irish transfer pricing firm of the year 2015 international tax review european law firm of the year...
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Irish Transfer Pricing Firm of the Year 2015International Tax Review
European Law Firm of the Year 2015Hedge Fund Journal
Law Firm of the Year 2014Irish Pensions Awards
Financial Times 2012-2014Matheson is the only Irish law firm commended by the Financial Times for innovation in corporate law, finance law, dispute resolution and corporate strategy.
International Corporate Restructuring Summit 2015 – Legal Update
Tony O’Grady and Patrick Molloy
ReceivershipLuxor
In the matter of Luxor Investments Limited Rhatigan group of companies Whether or not an agreement dated 25 October 2013 between
Luxor and UBSIG (ROI) Limited (subsidiary of Ulster Bank) is applicable in circumstances where the plaintiffs (ie, Luxor and other related companies) propose to redeem their loans with the defendant (Beltany Property Finance Limited) at par
2013 – restructuring between Rhatigan group and Ulster Bank – led to the fee agreement being concluded between Luxor and Ulster Bank
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Receivership (contd.)Luxor
Agreed to pay a fee to UBSIG on each completion date (ie, when the property was sold in whole or part)
Agreement provided for the payment of the fee independently of the repayment of the loans
Fee to be calculated on the disposal of the hotel or at the termination date by reference to the market value of the hotel at disposal or termination date subject to a minimum fee of €1 million
Financier secured – redemption at par to include all interest due
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Receivership (contd.)Luxor
Issues to be considered: Whether the fee agreement applies in the event of redemption
of the loans at par; and Is the fee agreement void as a clog on the plaintiffs’ equity of
redemption Evidence – at the time the fee agreement entered into neither
party expected the plaintiffs’ loans to be redeemed at par No ambiguity in the words used in the fee agreement Lack of clarity about circumstances when enforceable
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Receivership (contd.)Luxor
In construing contractual documents, the courts must not rewrite the bargain made by the parties
What should reasonable parties be taken to have intended by the use of those words in that agreement made in those circumstances, in relation to this event which they did not in fact foresee
Held: the fee agreement was intended to protect the bank should there be a deficit on disposal – never envisaged that the bank would recover all the monies due plus interest and still be entitled to an additional fee
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Receivership (contd.)Breccia
Flynn & Benray v Breccia Shareholder dispute relating to Blackrock Hospital Limited
(Blackrock Clinic) A shareholder (Breccia) purchased a co-shareholder’s (Benray)
loans and security, made demand and appointed a receiver to Benray’s shareholding in Blackrock
Benray obtained an injunction to prevent the sale of Benray’s shareholding in BHL
Receivership (contd.)Breccia
Benray claimed that the shareholders’ agreement precluded Breccia from making demand and appointing a receiver
Shareholders’ agreement entitled Breccia to step-in and pay off Benray’s debt to Anglo
Benray claimed that Breccia was in breach of the shareholders’ agreement and / or implied duties of good faith
Receivership (contd.)Breccia
Held per Haughton J: The loans and associated security had been acquired validly and
lawfully Pursuant to an implied term to like effect and / or an implied term
that the shareholders owed each other mutual duties of good faith and fair dealing, the demand and appointment of the receiver was invalid
The sole remedy available to Breccia was to avail of the step-in provision under the shareholders’ agreement
Granted a permanent injunction preventing Breccia from selling Benray’s shares other than in accordance with the shareholders’ agreement
Receivership (contd.)McPhillips
McPhillips v ACC Loan Management Limited & Others The security document required the appointment of a receiver
to be made “by writing under its hand” Foley’s / O’Reilly’s Bar – Bank of Scotland appointment –
security provided for the appointment under seal whereas the receiver was appointed under hand
ACC argued that the appointment of a receiver under seal also constituted the appointment of a receiver under hand – English authority cited in support of this position
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Receivership (contd.)McPhillips
Internal execution policy adopted in 2010 differentiated between documents executed under hand and under seal – no common authorised signatories
Court noted that an appointment under hand means under the hand of a duly authorised officer – no authority cited in support of this conclusion
Held: the document appointing the receiver was not signed in accordance with the bank’s own internal procedures and the appointment was therefore invalid
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Receivership (contd.)Kavanagh v McLaughlin
Tom Kavanagh & Bank of Scotland plc v McLaughlin Whether or not a receiver was validly appointed Document appointing receiver was signed by bank employee Held: power of attorney or other formal type of authorisation
not necessary if relevant employee was, in fact, authorised Evidence adduced left Supreme Court in no doubt that
employee had authority on behalf of bank to appoint receiver Appointment of receiver not required to be made by deed Written document appointing receiver signed by authorised
employee a valid appointment even if document purports to be a deed and employee not authorised to execute deeds
Receivership (contd.)Thomas Hill
Declan McDonald v Thomas Hill Possession proceedings brought by way of interlocutory
application Borrower denied having received the demand Senior manager of the bank confirmed that he printed, signed
and placed the letter of demand in the bank’s internal post No evidence before the court to prove as a matter of certainty
that the letter of demand had in fact been sent (ie, no certificate of posting or affidavit from the person who physically posted the letter)
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ExaminershipLadbrokes
In the matter of Ladbroke (Ireland) Limited and Others In the matter of eircom Ltd – Kelly J First written judgment in relation to the matter Upholds the primacy of the examiner’s commercial judgment
which is subject to review by the court only to the extent that it is so “utterly unreasonable and absurd that no reasonable man would have done it”
Decision of examiner to withhold sensitive commercial information with a view to protecting the interests of companies – question of fact rather than law
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Examinership (contd.)Ladbrokes
Held: the decision of the examiner was within the scope of his commercial judgment and was neither utterly unreasonable nor absurd
Decision likely to benefit the examinership process generally Alternative whereby the examiner’s commercial judgment
would be subject to review by the courts at any time would render the process unwieldy and unattractive to directors of insolvent companies
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Examinership (contd.)Camden Investments
Re Camden Street Investments Limited and ors Examiner sought confirmation of proposals for a single scheme
of arrangement for 3 related companies Held: a separate and distinct scheme of arrangement is
required for each company to which an examiner is appointed – however, in this case, the scheme of arrangement adequately distinguished between the proposals for each of the 3 companies
Despite the court finding that there was a failure by examiner in duty to put all material matters before court, proposals were confirmed
MiscellaneousCompanies Act 2014
Primary changes under Companies Act 2014: Greater consistency between 3 different methods of winding-up
(members’ voluntary, creditors’ voluntary and court-ordered) Increase in the minimum amount of indebtedness entitling a
creditor to petition to wind-up a company from €1,269.74 to: €10,000 where one creditor petitions; and €20,000 where two or more creditors petition
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Miscellaneous (contd.)Companies Act 2014
Commencement of members’ voluntary winding-up by Summary Approval Procedure in all but the most unusual of cases
Qualifications requirement for appointment of liquidators Statutory powers of receiver Removal of the functions of “the Examiner”
Miscellaneous (contd.)Personal Insolvency (Amendment) Act 2015
Establishment of a Circuit Court review mechanism where creditors reject a borrower’s proposal for a Personal Insolvency Arrangement
Increase in the amount of debt which may be covered by a Debt Relief Notice from €20,000 to €35,000
Increase in the functions and powers of the Insolvency Service of Ireland
Miscellaneous (contd.)Belgard Motors
In the matter of J.D. Brian Motors Limited, trading as Belgard Motors (In Liquidation) Issue to be determined – crystallisation of floating charge and
competing claims of fixed charge holder and the Revenue Commissioners
Held: Supreme Court found that on a straightforward reading of section 285(f) of the Companies Act 1963 where a floating charge was crystallised prior to commencement of winding up upon the happening of which it became a fixed charge, preferential creditors did not have priority over such charge
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Miscellaneous (contd.)Belgard Motors
Obiter comments regarding the actions of the parties post service of the notice of crystallisation have to be considered
Noted that it was a matter for the legislature to intervene It is now clear that, in the absence of a change to the relevant
legislation, if a floating charge is crystallised prior to winding up of the debtor on foot of a properly drafted crystallisation notice served in accordance with the security document, the debenture holder will take priority over preferential creditors
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Overview - trends
Judicial willingness to scrutinise enforcement Implication of terms in security documents Strict letter of documents approach to enforcement steps Examinership predictability enhancement
Legal Update – other trends/developments
Trends in debt financing New credit servicing legislation
Trends in debt financing transactions
2015 another strong year for loan sales (sales of European property backed loans estimated to be EUR70bill vs EUR80bill for 2014)
end is in sight (at least for Ireland)? Acquirers may look to sell on bundles or securitise in medium
term Refinancing by borrowers and “connection sales” continuing
in meantime
Trends in debt financing transactions
Other trends we are seeing: Irish banks acquiring performing loan books as a way of
acquiring new business New market entrants in retail/SME space – non bank lending
becoming more prevalent New technology in lending space: crowd funding; sales of
invoices on line
Banks will remain critical but share of lending to drop
Capital Markets Union
Action plan launched 30 Sept by Commission How to develop Europe’s capital markets
European economy equivalent in size to US but equity markets less than 50% in size and debt markets less than 33%
Europe’s investment needs are enormous More funding sources may reduce vulnerability to financial
shocks More liquid markets = lower costs and more competition
Capital Markets Union
A range of initiatives including: A kick start for securitisation – lower capital requirements for
“simple, transparent and standardised securitisation” New insolvency laws to allow “early restructuring” and second
chance for debtors (and more uniformity across EU) Making it easier to raise equity/debt from investors (simpler
prospectus laws) (European SMEs currently receive 5 times less funding from capital markets than in US)
Pan European information systems on SMEs
Capital Markets Union
Other funding sources to complement banks? Private placement of notes by SMEs and other issuers outside
large corporates? Methodology similar to US market could be adopted
Loan origination funds More invoice discounting/asset based lending online invoice trading Crowdfunding – Commission to decide on how best to develop
this; ie promote growth but look after investor protection
New Credit Servicing legislation
Aim of the government was to ensure that borrowers whose loans are sold by a regulated entity to an unregulated entity maintain the same regulatory protections, including under the various Central Bank Codes (including CPC, CCMA and Code of Conduct for Business Lending to SMEs)
Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 introduced on 8 July 2015
New Credit Servicing legislation
Applies to loans to “relevant borrowers” relevant borrower is a:
natural person within the State (unless can be categorised as a professional client for MIFID or is a regulated financial services provider); or
an SME - but only in this case where loan was provided by someone licenced to provide credit in State
Difficult to determine if borrower comes within one of these categories when you acquire loans (unless there is engagement with borrower in advance)
New Credit Servicing legislation
SME: An entity that employs fewer than 250 persons and has an
annual turnover or not more than EUR50m and/or an annual balance sheet total of not more than EUR43m
Definition not restricted to SMEs located in Ireland but we think that was the intention
New Credit Servicing legislation
“credit servicing” – managing or administering a credit agreement (long list of activities that come within this)
Does not include: determination of overall strategy for a portfolio, maintenance of control of key decisions and enforcement - once any such action, if it was taken by a regulated entity would not breach Codes and other provisions of financial services law
Carve out helpful for SPVs/master servicers but if they do anything that comes with “credit servicing”, they may need authorisation
New Credit Servicing legislation
“credit servicing firm” (requiring authorisation): If you undertake credit servicing other than on behalf of a
regulated financial services provider; or If you hold the legal title to loans to relevant borrowers and
haven’t appointed an authorised credit servicing firm. Also regulated financial service provider authorised, by
Central Bank or equivalent in EEA State, to provide credit in Ireland is taken to be authorised (ie Irish banks, passported banks and retail credit firms)
New Credit Servicing legislation
Points to consider for owners of loans (typically SPVs): Is there a servicer appointed? Do its terms of appointment
need to be revised? Does servicer need to apply for authorisation? Deadline is 8
October 2015 ensure nothing done in future that could require it to be
authorised
New Credit Servicing legislation
For credit servicers: Compliance with various regulatory requirements (minimum
competency, fitness and probity regime) as well as Codes Codes require amendment to cater for scenario of having loan
owner, servicer and borrower as opposed to just regulated lender/borrower relationship
Central Bank working on set of authorisation requirements and standards for credit servicers (consultation period ended 30/9)
Consideration to be given to respective roles of credit servicing firm, loan owner and any other servicer
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