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23 August 2023
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Matheson

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Established in 1825 in Dublin, Ireland and with offices in Cork, London, New York, Palo Alto and San Francisco, more than 700 people work across Matheson’s six offices, including 96 partners and tax principals and over 470 legal and tax professionals. Matheson services the legal needs of internationally focused companies and financial institutions doing business in and from Ireland. Our clients include over half of the world’s 50 largest banks, 6 of the world’s 10 largest asset managers, 7 of the top 10 global technology brands and we have advised the majority of the Fortune 100.
The judicial system in Ireland is established by the Constitution of Ireland, the principal courts being the District Courts and Circuit Courts (with limited jurisdiction)...
Ireland Corporate/Commercial Law

1. Legal System

1.1 Legal System and Judicial Order

The judicial system in Ireland is established by the Constitution of Ireland, the principal courts being the District Courts and Circuit Courts (with limited jurisdiction), the High Court (with unlimited jurisdiction in civil and criminal matters), the Court of Appeal (with appellate jurisdiction) and the Supreme Court (which usually exercises final appellate jurisdiction only). The judiciary is independent of the legislature and the executive.

Ireland is a member state of the EU and the United Nations. The Irish legal system is similar in many respects to that of the UK and the US. Irish law is based upon the common law, statute and the Constitution. The EU also represents an important source of Irish law, and decisions of the Court of Justice of the European Union (CJEU) exercise significant influence over Irish law.

Ireland is the only EU common law jurisdiction, making it an attractive jurisdiction in which to establish operations and litigate international commercial disputes. Other factors, such as the ease of doing business and the fact that it is the only eurozone country in which English is the main language spoken, make Ireland one of the best destinations for foreign direct investment.

2. Restrictions on Foreign Investments

2.1 Approval of Foreign Investments

The FDI Screening Regulation

The EU Investment Screening Regulation (Regulation (EU) 2019/452, the "FDI Screening Regulation?) became effective in October 2020. The FDI Screening Regulation sets out rules which enable scrutiny of investment ventures pursued within the EU by third countries.

Individual member states retain discretion as to whether they implement a screening system, but any such system must then meet basic criteria concerning confidentiality, transparency and the application of review timeframes.

The Screening of Third Countries Transactions Bill

The Department published the Screening of Third Country Transactions Bill ("Screening Bill") in August 2022. The Screening Bill provides for a new foreign investment or FDI screening regime, as mandated by the FDI Screening Regulation.

The regime provided for in the Screening Bill is suspensory (with criminal sanctions), involves very low thresholds, covers a wide variety of sectors and needs to be considered in parallel with merger control rules.

2.2 Procedure and Sanctions in the Event of Non-compliance

Under the Screening Bill, a new mandatory notification to the Minister for Enterprise, Trade and Employment (the "Minister") would be required for certain transactions that involve third-country or foreign-controlled undertakings that are parties to a transaction if the following conditions are met:

  • a third-country undertaking or a connected person is a party to the transaction;
  • the value of the transaction is at least EUR2 million;
  • the transaction relates to critical infrastructure and technologies, natural resources, sensitive data or media; and
  • the transaction relates to an asset or undertaking in the state.

A failure to correctly notify the Minister would be a criminal offence and parties could be liable to (a) on summary conviction, a fine of up to EUR2,500 and/or six months' imprisonment or (b) on conviction on indictment, a fine of up to EUR4 million and/or five years' imprisonment.

2.3 Commitments Required From Foreign Investors

Irish authorities currently impose no specific commitments on foreign investors in relation to their investments.

2.4 Right to Appeal

The parties to a transaction may appeal a screening decision to an adjudicator within 30 days. Adjudicators' decisions may be appealed further within 30 days to the High Court on points of law only. Such appeals proceedings would not be held in public due to the sensitivity of issues involved.

3. Corporate Vehicles

3.1 Most Common Forms of Legal Entity

The Companies Act 2014 (the "Companies Act") provides for the creation of various types of corporate vehicles in Ireland. A company of any type may be incorporated with a single shareholder.

Company Limited by Shares (LTD)

The LTD is the model form of private company limited by shares and the most common form of corporate vehicle used by foreign investors. The LTD has the same unlimited legal capacity as an individual. It has a one-document constitution, and its internal regulations may be set out in simplified form in that constitution. An LTD is prohibited from offering securities (equity or debt) to the public.

Designated Activity Company (DAC)

The DAC is an alternative form of private limited company. A key distinction between a DAC and an LTD is the existence of an objects clause in the DAC constitution. A DAC may be a suitable vehicle where an objects clause is needed (eg, to restrict the corporate capacity of a joint-venture vehicle) or for companies listing debt securities on a stock exchange.

Unlimited Company

The Companies Act recognises three distinct types of unlimited company:

  • a private unlimited company with a share capital (ULC);
  • a public unlimited company with a share capital (PUC); and
  • a public unlimited company without a share capital (whose liabilities are guaranteed by its members) (PULC).

Members of an unlimited company may be held liable on an unlimited basis for the debts of the company in the event of it entering insolvent liquidation. ULCs may not offer for sale or list any new securities, but a PUC and PULC may list debt securities.

Public Limited Company (PLC)

The key distinction between PLCs and private companies is that only PLCs may list their shares on a stock exchange and offer them to the public. PLCs must have a minimum issued share capital of EUR25,000. A Societas Europaea (SE), the European model company, is regarded as a PLC under the Companies Act.

Guarantee Company (CLG)

A CLG does not have a share capital and is a popular type of company for charities, sports and social clubs, and property management companies. The members' liability is limited to such amount as they undertake in the constitution of the company to contribute to the assets of the CLG in the event of its winding-up.

3.2 Incorporation Process

To incorporate a company in Ireland, certain documents, including the company's constitution, must be filed with the Companies Registration Office (CRO). Incorporation papers must contain the company name, registered office, directors' and secretary's details, subscriber details, the company's principal activity and the place in Ireland where it proposes to carry on that activity. The incorporation form includes a declaration that the requirements of the Companies Act have been complied with.

Under an express incorporation scheme, a company can be incorporated within five working days. Otherwise, it may take two to three weeks to incorporate a company. On incorporation, the CRO will issue the company a certificate of incorporation. CRO fees are EUR50, and the process is completed online.

3.3 Ongoing Reporting and Disclosure Obligations

Documents Presented at the AGM

Irish companies must generally present audited financial statements to the annual general meeting (AGM) and then publicly file a copy with the company's annual return in the CRO (including certain disclosures concerning directors' remuneration). A directors' report on the state of affairs of the company and its subsidiaries must be attached to the balance sheet presented before the AGM. For all LTDs and other company types with one member (other than PLCs), a written procedure is available in place of an AGM. Small and micro companies are subject to fewer public disclosures and more relaxed reporting requirements.

Directors' Additional Disclosures

Directors may need to make additional disclosures to the company if, for example, they hold shares representing more than 1% of the company's share capital. Directors of companies with assets exceeding EUR12.5 million and a turnover exceeding EUR25 million must also make a prescribed form of compliance statement in their directors' report.

Internal Register on Ultimate Beneficial Owner

Most Irish companies must maintain internal registers on individuals considered under law to be their ultimate beneficial owners. The EU (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 also require in-scope entities to file their beneficial ownership details on a central beneficial ownership register to which there is currently limited public access. Where the company has no beneficial owner or the beneficial owner cannot be identified, details of the company's senior managing officials (directors) must instead be provided.

Filings in Regard to Changes

CRO filings must be made in respect of changes in the following:

  • company name;
  • directors or company secretary;
  • registered office; and
  • share capital or the company constitution.

Details of mortgages or charges made regarding a company must also be filed with the CRO.

3.4 Management Structures

Irish companies are managed by a single-tier board of directors. All companies, other than LTDs, must have a minimum of two directors. The secretary may be one of the directors of the company. An LTD may have one director but there must be a separate company secretary in that case. A body corporate may act as secretary to another company, but not to itself. A body corporate may not act as a director.

At least one of the directors of an Irish company must be a resident of a member state of the European Economic Area (EEA) unless:

  • the company posts a bond to the value of EUR25,000, which, in the event of failure by the company to pay a fine imposed in respect of an offence under company law or a penalty under tax legislation, will be used in the discharge of the company's liability; or
  • the company holds a certificate from the CRO confirming that the company has a real and continuous link with one or more economic activities carried on in Ireland.

3.5 Directors', Officers' and Shareholders' Liability

Directors' common law fiduciary duties are codified in the Companies Act and include the duty to:

  • act in good faith in what the directors consider to be the interests of the company;
  • act in accordance with the company's constitution and use their powers only for the purposes allowed by law;
  • avoid conflicts of interest between the director's duty to the company and their other interests (including personal interests) unless the director is released from this duty; and
  • exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both the knowledge and experience that may reasonably be expected of a person in the same position as the director and with the knowledge and experience that the director possesses.

Where a breach of duty by a director is proved, they may be required to account to the company for any personal gain made and indemnify the company for any loss or damage resulting from the breach. Generally, parent companies are not liable for the acts of limited liability subsidiaries, but they may be liable under parent company guarantees.

Directors' duties are owed (to varying degrees) to the company, the shareholders, the company's employees, the company's creditors and any appointing shareholder. Directors may be found criminally liable for certain breaches of the Companies Act and other offences in environmental, data protection, health and safety, and tax law.

Subject to certain limitations in the Companies Act, a company is permitted, however, to indemnify a director in respect of liability incurred in defending proceedings, whether civil or criminal, in which judgment is given in the director's favour or the director is acquitted, or where the High Court, in an application for relief, declares that the director has acted reasonably and honestly. In practice, the directors of Irish subsidiaries of multinational companies benefit from group-wide D&O insurance policies.

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Originally Published by Chambers Global Practice Guides.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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