computer program, the translation, adaptation, arrangement, alteration or distribution to the public of the program and insofar as loading, displaying, running, transmission or storage of the computer program necessitates such reproduction, the right to do or licence or prevent others from doing such acts.

Under Irish law, the author or holder of a copyright cannot prevent a person having a right to use a program for the purpose of study, observation or testing functionality to determine the underlying ideas and principles if the person does so while performing an act which he or she is entitled to do. Neither can an authorised person be prevented from making a back-up copy where it is necessary for such use.

A decompilation right exists for permitted users to reproduce and translate the code of the copyright owners program in order to create an inter-operable program under tight conditions. This right is limited to those parts of the code necessary to achieve inter-operability and may not be exercised when the information needed for inter-operability is otherwise available.

The Trade Marks Act, 1996 ("the Act") changes the existing law of trade marks in Ireland by bringing it into line with developments in the EU and updating it to take account of various developments in the relevant case law. The following areas are of note:

  • Section 6(1) extends the definition of Trade Mark to include "... any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings".
  • This widened definition may now allow for the registration of sensory signs such as smells, sounds and tastes. In addition section 6(2) permits that shapes of items and their packaging may constitute a trade mark.
  • Where previously applications were made for registration by registered users only, the Act seems to facilitate the registration of a trade mark for use by licensees.
  • Whereas prior to the passing of the Act, marks used in connection with trade only were registrable, registration is now afforded to service industries by permitting the registration of service marks.
  • The Act retains the right to register Certification Marks (i.e. "a mark indicating that goods or services in connection with which it is used are certified by the proprietor ... in respect of origin, material, mode of manufacture of goods or performance of services, quality, accuracy or other characteristics" - S.55) while introducing registration for Collective Marks (i.e. "a mark distinguishing the goods or services of members of the association which is the proprietor of the mark from those of other undertakings" - S.54).

5.6

FILM FINANCING

Ireland continues to be a low cost country for film production from development to finance and production. In addition to the more usual forms of financing namely, advance distribution sales and receipts from advance licences for transmission, various government and EU incentive packages together with a number of investor friendly tax incentives further enhance Ireland's attraction to film makers.

The Irish Film Board was re-constituted in April 1993 under the Film Board Act, 1980 to ensure continuity of production and availability of Irish films that tell Irish stories to international audiences. The Irish Film Board provides loans and equity investment to independent Irish film-makers to assist in the development and production of Irish films. Its estimated budget for 1997 is expected to be IR£3.8 million with which the Board hopes to assist 8-10 films. Production finance of approximately 10% to 15% of the total budget is available for fiction films and for documentaries and loans for development. Up to a maximum of IR£25,000 can be obtained for development. There are normally three deadlines in January, May and September for Applications.

Following successful pilot experiments from 1987 to 1990 the EU adopted the MEDIA Programme for the years 1991 to 1995 with an estimated budget of IR£14,000,000. The continuation of the Media Programme - Media II - commenced in 1996. It now has a budget of 310 million ECU up to the year 2000. MEDIA aims to create a European Audio Visual area, setting up professional synergies, mobilising "Seed Capital", obtaining a balance between market forces and between the various media. The capital provided by the MEDIA Programme cannot exceed 50% of the initial budget of a project. It is granted in the form of an advance on receipts. While the focus is on small and medium sized enterprises with a European emphasis, balance is sought between "small" and "large" countries in favour of cultures and languages which are less widespread.

To encourage the investment in film production companies, a tax relief was introduced for companies and individuals tax resident in Ireland. Broadly speaking 80% of the amount invested can be written off for tax purposes where the qualifying investment is made in an unconnected film production company. A company may invest up to IR£8 million annually but not more than IR£3 million in any one production. The film production company must be Irish incorporated, tax resident in Ireland and not resident elsewhere and exist solely for the purposes of the production and distribution of qualifying films. The general rule is that not less than 75% of the production work must be carried on in Ireland, but, the 75% rule can be significantly reduced by certification from the Minister for Arts, Culture and the Gaeltacht. There is also a requirement that not more than 60 per cent and, in some cases 66 per cent of the cost of production of the film be met by relevant investments. Tax relief may also be claimed by individuals up to a maximum of £25,000 per annum, 80% of which can be written off for tax purposes.

This article is intended to provide general guidelines. Specialist advice should be sought about specific facts.