Corporate Law Newsletter July 08 No.5

Click here to
view PDF version

Compensation for Victims of Breaches Competition Law?
Helen H Whelan

The European Commission has published a White Paper on compensating consumer and business victims of breaches of competition law. The loss to the customer amounts to billions of euro each year in the European Union. The Commission believes that this is a sign that the wrongdoers generally get away with this illegal behaviour.

Competition Authorities and the European Commission have limited powers and resources to pursue infringers of competition law. The Commission wants to make it easier for the consumer to pursue businesses that infringe competition law for compensation.

The White Paper is intended to ensure an effective debate across Europe on giving access to justice for victims of competition law infringements.

What sort of infringements are the Commission talking about? Competition law is infringed when cartels engage in price fixing or large businesses use the power they have to control a market against the interests of the consumer. For instance, in Ireland a number of motorcar dealerships are facing prosecution for price fixing over a period of approximately eight years.

In Europe Microsoft was recently fined €899 million for infringements of competition law including ‘tying’ sales of Window Media Player to its Windows operating system.

The Commission is recommending changes to national laws to allow for collective compensation by means of representative actions taken by recognised consumer groups. Their view is that such collective actions ensure that large groups of victims with small value claims have access to justice.

Other recommendations include:

  • disclosure of evidence between parties,
  • a defence for infringers when the claimant has passed on the illegal overcharge to its customers;
  • infringement decisions of local competition authorities to be considered sufficient proof of an infringement in an action for damages.


The Commission believes that an effective minimum protection of victims’ rights to compensation would be best achieved by a combination of measures at EU and national level. We await further developments.

Trustees, Appoint Your Registered Administrator Now
Robert Haniver

From the 1st of November 2008 trustees of all pension schemes including large trust RAC schemes must appoint a registered administrator to carry out the ‘core administration functions’ of their pension scheme. ‘Core’ functions include preparing trustee annual reports and annual benefit statements and maintaining accurate membership and entitlement records.

Failure to appoint a Registered Administrator is an offence.

If you already carry out these core functions in-house, or outsource this to a service provider, it is necessary for the appointment to be registered with the Pensions Board before the 1st of November. Registration is free and must be renewed annually. Trustees should be aware that the appointment of a registered administrator does not relieve them of their own obligations.

The Social Welfare and Pensions Act 2008 came into law on the 7th of March 2008. This introduced a number of amendments to pensions legislation. Registered administrators need to be aware of these changes as they may be investigated by the Pensions Board to see if they are discharging their core administrative functions in accordance with the legislation. Failure to do so is an offence.

Directors Beware
Robert Haniver

The credit crunch, spiralling oil prices, high wages, inflation and the recession are making it increasingly difficult for Irish companies to stay in business. It is not surprising therefore that the Director of Corporate Enforcement has reported a recent increase in the number of insolvent companies in Ireland.

Insolvency occurs when a company cannot pay its debts as they fall due or where the balance sheet reveals that the assets are not sufficient to meet the liabilities.

As a Director of a solvent company, your primary duty is to act in good faith and in the best interests of the company as a whole. However, if you think your company is heading for insolvency, or is already there, you must shift your focus and put the interests of the company’s creditors to the fore.

Whether your obligation to protect the creditors’ interests requires the immediate cessation of trading and the appointment of a liquidator depends on the circumstances. Sometimes it will be in the creditors’ best interests for the company to continue trading. For example, if it can trade out of its present difficulties or better value can be achieved by realising the assets on a going concern basis.

It will often be in your own interest to commence liquidation as soon as the company becomes insolvent. If the insolvent company is subsequently wound up, the appointed liquidator is obliged to assess whether you have in any way jeopardized the creditors’ position or impeded the winding-up process.

If you are found to have engaged in reckless or fraudulent trading you may be held personally liable for the company’s debts or liabilities. If you are guilty of the offence of fraudulent trading this carries a maximum penalty of seven years imprisonment and/ or a fine of up to €63,487. In addition, Directors will face applications for restriction under Sections 150 or disqualification under Section 160 of the Companies Act 1990.

If an application is brought to make you personally liable for the debts of the company, you may be able to avoid liability and restriction if you can show the Court that you acted responsibly and in the honest belief that you were acting in the best interests of the company and its creditors.

Where you are concerned that your company may be insolvent there are some practical steps you can take:-

  • As soon as you suspect or know the company has no reasonable prospect of avoiding insolvent liquidation, you should consult the other directors and consider whether it is viable to continue trading;
  • The company should not incur further debt until professional accountancy and legal advice is obtained;
  • Insist that a business review be undertaken and a workable strategy put in place;
  • Ensure the company books are in order;
  • Insist that frequent board meetings be convened;
  • Ensure that board meetings are minuted to include all discussions, recommendations, disagreements and protests about the company’s approach to its insolvency and the steps to be taken to protect creditors;
  • Insist that all Directors receive regular updates concerning the company’s budgetary, trading and financial position;
  • Document all key decisions and advices;
  • Keep creditors informed;
  • Avoid any suggestion of fraudulent preference by paying one or some creditors only;
  • If the other Directors do not heed your fears of insolvency and refuse to take the necessary remedial steps to protect the creditors’ position you should consider resigning from the board. However, be sure to obtain personal legal advice to ensure you have done everything in your power to initiate steps to protect the creditors.

Cartels ‘Fast Track’ Plan
Helen H. Whelan

The European Commission has announced a new ‘fast track’ system in an effort to speed up the settlement process in price-fixing cartels.

The Commission will offer up to a 10% reduction on a company’s fines if the admit their involvement in a cartel. The Commission hopes to free up resources at a time when more cartels are coming to light. In 2007 the Commission received €3.3 billion in fines compared to less than €700 million in 2004.

Industry associations and lawyers have given a guarded welcome to the proposals. It was hoped that the reduction in fines would be greater. The CBI, the British employers’ body had sought a reduction of at least 25% in the fines.

The general belief is that unless the evidence against businesses involved in a cartel is overwhelming, there is no incentive for businesses to ‘plea bargain’ arising from this reduction.


VAT on Property – New Regime
Angela McHugh

The Finance Act 2008 introduced new rules for VAT on property transactions. These new rules will alter fundamentally, the manner in which VAT is accounted for on property transactions. With effect from 1st July 2008 the majority of property transactions are VAT exempt but there is an option to charge VAT in some situations. The rules introduce a new concept; the Capital Goods Scheme. The purpose of these new rules is to simplify and rationalize the VAT on Property legislation and to bring it in line with the EU VAT Directive 2006/112/EEC.

This article is a broad overview of the major changes that will occur under the new rules. However you should contact your solicitor and/or tax advisor for specialist VAT advice if you or your company, intend to do any of the following in relation to a property:

  • Purchase or sell;
  • Grant or take a lease whether it be long or short term; or
  • Assign or surrender an existing lease.


It is imperative that professional advice and guidance be sought prior to the completion of negotiations as the VAT treatment of the property under the new rules may affect the manner in which the transaction is structured and in some instances may affect the amount payable.

The new rules will make the following major changes:

  • Introduction of the Capital Goods Scheme. This scheme gives a 20 year life span to property from the date of its acquisition or development. There is a 10 year life span for refurbished property. These life spans are known as adjustment periods and all future treatment of a property with a Capital Goods Scheme life span will centre on these adjustment periods.
  • Introduction of the concept of a Freehold Equivalent supply. This refers to a transaction where the owner of the property enters into an agreement and 50% or more of the market value of the property is payable within 5 years of the date of the agreement. For example a 999 year lease would be considered a freehold equivalent.
  • Only supplies of Freehold or Freehold Equivalent property will be subject to VAT. This is subject to a number of factors depending on whether a property is considered ‘new’ or not. Your solicitor or tax advisor will be able to advise you as to whether your property will be considered ‘new’. Even where a supply of a Freehold or Freehold Equivalent property is considered exempt, the parties involved may jointly agree to opt to tax the supply. In many cases it may be more beneficial for the parties to exercise the option to tax.
  • The supply of undeveloped land is not liable to VAT. The exception to the rule is when it is a supply of undeveloped land in connection with a contract to develop it. In that case it is liable to VAT.
  • The sale of new residential properties by a developer/builder are liable to VAT.
  • Abolition of distinction between long and short leases.
  • Abolition of VAT on all lettings but with an option for the Landlord to tax. There is no option to tax residential lettings.
  • Abolition of any new waivers of exemptions being granted. The immediate cancellation of waivers where the Landlord and Tenant are considered connected persons, and the Tenant has less than 90% VAT recoverability. Please contact this office if you are concerned that a transaction that you are involved in may be considered to be between connected persons.
  • Introduction of new rules with regard to the assignment and surrender of leases entered into prior to the 1st July 2008
  • VAT on the supply of a freehold or freehold equivalent will be charged at the rate of 13.5%. VAT on lettings will be charged at 21%.

It is imperative that full VAT records are kept under the new VAT rules. Anyone with any interest in property should compile a VAT history for each property within their portfolio.

Breaking News
Helen H. Whelan


The Companies Consolidation and Reform Bill is not now expected to be published before mid-2009. This bill will update and consolidate the Companies Acts and related legislation into one Act. It is estimated that the bill will be the longest single piece of nontax legislation in the history of the State.

For more information on the changes proposed in the new bill, see the O’Rourke Reid Corporate Law Bulletin of September 2007 which is accessible on our website at 

Company Director jailed for breach of Companies Act

On 29 May 2008, the Circuit Court jailed a company director for authorising loans to himself from the company in breach of prohibition on loans to Directors contained in
Section 31 of the Companies Act 1990.

For more information on the prohibitions on loans to Directors see our article in the December 2007 edition of the O’Rourke Reid Corporate Law Newsletter on

Health and Safety Offences – Directors may face five year ban

Company Directors who are convicted of Health and Safety offences by the Circuit Court may be disqualified from acting as Directors or being involved in the management of a company for up to five years. Section 160(1) of the Companies Act 1990 provides that where a person is convicted of an indictable offence in relation to a company, the court may order that he may not be appointed or act as a Director or other officer of any company. In addition, the disqualified person may not form or manage any company or a co-operative society.

Employment Law Compliance Bill – Key Points for Employers
Claire Casey

The Employment Law Compliance Bill was published on 18th March 2008.

The aims of the Bill are to achieve higher levels of compliance with current employment legislation in Ireland and to increase workers’ awareness of their employment rights.

These objectives are to be overseen by the National Employment Rights Authority (NERA), which has been established on an interim basis since February 2007, but will be put on a statutory footing by the Employment Law Compliance Bill.

NERA was established under the heading of the Social Partnership Agreement ‘Towards 2016’. Its aims are to encourage common standards in the applicability of employment rights and to increase awareness of employment law standards.

The body was set-up to secure tightened compliance of employment rights closely linked with adequate enforcement. It is for this reason that employers should make themselves aware of the effects of the Bill.

The Powers Of Nera:

The powers of NERA will be strengthened by enabling the body to initiate investigations, publishing the outcomes of cases of public interest and identifying the employer involved in the breach.

Existing powers of labour inspectors in NERA are to be increased by providing them with enhanced rights of access to employer’s premises, employees, and data. Inspectors will have the power to impose on the spot fines, and can seek High Court orders to enforce compliance with employment legislation.

The number of labour inspectors from NERA is to be increased from 30 to 90. In addition, the Bill also has provisions which will enable labour inspectors to conduct joint investigations with other State Agencies, such as the Revenue Commissioners, Social Welfare Inspectors and An Garda Siochana.

Of note are the sections which aim to introduce greater compliance with employment legislation. These include giving NERA the power to issue compliance notices to employers who have not paid an employee money owing to them under employment legislation.

NERA intends to target specific industry sectors. For example, in 2008, the inspectors will be focussing on the security sector. In 2007, the construction sector was prioritised, as well as projects under the national minimum wage and protection of young persons.

NERA has sought to maximise its impact by targeting growth areas and certain pieces of legislation which are susceptible to the phrase ‘more honoured in the breach than the observance’.

One key introduction are the ‘Whistle blowing’ provisions, which have been introduced to protect employees from being penalised by employers where an employee makes a claim or reports a breach of employment law to NERA.

What Does The Bill Involve For Employers?

  • Employers are required to keep detailed records in respect of each employee for a period of at least the last three years of current employment and for two years after employment has ceased. This includes the written contract of employment, if one exists;
  • Employers will also be required to display clearly worded notices in a prominent position in the workplace advising employees of their rights under employment legislation; how to seek redress and how to contact NERA for information. This notice must be in a language which the employees can understand;
  • The Bill will require employers and employees to attempt to resolve disputes as far as possible at workplace level, in accordance with any arrangements the employer has in place for resolution of disputes, before the Labour Court is asked to mediate in the matter. This new provision builds on previous regulations which put in place a Code of Practice in relation to Grievance and Disciplinary procedures in order to provide guidance to employers in relation to this aspect of employment law;
  • There are new provisions to secure compliance with Employment Permits legislation; and
  • The Bill will introduce on the spot fines of between €500 and €1,000; fines on indictment of up to €250,000 and terms of imprisonment of up to three years for breaches of Employment Law.

The Bill is likely to become law in the coming months. Given the severity of penalties, it is recommended that all employers become familiar with their obligations under the Bill, particularly in regard to keeping up to date and comprehensive records for each employee.

The onus is on employers to keep the relevant records. If they fail to do so, they face a ‘catch-22’ situation when facing a claim under the relevant legislation. They will not have the information to demonstrate their compliance with the legislation and will face stiff penalties - regardless of whether or not they were compliant.

Employers should under take a comprehensive audit of their record management and document retention systems for employment matters, in order to be in a position to prove compliance should an inspector call.





    View our recent news Read more


  • Click here to view our News Archive Read more