Investing In Ireland

Business structures in Ireland

Companies and branches

The main vehicles for setting up business in Ireland are:

• an Irish-incorporated private limited liability corporation (‘private company’); or

• an Irish-registered branch of a non-Irish corporation.

Incorporating a new Irish corporation or registering a branch of a non-Irish corporation is a quick and inexpensive procedure. Mason Hayes & Curran’s company secretarial department provides a range of corporate secretarial, registration and administrative services. The company secretarial department has an arrangement for ‘fast track’ incorporation and registration procedures with the Irish Companies Registration Office.

Financing of corporations

Financing of Irish corporations can be by way of debt, subscription for shares, and, in some circumstances, contribution of capital without the issue of shares. At present, there are no thin capitalisation rules in Ireland and therefore an Irish corporation can be financed with a minimum amount of issued shares (e.g. €1).

A tax of 1% (stamp duty) is generally payable by the purchaser of shares in an Irish corporation, which is calculated by reference to the higher of the market value or consideration paid. Transfers of shares for a consideration or where the market value of the shares is less than €1,000 are exempt from stamp duty. This tax does not generally apply to the issue or transfer of shares in non-Irish corporations with an Irish branch.

There is an exemption from this stamp duty for Irish companies with US-quoted ADR programmes.

Classes of shares issued by corporations in Ireland include ordinary shares (equity share capital), preference shares with a fixed or fluctuating coupon and redeemable shares. Shares must be issued with a par value - usually €1, but the par value can be any amount in any currency. Irish corporations can, subject to certain formalities being observed, redeem and/or repurchase their shares out of distributable profits and reserves. On a repurchase of shares by a company, there could be a stamp duty charge of 1% on the transfer, where the transaction is not appropriately structured.

There are no requirements for minimum payment of dividends or interest. A 20% withholding tax can apply to payments of dividends or interest, but there are a wide range of exemptions from such withholding taxes. Exemptions are generally available where the recipient is tax resident in an EU country or a country with which Ireland has a double tax treaty.

Management of corporations

The day-to-day management of an Irish company is normally carried out by a board of directors. Every Irish corporation must have at least two directors and a company secretary (who may be one of the directors). A corporate entity may act as company secretary but the directors must be natural persons. Otherwise, there is a requirement to have at least one director who is resident in a member state of the European Economic Area (E.E.A.) or an insurance bond to the value of €25,395.

The day-to-day management of a non-Irish corporation which has a registered branch in Ireland will be regulated by the law of where that corporation was incorporated. There is no requirement in Ireland that there be any particular officers of a corporation with a branch, but there is a requirement for an Irish resident process agent for such a corporation.

Each Irish corporation must hold an annual general meeting, principally to consider the accounts of the corporation which will contain the auditors’ and directors’ reports. This requirement can be dispensed with where (as is often the case), the Irish corporation has one shareholder only.

Auditors

By law, every Irish corporation (except in one set of circumstances as set out below) must appoint an auditor who will report to the shareholders on the accounts prepared by the directors. Auditors must generally be members of the major accounting bodies in Ireland, Scotland or England and Wales. All the major international accounting firms have member or affiliate firms in Ireland.

A company does not have to have its accounts audited where specified conditions are met. These include (amongst others):

(i) turnover must not exceed €7.3m;

(ii) balance sheet total must not exceed €3.65m;

(iii) average number of employees must not exceed 50;

(iv) the company is not a parent undertaking or subsidiary undertaking; and

(v) the company’s annual return for the current and previous calendar year must be filed with the Companies Registration Office within the time periods specified in the Irish Companies Acts.

Corporations incorporated in Ireland and branches registered in Ireland are obliged to publicly file accounts. Corporations are entitled, in certain circumstances, to incorporate as private unlimited corporations to avoid such disclosure. Small and medium-sized limited corporations may prepare short-form profit and loss accounts and are free from the obligation to disclose particulars of turnover in audited accounts.

Partnerships

Another form of business structure encountered in Ireland is the partnership which is the default method of carrying on business between two or more persons (including corporate entities). A partnership can exist without formal registration. Partners have unlimited liability. Such an entity is often regulated by a partnership deed and in the absence of such a deed the Partnership Act 1890 applies. This legislation contains provisions that are not appropriate to carrying on a modern business.

There are no specific capital structure requirements for partnerships prescribed by Irish law.

Limited partnerships are also permitted under the Limited Partnerships Act 1907. For limited partnerships, a distinction is drawn between general partners who manage the firm’s business and have unlimited liability and limited partners who invest fixed amounts of money in the partnership, but who are not liable for its debts and obligations beyond the amount of their capital investments. Although a general partner has unlimited liability, it is possible for a limited liability corporation to be the general partner.

Limited partnerships are relatively uncommon.

Irish corporations

To form an Irish corporation, all of the following must be delivered to the Companies Registration Office:

• a memorandum of association, setting out the name, objects and initial authorised share capital;

• a set of articles of association, setting out rules for internal management;

• a form A1 setting out details of directors, secretary, registered office issued share capital and activity which the company is being formed to engage in; and

• €100 incorporation fee (or €50 where incorporated online).

Registering a business name

The registration of a business name is obligatory if any individual, partnership or any body corporate carries on business under a name other than its own name. Specifically registration is required if:

• an individual uses a business name which differs in any way from his/her true surname. So it

would be required if, for example, Mr. John Murphy traded as ‘Murphy Builders’ but not if he traded as ‘Murphy’ or ‘John Murphy’;

• a firm uses a business name which differs in any way from the true names of all partners; or

• a company uses a business name which differs in any way from its full corporate name.

The particulars for registration are required to be filed in the Companies Registration Office within one month of the date of the adoption of the business name. The official fee for business name registration is currently €40 (or €20 where registered online).

Registration of a business name does not prevent another person or entity from seeking to register the same business name. However consideration should be given in these circumstances to the law of passing off.

Non-Irish corporations

A non-Irish corporation which establishes a branch (which includes any place of business) in Ireland must register with the Companies Registration Office. This is done by filing the following:

• a Form F12 if the corporation is registered in Europe / F13 if the corporation is registered outside Europe;

• a copy of the corporation’s certificate of incorporation, charter and by-laws and its most recently available audited accounts;

• particulars of the directors and secretary;

• details of the corporation’s address in Ireland;

• the name and address of one or more persons resident in Ireland and authorised by the corporation to ensure compliance with the regulations, pursuant to which the branch is registered in Ireland; and

• €60 (being the current filing fee and €15 for each change in details required to be filed).

Non-Irish corporations must register with the Irish Revenue Commissioners within 30 days of commencing to trade in Ireland. Profits derived by the Irish branch are subject to Irish corporation tax.

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