DIRECTOR’S DUTIES AND RESPONSIBILITIES IN CHARITABLE COMPANIES

October 26, 2016

 

In light of the recent changes to Company Legislation and Charity Legislation, it is important for Directors of Charitable Companies to focus on their duties and responsibilities.  Of course in Charitable Companies having adequate corporate governments is extremely important, but even more so given the clear legislative framework which has been provided to them.

Changes from the Companies Act 2014

The Companies Act 2014 established a new form of a company called a Company Limited by Guarantee or CLG.  The existing form of company limited by guarantee converted on 1st June 2015 into a Company Limited by Guarantee and this is the form of Company usually chosen by Charities.  The Company may within the transition period change its name to the new suffix CLG and if it doesn’t the Company Registration Office will issue a new Certificate of Incorporation on 30th November 2016.

Therefore it is incumbent on all Boards of Charities to review their existing Memorandum and Articles of Association and check within consistencies with the mandatory provisions of the 2014 Act.  If changes are required to be compliant with the 2014 Act, then the approval of the Revenue Commissioners will need to be obtained if the Company has charitable status.

Section 225 of the Companies Act 2014 introduces a new requirement for Directors Compliance Statement to be prepared.  This obligation applies to CLGs were both the balance sheet is greater than €12.5 million and turnover is greater than €25 million.

The Compliant Statement is effectively confirmation from the Directors that they have:

  1. Drawn up a Compliance Policy Statement as to compliance by the Company with Company Law and Tax Law.
  2. Put in place appropriate arrangements or structures designed to secure material compliance with that Law.
  3. Conducted a review during the Financial Year of those arrangements and structures and found them to be appropriate.

Duties of Directors under the 2014 Act

Part 5 of the 2014 Act for the first time clearly sets out in legislation the current Common Law and equitable principals regarding Directors duties which will ensure greater clarity for Directors.

The duties as set out in this part of the Companies Act can be broadly broken down into fiduciary duties (previously developed and detailed by means of Case Law) and general duties (recognising certain Common Law duties also including and expanding upon existing Statutory Duties).

The general duties which Directors owe to the Company in a performance of their role includes:-

  1. Compliance with legislation.
  2. Act in the interest of Shareholders and Employees.
  3. Prepare Compliance Statement if required.
  4. Appoint a suitably qualified Company Secretary.
  5. Duty to disclose any interest in contracts made by the Company.
  6. Breach of duty: Liability to account and indemnify.

Fiduciary Duties of Directors

The fiduciary duties of Directors are set out in Section 228 of the Act and are:

  1. To act in good faith
  2. Act responsibly and honestly
  3. Act within powers
  4.  Regarding the use of company property the Director is not permitted to use the Company’s property information or opportunities for his own or for anyone else’s benefit.
  5.  To use independent judgment and not restrict his or her power to exercise this independent judgment.
  6.  To avoid conflict of interests.
  7.  To make decisions using all due care, skill and diligence (this is a quasi-objective standard by which a Director should be judged).
  8.  A duty to have regard to Shareholder’s interests.

Breach of Duties

Where an Officer of the Company is shown to have acted honestly and reasonably the Court may grant relief to that Officer.

The codification and classification of Company Law offenses as well as duties of Directors provides more clarity to Directors and removes ambiguity surrounding their roles that may have existed.

The Charities Act 2009

The Charities Regulatory Authority was formerly established on 16th October 2014 on foot of the Charities Act 2009.  It is the Charities Regulatory Authority (CRA) that has responsibility for the registration and regulation of Charities in Ireland and not the Revenue Commissioners.  However, it will be incumbent on Directors of Charitable Companies to ensure compliance with the Revenue Commissioners’ Rules where the Company has charitable status from the Revenue Commissioners and also to ensure compliance with the Regulations which will concern the CRA.

Some important points for Directors from the Charities Act 2009

(i)   It is provided in Section 10(2) that if any offence is committed by a Company with the consent or connivance of a Director or Manager than that Director or Manager can be found guilty of the same offence.

(ii)  There is a duty to register as a Charity and it is an offence to hold a Company out as a Charity without registering.

(iii) There is a duty to keep proper books of account and it is an offence if proper books of account are not kept

(iv) There is a duty a file an Annual Return with the Company Registration’s Office and also with the CRA.

(v)  There is a duty to report a potential theft or fraud to the CRA.  It is an offence if this potential theft or fraud is not reported.  There could be concerns around this section regarding potential defamation issues but it is important to note that there is a partial defence to defamation actions relating to this Section, but legal advice should be obtained by Directors where they have such a circumstance.

(vi) The CRA has extensive powers to conduct investigations and has power to direct handing over of certain documents.  There is provision in the Act for entry and search of premises by the CRA.

Conclusion

It is important for any Directors of Charitable Companies to seek legal advice to ensure compliance with the Legislation which now applies to their Company.  They should seek legal advice also to ensure that the appropriate form of Corporate Governance is in place.

Conor Lupton

Comyn Kelleher Tobin Solicitors

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

 

 

New Rules for Hotels as of 1st August 2016

August 15, 2016

New Regulations for the Registration and Renewal of Hotel s came into force on 1st August 2016 by virtue of the Registration and Renewal of Registration Regulations for Hotels 2016.

The Regulations are issued by Failte Ireland under powers it has in the Tourist Traffic Acts to regulate the Hotel industry.  Under those Acts and business wishing to call itself a hotel must be registered with Failte Ireland and therefore must conform to these Regulations.

The main changes contained in the new 2016 Regulations are as follows:

1. Reduced Minimum Size of Guest Bedroom

Double/ Twin Rooms now have a minimum size of 14 square meters, Triple Rooms have a minimum size of 18 square meters and single rooms have a minimum of 12.50 square meters. This represents a substantial reduction in the minimum size of room and reflects the need for additional hotel rooms, particularly in the Dublin area. There is also a level of detail introduced in relation to toilet facilities and the standard of same.

2. Compliance with Legislation

The 2016 Regulations clearly set out the legislative and regulatory compliance requirements of Hotels including the need to comply with food legislation, planning legislation, building regulations, fire safety regulations, licencing law, health and safety law and the Water Services Act 2013.

3. Provision of Food and Drinks

The previous requirement to supply dinner to guests has been replaced with a requirement to provide food and drinks. This requirement will provide more flexibility to Hotels in its catering facilities.

4. Alterations

The 2016 Regulations provide that where building works have been carried out on the premises since 1992, a fire safety certificate must be provided along with a certificate of compliance from an architect or engineer when making an application for registration. Where there is a material alteration to the building, the new fire safety certificate along with the certificate of compliance must be submitted with the next renewal application to Failte Ireland.

The above changes show a desire to improve the flexibility of hotel businesses and the intention to ensure a greater degree of compliance with laws. It provides a greater degree of certainty for hotel owners and for those seeking to develop hotels.

Conor Lupton

Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

Change to Law on Late Payments by Public Authorities

June 15, 2016

The making of late payment in commercial transactions is governed by the European Communities (Late Payment in Commercial Transactions) Regulations 2012 – S.I. 580 of 2012.

Under those Regulations,  it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest (“late payment interest”) on the amount outstanding. Interest shall apply until such time as payment is made by the purchaser.

The Regulations apply to commercial transactions in both the public and private sector. Some of the main provisions of those regulations are:

  • in the absence of any agreed payment date between the parties (i.e. specified in the contract), late payment interest falls due after 30 days has elapsed, provided the invoice is not subject to query; and
  • the Statutory interest rate for late payment is 8 percentage points above the European Central Bank’s reference rate.

These regulations were recently amended on 25th May 2016 by the EU (Late Payments In Commercial Transactions) (Amendment) Regulations 2016. The 2012 Regulations did not specify a time limit for public authorities regarding terms of payment for goods and services but allowed undertakings to challenge the payment terms if they were grossly unfair.

Following the recent amendment, public authorities now must not seek payment terms in excess of 30 calendar days for the supply of goods or services by undertakings.

This brings Irish law in this area more into line with the EU Directive from 2011 upon which the law in this area is based.

Conor Lupton

Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

Court of Appeal Judgment – Time Limits in Public Procurement Process

March 6, 2016

In a recent case of Forum Connemara Limited v. Galway County Local Community Development Committee, the plaintiff sought to bring a challenge regarding a public procurement process which was run by the defendant.

Usually the challenger to a public procurement process has a 30-day time period to bring a challenge to the process after the challenger was notified of the decision. That time limit had generally been strictly applied, although the High Court does retain a discretion to extend the time period if it felt that there was a good reason to do so.

High Court

In the High Court, the plaintiff successfully argued that the High Court should extend the time period. The factors which the High Court took into account in reaching this conclusion were:

  • The plaintiff was not a sophisticated organisation and may not have known of the strict time limits which were applied in public procurement processes
  • The plaintiff had received certain assurances from a Government Department which it had relied upon
  • The allegations made concerning the procurement process went to the heart of good government and therefore there was a public interest in hearing the challenge
  • The matter had caused great public and political concern in County Galway and that this was different to most public procurement processes

Court of Appeal

The case was appealed to the Court of Appeal and that Court recently overturned the High Court decision in deciding that the facts of the case were not extreme enough to warrant an extension of time limits to challenge the procurement process. It found that Forum Connemara employed 200 people and that it was not reasonable to infer that it would not have appreciated that it should take legal advice to protect its rights.

The Court of Appeal also found that in most challenges of this type, allegations will be made which go to the heart of good government. The Court also felt that most challenges of this type will cause a large degree of controversy so the facts in this case were not sufficient to mark the case apart from others.

Conclusion

The Court of Appeal judgment provides greater certainty for state bodies engaging in procurement processes regarding time limits as it seems the time limits will only be extended in very exceptional circumstances. It also highlights the need for the need for organisations which are considering challenging procurement processes to take specialist legal advice at an early stage.

Conor Lupton,

Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

DATA PROTECTION – NEW GUIDELINES ON USE OF CCTV

February 1, 2016

The Data Protection Commissioner has recently issued guidance notes on the use of various items of technology such as CCTV, body worn cameras and drones. It is important for businesses who use these technologies to ensure that their use is compliant with the new guidance so as to avoid a possible breach of Data Protection Laws concerning the use of those technologies.

The new guidance notes take account of the existing legislation and also recent case law and effectively provides the best practice guide for the use of these technologies.

CAN A CCTV SYSTEM BE USED?

Section 2(1)(c)(iii) of the Data Protection Act provides that the data retained must be adequate, relevant and not excessive for the purpose which it is collected. Therefore, this means that an organisation must be able to show that the collection of CCTV footage on a continuous basis is justified. Usually the use of CCTV for security reasons to capture images of intruders damaging property or stealing goods and such uses are indicated to be likely to meet the test of proportionality.

The uses which the Commissioner cites as examples of purposes which may fail the test of proportionality include installing the system in order to constantly monitor employees. That is not to say that monitoring employees would never be a justified use, but there would need to be special circumstances in order for this to be the purpose of using the technology.

In relation to the use of the technology, the location of the cameras will also be a key consideration. The use of the cameras in areas where people would expect to have a reasonable expectation of privacy would be extremely difficult to justify, for example, areas such as toilets.

In relation to proportionality the Data Protection Commissioner’s Office recommends that the Data Controller would have carried out a detailed assessment of how to use the CCTV cameras and would have prepared a detailed data protection policy dealing with the use of the CCTV cameras and also separately to document evidence of previous incidents given rise to the concerns which justify the use of the technology. In addition, clear signage should be used indicating that image recording is in operation.

The policy regarding the use of CCTV footage should include information such as how to make an access request, the retention period for the information and security arrangements for the storing of that information.

STORAGE AND RETENTION

Section 2(1)(c)(iv) of the Data Protection Act states that the data “should not be kept for longer than is necessary” for the purpose for which it was obtained. Therefore, the Data Controller will need to be in a position to justify the retention period which will be used. Obviously the longer the retention period the more difficult it will be to justify this period of time. The retention period should be clearly identified on the Data Protection policy relating to the use of CCTV.

A log of access to the information should be kept and access should be restricted only to authorised personnel.

SUPPLY OF CCTV IMAGES TO AN GARDA SIOCHANA

In order to not breach the Data Protection rights of data subjects where images of them are recorded the Data Protection Commissioner recommends that CCTV footage should only be provided to An Garda Siochana when a formal written request is provided to the data controller stating that An Garda Siochana is investigating a criminal matter.

It is stated that if in emergency situations a verbal request is provided then this can be acted on if followed up with a written request as soon as possible.

A distinction is drawn between a formal request from An Garda Siochana to obtain copies of CCTV footage or a request from An Garda Siochana to simply view the CCTV footage. If the Gardai are making a request simply to view the footage then this would cause less concerns from a data protection perspective.

ACCESS REQUESTS

It is important to note that the data controller may charge up to €6.35 in responding to such a request and must respond within 40 days. The access requester must provide a reasonable indication of the timeframe of the recording being sought and the length of time being sought should be reasonable.

Where images of parties other than the requesting data subject appear on the footage the onus lies on the data controller to redact or darken the images of the other parties as it may pose difficulties to the Data Controller if images of other parties are shown where they can be identified.

DOMESTIC USE OF CCTV SYSTEMS

There is generally an exemption whereby individuals can install CCTV systems in their own home. However, if the recording is being taken of a public place then this may not be regarded as personal or household activity and may be subject to the rules of proportionality and transparency as outlined above.

CONCLUSION

It is important for all data controllers to retain a clear and thought out policy regarding the use of CCTV footage and to deal with the items outlined above in that policy. If there was a question in relation to the validity of the use of CCTV footage the data controller should then be able to point to the policy and rely on the provisions contained therein.

Conor Lupton,

Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

Companies Act 2014 – 10 Things Company Owners Should Know

March 5, 2015

The Companies Act 2014 was signed into law on 23rd December 2014. It will be commenced in June 2015 and is the largest consolidation of company law ever undertaken. Thirty three pieces of legislation are consolidated into one Act comprising 1,400 pages.

However, in addition to consolidation, the Act introduces some important changes into Irish Company Law. Some of the main changes being introduced are:

1. Each current private limited company (the most common type of company) will be obliged to change its structure into either the new company limited by shares (CLS), or the new designated activity company (DAC). A transition period of 18 months will apply and at the end of that period if a company has done nothing it will automatically become a CLS.

2. The new CLS form of company will have have a more simplified form of structure and will have a one document constitution. The CLS may only have 1 director but if it only has 1 director will have to have a separate company secretary. The company will have the same legal capacity as a natural person and the doctrine of “ultra vires” will no longer apply. This form of company can dispense with having to physically hold an AGM.

3. The DAC form of company will still have a Memorandum and Articles of Association and will still only have the capacity to act in accordance with its powers in its Memorandum. It will still have a minimum of 2 directors and cannot dispense with the requirement to hold AGM’s. It will be a format of company suitable for banks, insurance companies, charities or management companies.

4. Companies will be able to pass written resolution by appropriate majority (special or ordinary resolution) and no longer will have to pass these written resolutions with all shareholders.

5. Directors compliance statements will be required for large companies and plc’s.

6. It will be possible for companies to register a person with the Companies Registration Office, a person who is authorised to bind the company to contracts.

7. The restriction of companies providing financial assistance for the purchase of its own shares (Section 60 of the Companies Act 1963) will be relaxed.

8. A summary compliance procedure can be used by a company to authorise certain actions which previously required a court application. This involves the company passing a special resolution and the directors swearing a statutory declaration.

9. The current voluntary strike off procedure operated at the company registrar’s  discretion will be put on a formal basis in the legislation. This allows companies which have no assets or liabilities and do not trade to be struck off on a voluntary basis rather than going into liquidation.

10. The duties of directors have been codified for the first time and company law offences have been classified in one part of the Act. This allows company directors have more certainty as to their responsibilities and potential liabilities.

Conor Lupton,

Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

The European Court of Justice Rules that the Data Retention Directive is “Invalid”

May 2, 2014

The Data Retention Directive requires telephone and internet service providers to retain data regarding usage by customers for up to 2 years. The Irish High Court in the case of Digital Rights Ireland Limited v. Minister for Communications, Marine and Natural Resources & Others 2012 along with an Austrian Court in another case, asked the ECJ to examine the validity of the Directive.

The ECJ has recently found that the Directive causes a “serious interference” with the Charter of Fundamental Rights which was introduced into law in the Lisbon Treaty in 2009. The Charter provides for certain political, social, and economic rights for EU citizens into EU law. In particular the Court found that the Directive caused a wide ranging interference with the privacy rights enshrined in the Charter.

This now means that national laws implementing the Directive are now open to challenge in the various national courts. Following the ECJ ruling, the case being brought by Digital Rights Ireland Limited challenging the implementing Irish legislation may now proceed.

 

Conor Lupton, Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

EU Directive May Affect Unlimited Non-filing Structures

March 18, 2014

In recent years many Irish companies and groups of companies chose to avail of the exemption from filing accounts with their annual return by converting their Irish trading company to an unlimited company.

Typically a structure was set up whereby the unlimited company must have at least one member who is not itself a limited liability entity.

Therefore, a structure could be used so that no financial reporting would be required if one could replace the current shareholders in the Irish company with a non-EU (e.g. Isle of Man) limited liability company and a non-EU (Isle of Man) unlimited liability company.  As the Irish company will be owned by at least one unlimited liability shareholder who is not governed by the laws of a Member State of the EU, this should ensure that the Irish company would not be required to publish its annual accounts under current legislation.

Such an unlimited shareholder would be exposed to liability for the debts of the company (without limitation) in the event of a winding up. However, provided that a limited company is used correctly in the structure between the ultimate shareholders and the unlimited trading company, then limited liability protection should apply. There can be important exceptions to that general rule.

However, EU Directive 2013/34 (“the Directive”) which deals with, amongst other things, financial reporting obligations of undertakings in the member states may cause the putting in place of the above structure to be altered or to end completely.

Recital 6 of the Directive states that the “scope of this Directive should be principles-based and should ensure that it is not possible for an under­taking to exclude itself from that scope by creating a group structure containing multiple layers of under­takings established inside or outside the Union”.

Article 1 states that “Measures shall apply to the laws, regulations and administrative provisions of the Member States relating to the types of under­takings… having unlimited liability…in fact…have limited liability by reason of those members being undertakings which are… not governed by the law of a Member State but which have a legal form comparable to those listed in Annex I.”

Article 38 provides that Member States may require undertakings which are governed by their laws and which are members having unlimited liability of any under­taking , to draw up, have audited and publish, with their own financial statements, the financial statements of the unlimited liability undertaking.

The Department of Jobs, Enterprise and Innovation has launched a consultation in which it seeks feedback on implementation options open to Member States under the Directive. The Directive is due to be implemented into Irish law in 2015.

Conor Lupton, Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://www.ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

New Legislation to be introduced to streamline Foreshore Development

January 24, 2014

The General Scheme of the Maritime Area and Foreshore (Amendment) Bill was recently published and the new Bill is set to be progressed in early 2014.

The main aim of the Bill is to align the foreshore consent system with the planning system. At present is was usually necessary when developing on the foreshore to file a foreshore licence/ lease application and in parallel to apply for planning permission to the local authority.  As there was different criteria and time periods for both it made the approval system extremely cumbersome.

The proposed legislation will also deal with development activity in the State’s exclusive economic zone beyond the territorial waters/foreshore and on the continental shelf, including in relation to strategic infrastructure projects, such as oil and gas, ports and offshore renewable energy.

Essentially  the streamlining of the approval process will reduce duplication in the consent process and involve a single Environmental Impact Assessment, thereby also reducing the cost of applications.

The development of marine tourism is certainly an aspiration generally and hopefully a simplification of the approval system for developing marinas will lead to increased activity in this sector.

Conor Lupton, Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135

Irelands First REIT (Real Estate Investment Trust)

August 20, 2013

The first REIT in Ireland, Green REIT was launched on the Irish stock market on the 18th of July 2013. The firm placed 300,000 shares on the Irish stock market at €1 per share in its initial public offering. As at 20th August the share price sits at €1.22. The company aims to invest in the Irish commercial property market across retail, office and industrial commercial property.

In his December budget, the Minister for Finance, Michael Noonan T.D., announced that the 2013 Finance Act would contain comprehensive provisions for the introduction of a new tax regime for Real Estate Investment Trusts (REITs) in Section 42 of the act. Following the enactment of the Bill on the 27th of March, the legislation for REITs is now in place and closely resembles similar structures which are in place in 35 countries around the world including thirteen European nations including the UK, Germany and the Netherlands.

What are REITs?

A REIT is a publicly listed company which has as its main activity the ownership and management of property or property-related assets for example office-space, industrial warehouses and retail units. REITs give investors the opportunity to directly hold property through share ownership making them a tax efficient investment with the added benefits listed below.

Benefits of REITs to Investors:

 1. Allows investors to hold a portion of a larger property portfolio than could possibly be achieved personally, thereby achieving diversification and reducing risk.

2. REIT shares can be bought and sold just like regular shares thus making them a much more liquid asset than holding property personally.

3.  A REIT must distribute 85% of its income for each accounting period in the form of dividends to its shareholders.

4. REITs are safer investment than many other investments due to the requirement that the loan to market ratio must not exceed 50% of market value.

5. Relevant tax incentives as mentioned below.

 Taxation Benefits:

The distinguishing feature of REITs is that, subject to certain specific conditions, they are exempt from taxation at the corporate level on distributed income. The rationale for this exemption is that previously the ownership of property through a corporate structure involves an additional layer of taxation when compared to private ownership of property.

Prior to REIT introduction, a property holding company paid corporation tax on its rental income and when the revenue derived from the rental income was distributed as dividends among shareholders taxation was applied again personally at an individual’s marginal tax rate. This taxation environment led to the demise of listed property investment companies in Ireland and the rise of the syndicate, which became so popular in Ireland throughout the Celtic Tiger as a means of investing in property. It is hoped the introduction of REITs can revive certain sectors of the property market.

Attracting International Investment:

REITs are established in the US and throughout all major economies. They are a globally understood and trusted investment mechanism. The introduction of REITs to Ireland will promote international investment in Ireland’s troubled property sector. Figures by the CBRE show that overseas investors accounted for the majority of more than €600 million of investments in Irish property in 2012, illustrating the foreign appetite for the deflated Irish property sector. The launch of REIT companies will further add to this appetite.

The opening of the Irish commercial property market to long-term equity money from overseas is seen by many as a vital step on the road to economic recovery. This lack of long-term equity money has been a huge barrier to large-scale development projects because Irish long-term equity investors, such as life companies and pension funds, were limited to scheme sizes of generally less than €50million for prudential reasons. The introduction of a REITs system will help change this.

NAMA and REITs:

Ireland is seen as one of the most attractive property markets in Europe and is currently courting attention from leading international real estate investors as mentioned previously. The prospect of significant capital appreciation on the basis of the incipient recovery in Dublin’s CBD occupational markets and, in time, market normalisation, offers investors an opportunity in the Irish market. NAMA could use REITs as a route to market and as an avenue to deleveraging their books.

Qualification as a REIT:

In order to qualify for the REIT tax regime, a REIT must:

  1. Be resident in Ireland and not resident elsewhere
  2. Be incorporated under the Irish Companies Acts
  3. Be a listed quoted company which is traded on a main Stock Exchange in an EU Member State
  4. Not be a close company (subject to certain ‘good shareholder’ exceptions)
  5. Derive at least 75% of its profits from the carrying on of a property rental business. Such business must consist of at least three properties, no one of which must be more than 40% of the total
  6. Maintain a 1.25:1 ratio of income to financing costs
  7. Hold at least 75% of its assets, by market value, in its property rental business
  8. Maintain a loan to value ratio of not more than 50%, and
  9. Distribute at least 85% of its income by way of dividend to its shareholders (income does not include capital gains)

 

Conor Lupton, Comyn Kelleher Tobin Solicitors

CKT 018

                       

Tel: + 353 21 4626900

Fax: +353 21 4223872

Email: conor.lupton@ckt.ie

http://ie.linkedin.com/pub/conor-lupton/a/444/135