IRELAND Agenda - ICSA · design and content. I would urge you visit the webpage and to connect with...

Members of Council:

Conor Sweeney, FCIS, (President), Hughes Blake

Conor Ryan, ACIS, (Vice President & Treasurer), Permanent TSB

Jennifer Monaghan, ACIS, Pearse Trust (Secretary)

Salvador Nash, FCIS, (Communications Officer)KPMG

Charles Brown, FCIS, Experian plc

John Burns, ACIS, AIB

Neil Colgan, FCIS, CRH plc

Tricia Cosgrave, ACIS, Irish Life

Ruairí Cosgrove, ACIS, PwC

Robert Grier, FCIS, Expert in Conflict Resolution

Martin Jacob, FCIS, JMDL Corporate Consultants Limited

Chris Kane, FCIS, Non-Executive Director

Giles Kerr, FCIS, Corporate Governance & Company Secretarial Consultant

Deirdre Mooney, FCIS, William Fry

Brendan O’Connor, FCIS, PwC

Emma O’Sullivan, ACIS, A&L Goodbody

Monica Robertson, FCIS, Phelan Prescott & Co.

Jon Rock, FCIS, D&B Business Information Solutions

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▪ ICSA Publishing ▪ 16 Park Crescent ▪ London ▪ W1B 1AH ▪

The Official Quarterly Regulatory Update for the ICSA, Irish Region ▪ November 2013

The Official Quarterly Regulatory Update for the ICSA, Irish Region November 2013

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Message from the PresidentWelcome to the ninth edition of Agenda, the regulatory update for Irish members of ICSA.

New look AgendaWe have redesigned the Agenda in order to make it more accessible and web friendly. I trust you find the new format easy to negotiate but we welcome all feedback on both design and content. I would urge you visit the webpage and to connect with us through our LinkedIn page. Our website address is www.icsacharteredsecretaries.ie.

ICSA Ireland Annual General Meeting and Briefing from Simon Osborne, CEO of ICSAOur Annual General Meeting takes place on 22nd November 2013 at 11.45am and will be followed by a briefing from Simon Osborne, Chief Executive of ICSA. Simon’s briefing will provide details on the upcoming General Meeting of the Institute to be held on 11 Decem-ber 2013 at which a vote will be held on reforming the governance structure and con-stitution of the Institute. Simon will be available to answer questions after his briefing. The proposed changes are significant and additional information can be found on the ICSA website. I would encourage all of you to vote by completing the proxy form which has been mailed to you and returning by post or email.

Annual LunchOur annual lunch will take place after Simon’s briefing at 12.30pm. This is always an enjoy-able event and is a great opportunity to network with your peers. I would urge you to attend, bring colleagues and clients and you can register for the lunch on our website.

Companies (Miscellaneous Provisions) Bill 2013Earlier this month the Minister for Jobs, Enterprise and Innovation flagged the upcoming Companies (Miscellaneous Provisions) Bill 2013. It is important to note that this is separate to the larger Companies Bill which will take longer to enact. It is intended to enact the Companies (Miscellaneous Provisions) Bill by the end of 2013 to deal with certain issues around examinership, electronic filings of accounts, statutory audit levy for public interest entities and issues around third country auditing. The full text of the DJEI press release can be accessed on their website.

When we have more information on how this new piece of legislation will impact Irish com-panies, we will advise in the next edition of Agenda.

http://www.linkedin.com/groups?gid=4988792&trk=my_groups-b-grp-v

http://www.icsacharteredsecretaries.ie

https://www.icsa.org.uk/about-icsa/general-meeting

http://www.icsacharteredsecretaries.ie/event/annual-lunch/

http://www.djei.ie/press/2013/20131011.htm

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Calendar of EventsI have attached below a list of events for 2013 / 2014. More events may be added during the course of the year and we will keep you informed. I would encourage members to be active within your region by attending as many ICSA Ireland events as possible. Please note that these events are open to non mem-bers also and if you have any colleagues or friends who may be interested in attending, please urge them to come along.

Conor SweeneyPresident ICSA Chartered Secretaries Irelandwww.icsacharteredsecretaries.ieLinkedInpresident@icsacharteredsecretaries.ie

2013 / 2014 – Diary Dates

• Annual General MeetingFriday, 22 November 2013 – 11.45 am to 12.00 noon

• Briefing by Simon Osborne, CEO ICSA Friday, 22 November 2013 – 12.00 noon to 12.30 pm

• Annual LunchFriday, 22 November 2013 – 12.30 pm to 2.30 pm

• CPD Breakfast EventTuesday, 18 February 2014 – 8.00 am to 9.30 am

• ICSA Ireland Annual ConferenceTuesday, 13 May 2014 – 8.00 am to 1.30 pm

ConclusionI would like to again take this opportunity to thank William Fry for contributing to this edition of Agenda. Should you have any queries in relation to any of the above articles please do not hesitate to contact me at [email protected].

http://www.icsacharteredsecretaries.ie

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The Official Quarterly Regulatory Update for the ICSA, Irish Region ▪ November 2013 The Official Quarterly Regulatory Update for the ICSA, Irish Region ▪ November 2013

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ICSA Agenda ContentsTo go to a specific section, please click the chapter heading or section title

Governance & Directors 41. Improving Your Corporate Governance Reporting 42. Directors Encouraged to “Do the Right Thing” 43. High Court Grants Disqualification Orders Against Directors 54. FRC Consults on Executive Remuneration 5

Regulatory Updates 75. Central Bank’s Regulatory Powers Boosted 76. Corporate Governance Code to be Revised 77. Central Bank Consultation on Revised Client Asset Regime 88. Launch of Ireland’s First REIT 9

Insolvency & Corporate Recovery 119. Liquidator Substituted After Chairman found to have Misconducted Creditors’ Meeting 1110. Claim that a Company can Survive as a Going Concern Not a Defence to Winding-Up Petition 1111. EU Consultation on New European Approach to Business Insolvency 1212. Update on the Personal Insolvency Act 2012 12

EU Updates 1413. Consultation on Proposed EU Directive to Require More Disclosure by Companies 1414. Progress of European Initiatives during Irish Presidency of the EU 1415. EU Commission Proposal for a Regulation on Money Market Funds 1516. EMIR Update 1617. EU Commission Proposes New Rules for Setting Benchmarks 16

Tax Updates 1818. Financial Transaction Tax Update 1819. FATCA Implementation Delay 18

Pensions Update 1920. Pensions Board Consults on Future Regulation of Defined Contribution Pensions 1921. Pensions Board Report Indicates Increased Focus on Non-Compliance 1922. Restructuring of the Pensions Board 1923. OECD Recommends Reforms to Irish Pension System 20

Government Legislative Programme Autumn 2013 22

Recent Central Bank Publications of Interest 23


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ArticlesGovernance & Directors1. Improving Your Corporate Governance ReportingThe Irish Stock Exchange (ISE) commissioned an independent review of disclosures in companies’ annual reports for 2010 as compared with 2011 (the first full financial year that companies had to apply the Irish Corporate Governance Annex). Recently, a representative from the ISE addressed a conference about the results of the review.

The review assessed:

• The level of compliance with the Irish Annex; and • Whether the Irish Annex was making any impact on the type of disclosures made in annual reports.

The review found that there was a high level of compliance with the Irish Corporate Governance Annex with 65% of companies claiming full compliance and 35% claiming partial compliance. Generally there was also an overall improvement in disclosures as to how companies were achieving best practice in cor-porate governance. Specific improvements were observed in areas such as:

• Board evaluation• Independence• Risk oversight• Remuneration

Whilst noting these specific improvements, the ISE concluded that there is further room for improvement particularly in the following areas:

• Board Composition: Reporting in this area could be improved by providing a rationale for the size and structure of the board, information on the skills and expertise of board members and informa-tion on the processes around individual board appointments.

• Audit Committee: Disclosures in this area could be improved by reporting on the work under-taken by the committee throughout the year.

2. Directors Encouraged to ‘Do the Right Thing’Comments by Chief Justice Susan Denham have highlighted the need for directors to act ethically and to do the right thing in managing their companies.

Speaking at the launch of the Courts Service annual report for 2012, the Chief Justice said the finan-cial crisis had uncovered malpractice in business as figures for 2012 revealed a 50% increase in the number of orders to restrict company directors and a 350% increase in the number of company direc-tors disqualified as compared with 2011. She emphasised that Ireland’s boardrooms must be mindful of ethics rather than keeping a ‘a constant eye on the needs of shareholders’ if trust in the economy is to be rebuilt.

The Chief Justice said that boards of directors hold a privileged position of trust, ‘they are relied upon, primarily by the company and shareholders, but also employees, customers, suppliers and the public at large,’ she said, adding that we rely on boards to ‘do the right thing’. She also said that ‘knowing what the right thing to do in a situation, and then doing it, comes from exercising no small amount of courage’.

The increase in restriction and disqualification figures is a useful reminder to directors to take steps to understand their role, perform it effectively and thereby reduce their exposure to personal liability.


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3. High Court Grants Disqualification Orders Against DirectorsThe High Court has made an order disqualifying the two directors of Mossway Limited (In Liquidation) for a period of 12 months.

Background

The principal business of the company had been the provision of haulage services with a warehousing and distribution facility. On 3 June 2011, the Revenue Commissioners presented a petition to wind up the company on the basis that it was unable to pay its debts as they fell due. The Court made the order sought and appointed an Official Liquidator.

Due to the manner in which the directors had conducted the company’s business together with their failure to co-operate with the liquidation process, the Official Liquidator sought to have the directors restricted or disqualified.The Official Liquidator referred to the following as evidencing a lack of commercial probity by both direc-tors:

• non-payment of revenue debt (while this is not of itself an automatic ground for disqualification, it is a factor to be taken into consideration by the Court in determining whether or not a director may be deemed to be ‘unfit’);

• failing to keep adequate books and records and to deliver up books and records making it extremely difficult for the Official Liquidator to ascertain the underlying reasons for the company’s insolvency;

• use of company funds for director’s personal expenditure;• engagement by the directors of a self-administered wind down whereby payments were made in

disregard of statutory obligations and obligations to the Revenue Commissioners; and• the transfer of assets, employees and customers out of the company after it ceased to trade, to

another company of which one of the company’s directors was a director together with his wife.

Decision

The Court was satisfied from the evidence provided that the conduct of both directors was of such a serious nature as to deem them both unfit to be concerned in the management of the company. Disquali-fication orders were made against both directors. One of the directors argued that he had left much of the running of the business of the company to the other director and had not been actively involved in the company’s affairs. However, the judge decided that this, of itself did not detract from the responsibili-ties which he ought to personally have been exercising as a director in any event. Having satisfied itself as to the appropriateness of granting disqualification orders, the Court then had to consider the appro-priate duration of such disqualification orders. The judge concluded that a disqualification period of 12 months was appropriate for both directors. The Order against one of the directors was postponed for two weeks to afford him time to resign as a director of the other company to which the company’s assets and employees had been transferred.

4. FRC Consults on Executive RemunerationThe Financial Reporting Council (FRC) in the UK has published a consultation on whether to amend the UK Corporate Governance Code (the Code) to address a number of issues relating to executive remuneration.The FRC announced last year its intention to consult after the UK Government’s legislation on voting and reporting on executive remuneration had been finalised. That legislation, which contains new require-ments related to voting on remuneration policies and requirements regarding the information companies

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must disclose in their remuneration report, has now been enacted. It came into force for companies incor-porated in the UK for accounting periods beginning on or after 1 October 2013.

There are three main issues on which views are sought:

• Clawback Provisions: Whether the current Code requirements are sufficient around clawback arrangements, or, whether the Code should include a ‘comply or explain’ presumption that compa-nies have provisions to recover and/or withhold variable pay.

• Remuneration Committee Membership: Whether non-executive directors, who are also execu-tive directors in other companies, should sit on the remuneration committee, in order to avoid the perceived conflict of interest that may arise.

• Vote Against the Remuneration Report: Whether there should be an explicit requirement in the Code to report to the market, in circumstances where a company fails to obtain at least a substan-tial majority in support of a resolution on remuneration

As well as consulting on the three specific issues, the FRC has also asked respondents to highlight whether they believe there should be any further changes to the sections of the Code relating to remuneration. Comments are requested by 6 December 2013.

Any proposed changes to the Code will be subject to consultation in the first quarter of 2014 and, if adopted, would be applicable for accounting periods beginning on or after 1 October 2014.


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Regulatory Updates5. Central Bank’s Regulatory Powers BoostedThe Central Bank (Supervision and Enforcement) Act 2013 (the ‘Act’) strengthens the regulatory powers of the Central Bank (CBI) significantly. The Act applies to regulated financial services providers (RFSPs) and in certain cases to related undertakings. Almost all provisions came into force on 1 August 2013. Under the significant powers in the Act the CBI may:

• require persons to provide specified information, records or documents and to certify their correct-ness;

• require an entity to provide, at its own cost, a report on a specified matter prepared by a third party expert approved by the CBI;

• appoint authorised officers, with extensive powers including, powers to search and inspect premises, to require information or records, to explain practices and to answer questions.

The CBI may require a RFSP’s auditor to report to the CBI on the RFSP’s compliance with specified obli-gations. The Act also provides protection from disciplinary and civil action for whistleblowers disclosing breaches of financial services legislation to the CBI on reasonable grounds and in good faith. For persons performing pre-approval controlled functions such disclosure is, as a rule, mandatory.

The Act provides the CBI with broad powers to issue directions in relation to conduct of business and to make regulations.

The CBI may direct a RFSP to make redress to customers for losses arising from widespread or regular specified defaults, including overcharging, misselling or system failure.

The CBI may apply to the High Court for an order restraining conduct that breaches financial services legislation or an order for restitution against a person unjustly enriched by a breach.

Finally the Act increases the maximum penalties under the administrative sanctions regime to the greater of €10,000,000 or 10% of turnover (for the last financial year for companies) and to €1,000,000 for individuals.

6. Corporate Governance Code to be RevisedThe Central Bank of Ireland (CBI) recently published a consultation paper (CP69) on proposed changes to the Corporate Governance Code for Credit Institutions and Insurance Undertakings. The consultation period ended on 1 October 2013, following which, the CBI intends to publish the revised Code in Decem-ber 2013. There will be a transitional period to allow institutions implement necessary amendments.

Notable proposed amendments to the Code include:

Chief Risk Officer (‘CRO’)

The introduction of a new section on the role and responsibilities of the CRO. Institutions will be required to have a member of senior management with specific responsibility for managing the risk control func-tion. Duties of the CRO will include:

• Maintaining effective processes to identify and monitor risks;• Reporting risks in a timely and comprehensive manner to the risk committee; and• Facilitating the setting of the risk appetite by the board.

Where a medium and low impact institution does not require a dedicated exclusive CRO due to its nature, size and complexity, the CRO, may also fulfil another pre-approval control function, provided there is no conflict of interest and the CBI is notified of the arrangement.

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Chairman

Proposal to amend the prohibition on a Chairman concurrently holding the Chairmanship of another credit institution or insurance undertaking so that a Chairman of group subsidiaries which are medium or low impact can hold the position in a sister institution if he has sufficient time to fulfil the role, again, subject to CBI pre-approval.

Chief Executive Officer (‘CEO’)

• New requirement to appoint the CEO to the board.• Proposed proportionate approach to the prohibition on a CEO from holding the position of CEO of

another credit institution or insurance undertaking simultaneously for smaller institutions where a full-time CEO might not be justified.

Role of the board

Insertion of additional detail on the role and responsibilities of the board.

Committees

• Risk committee: Proposal for membership to be a majority of non-executive directors and chaired by a non-executive director.

• Cross-committee membership: Proposed requirement that the Chairman of the audit committee be a member of the risk committee and vice versa for the potential benefit from the cross-over of ideas and knowledge.

• Minimum number of members: Proposal for a minimum of 3 members on each committee.

Annual compliance statement (ACS)

Proposal to permit institutions that do not have a financial year ending 31 December to change the sub-mission basis of their ACS to their financial year rather than the current requirement whereby the ACS is submitted on the basis of a 12-month calendar year.

The consultation also sought comments on issues including board composition, board meeting require-ments, current limits on the number of directorships and whether provisions on gender diversity should be introduced in the revised Code.

7. Central Bank Consultation on Revised Client Asset RegimeThe Central Bank of Ireland has published a consultation paper on client asset regulations and guidance, which will replace the existing client assets requirements (issued 1 November 2007).

The main aspects of the revised client asset regime are as follows:

• The regulations are based on seven client asset core principles which reflect the fundamental obli-gations on all firms holding client assets.

• Fund service providers, will for the first time be subject to client asset regulations in respect of client funds held in collection accounts.

• The daily calculation will be expanded to include the margin transactions for investment firms writ-ing margin transactions.

• The regulations do not permit a firm to maintain any asset other than client assets in a client asset account/collection account.


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• Firms will be required to appoint an individual to a client asset oversight role which will be a pre-approved control function, appointed under Part 3 of the Central Bank Reform Act, 2010.

• Firms will be required to create, document and maintain a client asset management plan in order to safeguard client assets.

The regulations and guidance aim to enhance the Central Bank’s client asset regime by minimising the risk of loss or misuse of client assets while a firm is a going concern and in the event of the insolvency of a firm, to return those assets to clients as efficiently and cost-effectively as possible. The closing date for submissions is 31 December 2013.

8. Launch of Ireland’s First REITGreen REIT, Ireland’s first real estate investment trust (REIT) has raised over €300 million euros ($400 mil-lion) by placing shares with institutional investors. The latter are reported to include BlackRock and Thread-needle. On 18 July 2013 the REIT placed 300,000 shares on the Irish stock market at €1 per share in its initial public offering. On 15 October 2013 the share price was up 21% at €1.21 per share. The REIT aims to further increase the size of its fund by borrowing around one-third of its equity.

It has become increasingly clear that Dublin lacks suitable office space for the rising number of foreign companies that want to set up here and the REIT intends to exploit this demand. Indeed, the National Asset Management Agency expects to create a similar vehicle while the Irish Finance Minister, Michael Noonan, has predicted that other REITs will also be seeking listings this year.

Mr Noonan made changes in last December’s Budget to encourage REITs as an investment vehicle. Subject to meeting certain criteria, a REIT will not be liable to either corporation/income tax on its property rental income or property profits, or capital gains tax on disposals of assets of its property rental business.

A REIT must meet the following criteria:

• At least 75% of the aggregate income of the REIT must derive from property rental business – unlike the position in the UK, there is no balance of assets test.

• The property rental business must include at least three rental properties. No one property can represent more than 40% of the total market value of the properties involved in the property rental business. This is subject to a three-year grace period.

• While no borrowing threshold has been set down, a tax charge will arise to the extent that the sum of the property financing costs and rental income exceeds the rental income by a ratio in excess of 1.25:1.

• At least 85% of the property rental income (excluding capital gains) for each accounting period must be distributed to shareholders on or before the REIT’s normal filing date for the company’s tax return in respect of the relevant accounting period.

• Property income dividends paid by the REIT will be subject to Dividend Withholding Tax (currently 20%).

• It must be resident in the State. • It must be a company incorporated under the Irish Companies Acts. • Its shares must be listed on the main market of a recognised stock exchange of a member state of

the EU. A three-year grace period applies to this requirement. • It cannot be a ‘close company’ (within the meaning of the Taxes Consolidation Act 1997), unless

controlled by “qualifying investors” such as life assurance companies, pension schemes and certain collective investment schemes. This is subject to a three-year grace period.

• A tax charge will arise if the REIT pays a dividend to shareholders with 10% or more of the share capital, distribution or voting rights in the REIT (other than “qualifying investors”), unless “reason-able steps” were put in place to prevent the making of the distribution to such person.

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• Provision is made for the establishment of ‘group REITs’. • A charge to tax will arise where an asset forming part of the property rental business is developed

(at a cost exceeding 30% of the market value of the asset at the date of commencement of the development) and sold within a three-year period.

A REIT will be liable to pay stamp duty on assets which it acquires. A transfer of shares in a REIT will also be liable to stamp duty at a rate of 1%.


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Insolvency & Corporate Recovery9. Liquidator Substituted After Chairman found to have Misconducted Creditors’ MeetingThe manner in which creditors’ meetings are conducted can often be as significant as the actual out-come of the meeting. A good example of this can be seen from the recent High Court decision in In re Mountview Foods Ltd (In Voluntary Liquidation) [2013] IEHC 125.

A creditor of Mountview Foods Ltd brought an application before the High Court challenging the appointment of the liquidator at a meeting of the creditors of the company. The creditor complained that the chairman had refused to allow its proxy to vote in favour of its nominee for liquidator. The reason given by the chairman for excluding the proxy was that the creditor had returned both the general and special proxy forms and it was not possible to ascertain which form it intended to rely on.

Laffoy J noted that the special proxy form provided by the company deviated from the form prescribed by the Rules of the Superior Courts. In particular, the form did not make clear that the special proxy was to have authority to vote ‘for’ or ‘against’ the particular resolution. It also purported to identify the reso-lution in question by reference to the notice convening the meeting, but there was no reference to any resolution in that notice. The judge stated that it was the responsibility of the company to provide proxy forms in the prescribed format and it could not shift blame onto creditors who had mistakenly completed and returned both forms. She found that the completed version of the special proxy form was so obvi-ously defective that it should have been treated by the chairman as such.

The liquidator’s appointment was also challenged on the basis that the chairman had permitted the proxies of three companies to vote despite the fact that the relevant proxy forms were not properly exe-cuted. The chairman relied on his own personal knowledge of the officers in question, gleaned from busi-ness dealings over many years, to satisfy himself that they were authorised to sign the proxy forms. The Court found that these proxies should not have been permitted to vote.

The chairman was also found to have wrongly excluded two proxies solely on that basis that the forms had been sent by fax.

The Court found that had the chairman treated the relevant proxies in the proper manner, the result of the voting would have been very different: the applicant’s nominee (and not the company’s nominee) would have been appointed the liquidator of the company. Accordingly, Laffoy J made an order setting aside the decision of the chairman and substituting the nominee of the applicant in place of the liquidator appointed at the creditors’ meeting.

The judge also commented that the Oireachtas should consider whether the law needs to be clarified so that all of the eventualities which may happen at creditors’ meetings, including the improper appoint-ment of a liquidator, are expressly addressed in the legislation.

10. Claim that a Company can Survive as a Going Concern Not a Defence to Winding-Up PetitionThe High Court has granted a creditor’s petition to wind-up a company, notwithstanding the claim that the company could survive as a ‘going concern’ following a restructuring. The basis for the decision was that such a claim should have been advanced by way of application for examinership .

The Revenue Commissioners issued a winding-up petition against Heatsolve Ltd on foot of a demand seeking €149,134.59 for arrears of tax, including VAT and employee PRSI contributions. The company subsequently paid a portion of this sum, reducing the balance owed to €84,295.75.

The company sought an adjournment of the petition claiming that it would be in a position to gener-ate an income stream the following month and to discharge the debt in full within 18 months. Two major creditors of the company supported the application for an adjournment.

The company argued that the Court had a wide discretion to adjourn the petition in order to enable

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it to trade its way out of difficulties. It referred in this regard to section 213 of the Companies Act 1963 which states that the court “may” (as opposed to ‘shall’) order the winding-up of an insolvent company and to section 216 which allows the court to adjourn the hearing of a winding-up petition.

However, the Court did not think that it should exercise its discretion in such a far-reaching manner as to convert the winding-up procedure into something akin to examinership. Hogan J noted that examin-ership involves a series of ‘checks and balances’ designed to protect both companies and their creditors. One such safeguard is that a petition for examinership must be accompanied by an independent account-ant’s report, the purpose of which is to guide the court on the likely prospects of survival of the company. No similar safeguards exist in the context of the winding-up process.

The judge concluded that a company seeking to resist a winding-up petition cannot ordinarily do so on the ground that, if given breathing space from its creditors, it will have a reasonable prospect of survival as a going concern and will be in a position to discharge the debt of the petitioning creditor. Any such argu-ment must be advanced by way of an application for examinership rather than by means of a defence to a winding-up petition.

As the Revenue Commissioners had complied with the requisite statutory formalities in making their petition, the Court held that it had no alternative but to make the winding-up order sought.

11. EU Consultation on New European Approach to Business InsolvencyIn December 2012 the European Commission issued a policy communication called “A new European Approach to Business Failure and Insolvency” and a proposal to amend the EU Insolvency Regulation.

The proposed new European approach to business insolvency focuses on helping sound business to survive, while at the same time protecting creditors’ rights.

The Commission has highlighted a number of areas where differences between domestic insolvency laws could potentially hamper the establishment of an efficient insolvency legal framework within the EU market. Key issues include the time required to discharge a debt, the conditions for opening proceedings, the filing of claims and the rules for restructuring plans.

In July, a public consultation was launched to seek views from stakeholders on areas where harmo-nisation of national insolvency laws might bring benefits. The consultation aims to identify the issues on which a new European approach to business failure and insolvency should focus in order to develop a rescue and recovery culture across all EU member states. It further outlines certain benefits which the harmonisation of specific areas of national insolvency law might bring.

The public consultation was opened until 11 October 2013.

12. Update on the Personal Insolvency Act 2012The Personal Insolvency Act 2012 was signed into law on 26 December 2012. As of 31 July 2013, all sec-tions of the Act (save for Part 4 which relates to bankruptcy) had been commenced by ministerial order. Some recent developments relating to the legislation are summarised below:

A Debtor’s Perspective

Debtors wishing to avail of a debt settlement regime under the Act must seek advice from an authorised Approved Intermediary (AI) or Personal Insolvency Practitioner (PIP) to ensure that they satisfy certain eligi-bility criteria. Subject to meeting these criteria, a variety of restructuring options are potentially available, including, for example, extensions of repayment timeframes; debt write-offs; write-downs of negative equity; split mortgages; and alterations to interest rates.

The AI or PIP retained by the debtor will advise on the best available options, on the basis of the indi-vidual debtor’s personal and financial circumstances.

A Creditor’s Perspective

Creditors must ensure that they have proper systems and procedures in place to process applications


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received from debtors for any of the three new debt settlement regimes provided for under the Act. While active participation in the process itself will not guarantee that a creditor’s position will not be adversely affected, it will at least permit creditors to minimise potential losses, insofar as possible, in the circumstances.

All creditors (including secured creditors, unsecured creditors, guarantors, landlords, receivers and mortgagors in possession) should ensure they are fully informed of the statutory restrictions on creditors seeking to recover a debt during the currency of any of the debt settlement regimes provided for under the Act. Creditors should also be aware of the provisions relating to submissions, proof of claims, security valuations, participation at creditor meetings, voting rights, appeal entitlements and statutory time-frames.

The Insolvency Service of Ireland

The Insolvency Service of Ireland (ISI) started accepting applications for Debt Relief Notices and Protective Certificates for Debt Settlement Arrangements and Personal Insolvency Arrangements on 9 September 2013.

The ISI has also released guidelines on what might be considered to be “reasonable living expenses” and has published various ‘scenario packs’ illustrating how each of the three new debt settlement regimes provided for under the Act will operate in practice.

Qualification and Supervision of AIs & PIPs

The ISI has made various Regulations prescribing the qualification criteria, licensing requirements and regu-latory standards relating to both AIs (dealing with Debt Relief Notices) and PIPs (dealing with Debt Settle-ment Arrangements and Personal Insolvency Arrangements).

The ISI has also published a list of authorised AIs and PIPs. As at the end of September 2013, eight persons have been authorised to act as AIs and 49 have been authorised to act as PIPs, although it is understood that over 100 applications for PIP licences have in fact been received by the ISI.

A list of authorised AIs and PIPs is available on the ISI website.

Specialist Judges

Six specialist judges have been appointed to the Circuit Court, which has specific jurisdiction to deal with applications under the Act where the debtor’s total liabilities are €2.5 million or less. Where a debtor’s liabilities exceed this amount, applications under the Act must be made to the High Court.

Pre-Bankruptcy Dispositions

Part 4 of the Act makes a number of significant changes to the Irish bankruptcy regime. This part of the Act is expected to be commenced by ministerial order shortly.

The most significant of these changes is the substantial increase in the “look-back” periods. In respect of fraudulent preference, the look-back period will be extended from one to three years, during which time certain transactions remain potentially at risk of being set aside in the event of a debtor becoming bankrupt. In such circumstances, a creditor may be forced to repay any monies received during that period to the Official Assignee. The look-back periods in respect of fraudulent/voluntary conveyances will increase from two to three years.

It is estimated that between 3,000 to 4,000 applications for Debt Relief Notices and approximately 15,000 applications for Debt Settlement Arrangements and Personal Insolvency Arrangements will be made in the first year of the new insolvency regime coming into practice.

https://www.isi.gov.ie/

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EU Updates13. Consultation on Proposed EU Directive to Require More Disclosure by CompaniesThe Government recently consulted on the proposed EU Directive which will require non-financial infor-mation to be reported in the Annual Reports of companies that have more than 500 employees and either a balance sheet total of €20 million or a net turnover of €40 million. The proposed Directive also requires any listed company (regardless of size) to detail its diversity policy in its corporate governance statement.

The objective of the proposals is to ensure a level playing field across the EU by requiring consistency and comparability for non-financial information. Additionally, the reporting of age, gender, geographical diversity and educational and professional backgrounds provides enhanced transparency to increase board diversity.

The deadline for submissions to the Department of Jobs, Enterprise and Innovation was Friday 4 Octo-ber 2013. The Department was seeking comments on the proposed Directive to help inform its approach in the negotiations on the proposed Directive.

14. Progress of European Initiatives during Irish Presidency of the EUIn a recent address to the Institute for International and European Affairs in Dublin, the Central Bank’s Head of Markets Policy, Martin Moloney, congratulated the Irish Presidency on its success in progressing key financial services regulation and, in particular, key securities markets-focused regulation, during its term.

At the start of the Presidency, Ireland took over 20 financial services files at different stages of comple-tion. These represented many of the elements of the complex regulatory response of the EU to the finan-cial crisis. By the end of the Presidency, 11 files had reached policy commitments in legislative form – the largest ever for any Presidency.

Banking Regulatory Reform

During the Presidency, agreement was reached on the Single Supervisory Mechanism, the Banking Recov-ery & Resolution Directive, the Mortgage Credit Directive and, most importantly, the Capital Requirements Directive IV (CRD IV), which covers prudential rules for banks, building societies and investment firms.

It was Mr. Moloney’s view that the three pillars of CRD IV – tougher liquidity rules, better quality capital holdings and a non-risk weighted leverage ratio – should assist regulators throughout the EU if and when another asset bubble emerges.

PRIPS Regulation

The Council’s general approach on the draft Packaged Retail Investment Products Regulation (PRIPS) was agreed during the Irish Presidency. The draft regulation which is aimed at improving market transparency for retail investors, covers investment funds, structured deposits and life insurance policies with an invest-ment element. It requires key information documents to be drawn up for PRIPs and lays down uniform rules on the format and content of such documents and on their provision to retail investors.

Mr. Moloney noted that, throughout the history of the EU, investment funds and life insurance policies have been regulated entirely separately. He stated that the PRIPS Regulation bridges that chasm in con-sumer protection and for that reason alone is a very welcome development.

Market Abuse Regulation

Under the Irish presidency, agreement was reached with the EU Parliament on the Market Abuse Regula-tion (MAR). Mr. Moloney noted that there has been an apparent move towards the use of EU Commission


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Regulations as the primary legislative tool which, he added, reflects a focused aspiration from an EU policy perspective to have, in as much as possible, maximum harmonisation of legislation. This would include the aim to have a single rule book for products, services and activities that are traded across the EU.

Mr. Moloney also noted that part of the compromise to get MAR over the line involved affording cer-tain discretions to EU Member States such as:

• A discretionary option for Member States to put criminal sanctions in place within 24 months of MAR coming into force.

• Discretion as to what sanctions will apply for failure to cooperate or to comply with an inspection, investigation or request by the competent authority of a Member State.

Mr. Moloney expressed his hope that Member States will not use those discretions to step back from the original Market Abuse Directive.

MIFID

The Council’s general approach on MiFID II was agreed during the Irish Presidency. Mr. Moloney high-lighted the benefits of MiFID II in as much as it responds to some of the unintended consequences of MIFID I, to the emergence of high frequency trading and to a perceived need to improve oversight of less regulated trading. MiFID II proposes to introduce a new regulatory framework: the OTF (Organised Trad-ing Facility) regime to regulate trading previously done off-market. MiFID II also proposes to introduce a harmonised third country regime and new consumer protection rules.

15. EU Commission Proposal for a Regulation on Money Market FundsThe European Commission has released a Proposal for a Regulation on Money Market Funds (MMFs).

The draft Regulation can be regarded as the culmination of reforms recommended for money market funds by IOSCO , the ESRB and the FSB . However, it is important to note that three of the reforms that were most aggressively pursued by these bodies, i.e. the mandatory conversion of short term Constant Net Asset Value (CNAV) MMFs to Variable Net Asset Value (VNAV) MMFs, a ban on sponsor support and the limited use for valuation of the amortised cost method, have not been adopted by the Commission in its draft Regulation.

The draft Regulation breaks MMFs into two categories: (i) short term MMFs; and (ii) standard MMFs, and thus duplicates the approach followed in CESR’s Guidelines on a Common Definition of Money Market Funds.

Anticipated Implementation Date

The draft Regulation will now pass to the European Parliament for approval and then to the Council of the EU. The Commission has advised that it could potentially be agreed over the course of 2014, in which case, it is expected that it would then be directly applicable throughout the EU towards the end of 2014.

Industry Reaction

Irish Funds Industry Association (IFIA)

The IFIA is calling on the EU to implement a consistent global response to money market funds reform rather than pursue an agenda that will create significant cross border arbitrage between the US and the EU despite the fact there is no material difference between money markets in the US and EU.‘Having different rules for money market funds in the US and the EU is neither consistent nor effective. The EU proposal for a 3% capital buffer must be reconsidered on that basis,’ said Kevin Murphy, Chair-man of the IFIA. The IFIA MMF Task Force is currently preparing a response to the Commission’s Proposal.

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16. EMIR Update

EMIR Reporting Obligation Delayed

European Securities and Markets Authority (ESMA) has updated its indicative timeline for the implementa-tion of the European Market Infrastructure Regulation (EMIR) to reflect that the first registration decisions concerning trade repositories are now not expected until 7 November 2013 at the earliest. Previously, registration decisions had been expected from 24 September 2013, with reporting to trade repositories (TRs) starting on 1 January 2014. As the reporting start date depends on the date of registration of the TR, reporting to trade repositories is now not expected to start before February 2014.

EMIR Technical Standards on Colleges for CCPs Published in Official Journal

The Regulatory Technical Standards (RTS) on colleges for central counterparties relating to EMIR have been published in the Official Journal of the EU. The RTS address:

• the determination of the most relevant currencies; • the operational organisation of the colleges;• participation in the colleges; • governance of the colleges;• exchange of information among authorities; and • voluntary sharing and delegation of tasks.

The RTS came into force on 3 October 2013.

Deadline for draft RTS on cross-border application of EMIR extended

The European Commission has extended the deadline for ESMA to deliver its draft regulatory technical standards (RTS) on the cross-border application of EMIR in order to give ESMA more time to take into account the responses it has received to its public consultation on the draft RTS. The deadline for receipt of the draft RTS has been extended from 25 September 2013 to 15 November 2013.

17. EU Commission Proposes New Rules for Setting BenchmarksThe European Commission has proposed draft legislation in a bid to restore confidence in the integrity of benchmarks. Benchmarks are widely used as a reference price for financial instruments or financial con-tracts, or to measure the performance of an investment fund.

A number of recent high profile multi-million euro settlements made with several banks, concerning the manipulation of LIBOR, EURIBOR and TIBOR, have highlighted the importance of benchmarks and their vulnerabilities. While the Commission has separately proposed market abuse and criminal sanctions reforms, it concluded that sanctioning alone does not remove the risk of manipulation arising from inad-equate governance of the benchmark process where conflicts of interest and discretion exist.

The main objective of the proposed legislation is to ensure that benchmarks produced and used in the EU are robust, reliable, representative, fit for purpose and not subject to manipulation. The proposed legislation aims to:

• Enhance governance and controls over the benchmark-setting process;• Limit and manage conflicts of interests at providers of and contributors to benchmarks;• Improve the quality of data and methodologies used in the determination of benchmarks; and • Ensure adequate protection for investors and consumers through improved transparency and suit-

ability assessments.


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The supervision of benchmark administrators will be carried out by the national competent authorities, under the coordination of ESMA (European Securities and Markets Authority). Where the benchmark is deemed to be critical, a college of national supervisors, including ESMA, will be established to take key decisions concerning the supervision of the benchmark administrator (to include authorisation and sanc-tions). A benchmark is deemed to be critical when the majority of contributors to it are supervised enti-ties and where the benchmark is used as a reference for financial instruments having a notional value of at least €500 billion. If such a benchmark were to cease to be provided, it would have significant adverse impact on financial stability and the orderly functioning of markets.

The draft legislation has been passed to the European Council and Parliament for their consideration.

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Tax Updates18. Financial Transaction Tax Update In another blow to the controversial proposed financial transaction tax (FTT), the EU Council’s legal advis-ers have recently concluded that aspects of the FTT may not be lawful.

On 10 September 2013 the Financial Times reported on and published on its website a confidential, non-binding opinion from the Legal Service of the EU Council which examined Article 4(1)(f) of the FTT (under which a financial institution outside of the FTT zone is subject to the FTT when it transacts with a counterparty in the FTT zone). The memo, dated 6 September 2013, concluded that aspects of the FTT in the form proposed:

• exceed Member States’ jurisdiction for taxation under the norms of international customary law; • are not compatible with the EU Treaty as they infringe upon the taxing competences of non-partici-

pating Member States; and• are discriminatory and likely to lead to a distortion of competition to the detriment of non-partici-

pating Member States.

In response to the leaked document, the European Commission issued a very strong defence of the FTT, stating that it strongly disagreed with the Council’s lawyer’s opinion on the FTT, noting that it only covered the issue of residence implied through Article 4(1)(f) of the proposed FTT Directive.

The UK lodged a formal complaint on the FTT before the European Court of Justice in Luxembourg on 19 April of this year. The complaint also focusses on Article 4(1)(f) of the draft FTT Directive, and the leaked memo will certainly add weight to the UK’s arguments.

The FTT has been a political hot potato in the EU. Now that the EU Council has been advised that aspects of it may be unlawful, it is probable that the scope of the FTT could be narrowed, despite the EU Commission’s steadfast support of its original proposal.

19. FATCA Implementation DelayThe US Inland Revenue Service (IRS) has announced a revised timeline for the implementation of FATCA which will be postponed until 1 July 2014, as opposed to 1 January 2014. The US Treasury and the IRS intend to amend the final regulations to postpone by six months the start of FATCA withholding, and to make corresponding adjustments to various other time frames provided in the final regulations.


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Pensions Update20. Pensions Board Consults on Future Regulation of Defined Contribution PensionsThe Pensions Board has published a consultation paper on the future of defined contribution (DC) pen-sions. The paper sets out an overview of the current DC system and, in particular, the Pensions Board’s view on some significant problems within the DC system.

The paper also sets out the Pensions Board’s objective as regards the future regulation of DC pension provision and how it envisages achieving this objective.

The Pensions Board has invited trustees, providers, managers, advisers and other interested stakehold-ers to submit comments by 30 October 2013.

21. Pensions Board Report Indicates Increased Focus on Non-ComplianceThe Pensions Board’s Annual Report for 2012 indicates that the Board will place an increased focus on non-compliance with Pensions Act obligations during 2013 and the Report highlights areas that will receive particular attention.

These areas include:

Appointment of Registered Administrators

Since 1 November 2008, trustees of a scheme are required to appoint a Registered Administrator to undertake specified core functions (unless they appoint themselves as a Registered Administrator to carry out such functions). The Report highlights that too high a proportion of scheme trustees have not fulfilled this obligation.

Trustee training

Trustees of a pension scheme (including directors of a company that is a trustee) are required to receive trustee training within six months of their appointment and at least every two years thereafter. The Report notes the Pensions Board’s concern that a minority of trustees (particularly trustees of defined contribution schemes) are not meeting their trustee training obligations.

Comment

Trustees should ensure that they are aware of their legal obligations under the Pensions Act and are reminded that non-compliance with these obligations is an offence which can result in an on the spot fine and/or prosecution.

22. Restructuring of the Pensions BoardA number of important changes have been introduced to strengthen the governance and regulation of occupational pension schemes in Ireland. These include a restructuring of the Pensions Board.

The existing Pensions Board will be renamed as the Pensions Authority. The new Pensions Authority will have two distinct arms:

• a three-person Pensions Commission with an independent chair to provide oversight on pensions regulation; and

• a separate unpaid Pensions Council, comprised of members representing various consumer inter-ests, which will advise the Minister for Social Protection on pensions policy.

As part of this restructuring, the current Chief Executive of the Pensions Board will become known as the Pensions Regulator.

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The restructuring of the Pensions Board will not begin until the Minister for Social Protection signs the relevant commencement order.

In addition to these changes, the Government has also announced the amalgamation of the Offices of the Pensions Ombudsman and the Financial Services Ombudsman.

Comment

The landscape of pensions governance and regulation in Ireland will alter significantly with these changes. These restructuring changes will hopefully strengthen the governance and regulation of occupational pen-sion schemes and increase consumer confidence in the pensions system.

23. OECD Recommends Reforms to Irish Pension SystemThe OECD published its Report on the pension systems in Ireland. The Report, which was commissioned by the Department of Social Protection, examines all aspects of the Irish pension system including the provision of State pensions, occupational schemes in both the private and public sectors and personal pensions.

Some of the main findings and recommendations of the Report include:

Increasing private pension coverage

The Report argues that to increase the adequacy of pension cover in Ireland, there is a need to increase private pension coverage and suggests that this can be achieved through compulsory membership, auto-matic enrolment and/or improving existing tax incentives for pension savings. According to the Report, compulsory pensions have, from international experience, proven to be the least costly and most effective approach to increased pension coverage. Auto-enrolment is considered to be the next best alternative to increasing pension coverage but the Report warns that such a system could be more costly to establish.

Reforming the State pension

The Report found the State pension system to be complex and inequitable and argued that it should be replaced with a universal basic State pension (regardless of the amount of contributions paid through PRSI) or with a means tested pension. The Report also recommends that workers should be given incentives to remain in the labour market for longer and suggested that an increased State pension could be offered to those who take late retirement. The Report suggests that the State pension age could be linked to life expectancy after 2028 (when it is scheduled to rise to 68) in order to ensure that improvements in life expectancy do not significantly extend the duration of retirement.

Improving the design of defined contribution (DC) schemes

The Report says that the design and set up of DC pension schemes needs to improve. It recommends that appropriate default investment strategies should be established while also providing choice between investment options. The Report also recommends that retired members should be encouraged to pur-chase an annuity at some point during their retirement in order to protect against longevity risk. Signifi-cantly the Report also states that while the principle of pension savings being ‘locked away’ until retire-ment should remain, the Government could consider allowing members to make withdrawals from their pension savings in cases of significant financial hardship.

Enhancing the security in defined benefit (DB) schemes

The Report strongly recommends the strengthening of Irish legislation for the protection of DB scheme members when such schemes wind up. The Report is very critical of current legislation which (unless the scheme documentation otherwise provides) allows financially ‘healthy’ employers to walk away from DB


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schemes and suggests that employers should not be allowed to abandon such schemes unless the assets of the schemes cover at least 90% of the pension liabilities.

The Report also highlights the inequality between pensioners and other members of a scheme in cir-cumstances where a scheme is winding-up in a deficit funding situation. It recommends that the priority currently given to pensioners on a winding-up should be eliminated, and that more flexible DB schemes should be introduced which would allow for more risk sharing between pensioners and other members and also allow for accrued benefits to be cut in cases of underfunding.

Comment

Although the need to increase private pension coverage has been self-evident for some time, the reality is that this can only be done in a meaningful way when the economy has recovered sufficiently.

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Government Legislative Programme Autumn 2013The Government has published the Legislative Programme for the Oireachtas Autumn Session 2013.Below is a summary of proposed Bills which are likely to be of interest. The summary provides an outline of the purpose of the Bill, as described in the Government Legislative Programme and an indication of when the Bill is expected to be published.

Proposed Bill Purpose as per Legislative Programme Expected Publication Date

Central Bank (Consolidation) Bill To consolidate the body of legislation relating to the Central Bank into a single statute

2014

Companies (Miscellaneous Provi-sions) Bill

To make necessary amendments to the European Communities (Statutory Audits) (Directive 2006/43/EC) Regulations 2010

November 2013

Criminal Justice (Corruption) Bill To consolidate and reform all the legislation cur-rently cited as the Prevention of Corruption Acts 1889 – 2010 in a single statute

No indication as to when publication is expected

Irish Collective Asset Management Vehicle Bill

To provide for a new corporate vehicle for invest-ment funds


Intellectual Property (Miscellaneous Provisions) Bill

To amend the Patents Act 1992 to expand the research exemption provision and to amend the Trade Marks Act 1996 to allow Ireland to accede to the Singapore Treaty on the Law of Trademarks

During the Autumn 2013 Session

Data Sharing Bill To underpin better risk-based enforcement, effi-ciency and cooperation in business regulation, by allowing specified public bodies to share specified data relating to businesses


Criminal Justice (Cybercrime) Bill To enable ratification of the Council of Europe Convention on Cybercrime and the transposition of the EU Framework Decision on attacks against Information Systems



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Recent Central Bank Publications Of Interest

Title DateEconomic Letter: The Importance of Banks in SME Financing: Ireland in a Euro-pean Context

October 2013

Compendium of Irish Economic Statistics 2013 October 2013

Mortgage Arrears in Ireland: Introducing the Enhanced Quarterly Statistics October 2013

Policy Measures to Improve Access to Credit for SMEs: a Survey October 2013

Quarterly Bulletin of the Central Bank for Q4 2013 October 2013

Economic Letter: A Monthly Business Cycle Indicator for Ireland September 2013

Research Bulletin 2013 September 2013

Research Technical Paper: Price expectations, distressed mortgage markets and the housing wealth effect

August 2013

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