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.
Banking
An entity may not carry on banking business in Ireland unless it is the holder of a license granted under the Central Bank Acts, 1942 to 1989. Banking is defined by the Central Bank Act, 1989 essentially as comprising the taking of deposits and other funds. A license to carry on banking business may be granted by the Central Bank which has a broad discretion in the exercise of its powers including, in certain circumstances, power to suspend or revoke a license. The 1989 Act stipulates that the approval of the Central Bank will be required where a person proposes to acquire more than 10% of the total shares or voting rights of a holder of a banking license. Where the acquisition would result in 20% or more of the total assets of all license holders in Ireland being acquired, then the Minister for Finance must consent to the acquisition.
In dealing with applications for licenses, the Central Bank applies its own standards which, although they have no statutory authority, are used as practical guidelines. These guidelines were last updated in 1987 and further revision is expected shortly to incorporate the provisions of the Central Bank Act, 1989 and European Union banking directives.
At present, an applicant wishing to establish a banking subsidiary in Ireland is required, amongst other things, to provide:
Money-Lending
- (a) a paid up share capital of not less than IR£5 million;
- (b) an undertaking from the parent or major shareholder of a banking subsidiary that the subsidiary will be in a position to meet its liabilities; and
- (c) a suitable management structure.
Money-lending in Ireland is governed by the Moneylenders Acts, 1900 to 1989. It is unlawful to carry on the business of money-lending without first obtaining a license or unless the proposed lender falls within a category of enterprises excluded from the provisions of the legislation. Under Section 6 of the 1900 Act, as amended by the Central Bank Act, 1989, the Moneylenders Acts do not apply to certain bodies, including:
A person wishing to obtain a money-lending license must first obtain a certificate from the District Court and then apply to the Department of Justice for the necessary license. The Moneylenders Act, 1933 severely restricts a license holder in the conduct of his money-lending business: contracts must be in a prescribed form, there is a prohibition on the charging of compound interest and there are restrictions on communications between money-lenders and borrowers.
- (a) the holder of a bank license granted under the Central Bank Act, 1971;
- (b) a company which is the holder of a certificate in respect of trading activities in the IFSC; or
- (c) any person bona fide and otherwise carrying on either the business of banking or insurance or any business which does not have for its primary object the lending of money.
In order to avoid the restrictions imposed by the Moneylenders Acts, it was previously advisable for a foreign company which wished to make a loan in Ireland to obtain an Exemption Order, exempting it from the provisions of the Moneylenders Acts. This procedure has now been altered by the Central Bank Act, 1989 which in effect provides that the Minister for Enterprise and Employment may grant exemptions to classes of businesses rather than to individual entities.
Under this provision an Order for Exemption was made on December 2, 1992 which exempts five classes of companies from the provisions of the Moneylenders Acts. These classes include a company providing loans for the purposes of a business or profession, a company engaged in financing the sale of goods by way of hire purchase or deferred payment or the purchase or development of land, a company engaged in the provision of loans to enable employees to acquire shares in their employing companies and a company providing loans or other lending facilities in foreign currencies to persons not ordinarily resident in Ireland, where such a company has applied for a tax certificate in respect of trading activities to be carried on in the IFSC. In this last case, the exemption ceases to have effect if and when a certificate is issued. The company does not then need to be exempted as the Moneylenders Acts do not apply to it and in practice this should, for most commercial transactions, remove the administrative difficulties of seeking a specific exemption.
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 authorization from the Minister which shall be valid throughout the Member States.
The Regulations prescribe conditions for obtaining such authorization 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 authorization. "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.
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.
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 1995 is expected to be IR£3,000,000 with which the Board hopes to assist 4-6 films. Production finance of approximately 10% of the total budget is available for fiction films and for documentaries and loans for development. Up to a maximum of £12,000 can be obtained for documentaries. There are normally two deadlines in January/February and July/August 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 £14,000,000. 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.
The MEDIA Programme also includes the European Script Fund which lends money to producers and writers across the European Community for development of film and television fiction. Script loans do not usually exceed £26,250. Loans of up to £10,500 (maximum of 50% of the global development budget) are available to European independent producers of documentaries. In addition, pre-production aid is also available for cartoon which must have a minimum duration of 26 minutes and involve co-operation between 2 or 3 European countries. A special section of MEDIA deals with promotions, audio-visual creation and production using advanced technology. The level of financial investment is negotiated on a case by case basis. Financial aid packages are available to improve distribution (GRECO) and broadcasting across the barriers of European language (BABEL) to name but a few.
To encourage the investment in film production companies, a tax relief was introduced for companies and individuals. Broadly speaking, investor companies may deduct from their total profits for tax purposes the amount of any qualifying investment it makes in an unconnected film production company. For investments made after 6th May, 1993, a company may invest up to IR£1,050,000 in one year in one film production, or alternatively invest prescribed amounts if investing in more than one film production. The film production company must be Irish incorporated, tax resident in Ireland and not resident elsewhere and exists 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 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.
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.