Enforcing US Court Judgments in Ireland-The Common Law Principles

As there is no agreement in place between the United States and Ireland for the automatic recognition and enforcement of Judgments obtained from a court in the US in Ireland, it will be necessary to rely on common law rules.

enforcing-us-court-judgments

In fact, there is no bilateral treaty or multilateral international convention in force between the United States of America and any other country on a reciprocal recognition and enforcement of judgments.

 

The Irish common law rules/principles are quite restrictive and enforcing non-EU judgments in Ireland can be problematic as a consequence.

 

Common law principles

 

The common law principles that the Irish Courts will rely on are

  1. The US judgment must be for a liquidated sum, that is a definite monetary value
  2. The US judgment must be final and conclusive
  3. The US judgment must be granted in a Court of competent jurisdiction.

 

Number 1 above is obvious-you either have a judgment for a definite sum or not.

 

Likewise with number 2-the legal proceedings must have come to an end with no opportunity to appeal the judgment and the judgment must have been achieved following the correct procedures in the state in the US which granted the Judgment.

 Court of competent jurisdiction

Number 3 above can be the most problematic as a result of a case called Rainford v Newell Roberts [1962] IR 95 where a Judgment was obtained by Rainford in the UK and sought to enforce the judgment in Ireland. (This situation would not arise now as a result of both countries mutual recognition of judgments due to various EU law and international conventions but is illustrative of the common law principles involved in seeking to have the US judgment enforced here)

 

This problem centres primarily on the question of proper service of the proceedings on the Defendant, as accepted by Irish rules of private international law.

 

In Rainford v Newell-Roberts the defendant had not been in the UK when served with the legal proceedings and had therefore not submitted to the jurisdiction of the English Courts and as a consequence the Irish Courts did not allow enforcement of the Judgment.

 

Where the dispute or Judgment arises as a result of breach of contract and the contract provides that a foreign jurisdiction will have exclusive jurisdiction in the event of a dispute the Irish Courts would be very likely to stay any proceedings instituted in Ireland and recognise the exclusive jurisdiction clause in the contract.

enforcing-us-court-judgments1

Grounds on which Judgment will be refused

In addition to the above considerations and criteria the Irish Courts will refuse to grant Judgment in Ireland where

  1. The Judgment would violate Irish public policy
  2. The foreign judgment was obtained by fraud
  3. The foreign judgment is in breach of natural justice
  4. The foreign judgment cannot be reconciled with an earlier foreign judgment.

Flightlease (Irl) Ltd (In Vol Liq) & Cos Act [2012] IESC 12

This 2012 decision of the Supreme Court in Ireland is instructive and helpful.

In Flightlease (Irl) Ltd (In Vol Liq) & Cos Act [2012] IESC 12 the Supreme Court was invited to accept the appropriate basis upon which the common law in this jurisdiction should recognise an in personam order of a foreign court. Flightlease argued that the traditional test as set out in Dicey (and in particular Rule 36) represents the current law in this jurisdiction. Swissair contended that the courts in this jurisdiction should follow the lead of Canadian courts and adopt a ‘real and substantive connection’ test.

(Read the full decision in this case here)

According to Rule 36 of Dicey if a judgment debtor was, at the time the proceedings were instituted present in a foreign country or if the judgment debtor submitted to the jurisdiction of the courts of the foreign country the Irish courts would recognise and enforce a judgment of a court of that country. (Dicey, Morris & Collins on Conflicts of Laws 14th edition (“Dicey”))

 

“Rule 36. Subject to rules 37 to 39, a court of a foreign country outside the United Kingdom has jurisdiction to give a judgment in personam capable of enforcement or recognition in the following cases:

 

First case. If the judgment debtor was, at the time the proceedings were instituted, present in the foreign country.

 

Second case. If the judgment debtor was claimant, or counterclaimed in the proceedings in the foreign court.

 

Third case. If the judgment debtor, being a defendant in the foreign court, submitted to the jurisdiction of that court by voluntarily appearing in the proceedings.

 

Fourth case. If the judgment debtor being a defendant in the original court, had before the commencement of the proceedings agreed, in respect of the subject matter of the proceedings to submit to the jurisdiction of that court or of the courts of that country.”

 

The Supreme Court decided that to follow the lead of the Supreme Court in Canada would lead to the Supreme Court in Ireland exceeding it’s judicial function and that the correct position is as set out by Rule 36 in Dicey outlined above.

Filed Under: Business and Company Law, Debt Problems | Bankruptcy, Transnational Litigation Tagged With: , ,

How to Obtain an Auctioneer’s Licence in Ireland

The Auctioneers and House Agents Act, 1947 and District Court rules (Order 63) makes provision for the granting of an auctioneer’s licence.

It is worth noting that regardless of when an auctioneer’s licence is obtained it will expire on the 5th of July each year.

auctioneers-licence-ireland

The application for the licence itself is made to the Revenue Commissioners and must be accompanied by the following documents:

  • A certificate of qualification granted not more than 28 days before the application for the licence.

This must be obtained in the District Court. Notice of this application must be served on the Superintendent of the Garda Siochana of the area of intended business at least 28 days before the Court application. Notice of this application must also be advertised in a newspaper in the Court area where the applicant intends carrying on the business. A Garda Siochana, not below the rank of inspector, can object to the granting of the certificate of qualification on a number of grounds.

When making the application to the District Court for the certificate you will also need a Certificate from your accountant stating that you have complied with the requirements of the Auctioneers and House Agents Act 1967 concerning keeping proper books of account.

  • A certificate of deposit from the Accountant of the Courts of Justice which involves a guarantee bond (issued by a licensed assurance company) or cash deposit in the sum of €12,700-again granted not  more than 28 days before the application;
  • A cheque for excise duty for €250;
  • A tax clearance certificate.

 

This is essentially how you obtain an auctioneer’s licence; if you need any assistance with any of the above don’t hesitate to contact us.

 

Filed Under: Business and Company Law Tagged With: , ,

The Commercial Agents Regulations and Directive | Agency Agreements Essentials

Agency agreements are commercial agreements which see the agent sell goods or services on behalf of the principal. Unlike a commercial distribution agreement, title to the goods does not move from the principal to the agent.

commercial-agents-directive

If you are considering entering into an agency agreement the key considerations will be under the heads of

  • Normal commercial principles and contract law
  • The Commercial Agents Directive and
  • Competition law.

Competition law

Competition law will only need to be carefully considered if the principal and agent are considered to be two separate “undertakings” and this will depend on the amount of risk borne by the agent.

Generally however, an agent is considered to be part of one undertaking with the principal; if this is the case then there should be no concerns in relation to the prohibition on anti-competitive agreements.

The Commercial Agents Directive

The Commercial Agents Directive (Council Directive 86/653/EEC) has been implemented in Ireland with the Commercial Agents Regulations of 1997 and 1997.

This law favours the agent to a large extent as it seeks to balance up the strength between the typically larger principal and more dependent and smaller agent. This is given effect by imposing conditions in an agency agreement under three important headings:-

  1. How the agent is remunerated
  2. The notice required to terminate the agency agreement
  3. Any compensation to be paid to the agent for the termination of the agreement.

What is a commercial agent as defined by this legislation?

There are 3 broad criteria to be satisfied:-

  1. The agent must be self employed
  2. The agent must have authority to act on behalf of the principal
  3. The agent negotiates and concludes transactions on behalf of the principal.

It is important to note also that the Commercial Agents Regulations defines a commercial agent as someone selling goods, not services, on behalf of a principal.

Furthermore there are some important exclusions in the legislation as to who is a commercial agent, for example a partner in a partnership and an officer of a company who is authorized to enter agreements on behalf of the company.

commercial-agents-regulations

In Ireland it is also necessary to have an agency agreement evidenced in writing to be covered by the Commercial Agents Regulations.

Remuneration of the Agent

The Commercial Agents Directive and Regulations contain some important provisions in respect of remuneration of the agent.

For example,  how the agent is to be remunerated where the agency agreement does not provide for this and the circumstances where the agent  is entitled to be paid after the termination of the agreement and requirements that the principal provide regular statements of the amount of commission due to the agent.

Termination of Agency agreement

The law in this area sets our

  • The necessary notice periods required before termination
  • Compensation for damage to be provided to the agent on the termination of the agreement
  • Compensation where the agent dies.

Conclusion

Clearly the Commercial Agents Directive and Regulations require careful consideration and legal advice prior to entering into such an agreement, either as principal or commercial agent.

Filed Under: Business and Company Law Tagged With: , , ,

Distribution Agreements | Exclusive, Non Exclusive and Selective

Distribution agreements, agency agreements and franchising agreements are three very common types of commercial agreement entered into by companies and individuals.

distribution-agreements1

All three agreements are, from a competition law perspective, known as vertical agreements.

When entering into these types of agreements the key considerations to be factored in include

  • Normal commercial considerations between the contracting parties
  • Competition law in terms of the restrictions placed on one of the parties by the agreement
  • Agency agreements need additional consideration as there is an EU Commercial Agents Directive and Commercial Agents Regulations to consider.

Elsewhere on our site you can read more about franchise agreements. This piece will focus on distribution agreements and we will deal with agency agreements separately on our site.

The key difference between a distribution agreement and an agency agreement is that in a distribution agreement title to the goods passes from the supplier to the reseller. (In an agency agreement title does not pass)

(This is part of the small business law series of articles)

Distribution agreements

Distribution agreements are generally for 5 years or less and are agrements between suppliers and resellers.

There are three types of distribution agreement:-

  1. Selective agreements
  2. Exclusive agreements
  3. Non-exclusive agreements.

Selective agreements

Selective agreements are where the supplier has applied some selective criteria in choosing a distributor. They are commonly used in the supply of luxury goods and allow the supplier have some control over how the goods are sold.

distribution-agreements

Exclusive agreements

Exclusive agreements are where the reseller has exclusive distribution rights in a geographical area and the supplier is restricted from supplying other distributors.

 

Non-exclusive agreements

Non-exclusive agreements arise where the supplier is not restricted from supplying other resellers.

Key considerations

Some considerations to keep in mind when entering into a distribution agreement, apart from the normal commercial factors, include

  • The territory covered in the agreement
  • The use of the intellectual property rights of the supplier by the reseller
  • The terms and conditions concerning purchase and sale of the goods
  • The selection criteria in selective agreements together with any training/support to be given, any sales targets/criteria and the restriction on the distributor from supplying unauthorised distributors
  • The restrictions on the supplier from supplying other distributors in exclusive distribution agreements.

This is not an exhaustive list and if entering or negotiating a distribution agreement the normal commercial negotiating should take place to ensure that you get the best deal.

Filed Under: Business and Company Law Tagged With: , , , ,

Involuntary Company Strike Off-Potentially Serious Consequences for Company Directors

The striking off of a company from the Register of Companies can be voluntary or involuntary. Elsewhere on this site you can read about the voluntary strike off scheme; in this piece we will take a look at involuntary strike off of a company and how to restore it to the register of companies.

involuntary-strike-off

Serious consequences

When a company is struck off the Register of Companies it is dissolved and no longer exists.

This means that

  • Company directors could be held personally liable for debts of the company incurred after strike off;
  • Limited liability protection no longer exists;
  • The company’s property becomes the State’s property.

Involuntary strike off

Involuntary strike off can happen if the Registrar of Companies strikes off for failure to file returns for example; the Revenue Commissioners can also apply to have a company struck off.

 

If the company has been struck off for less than 12 months then it can apply to the Registrar to have the company restored.

 

However if the company has been struck off for more than 12 months then an application will have to be made to the High Court to have the company restored to the Register.

This can be a costly exercise.

When making this application by way of Petition you will have to notify

  • The Registrar of Companies
  • The Chief State Solicitor’s Office
  • The Revenue Commissioners
  • The Revenue solicitors
  • The Minister for Finance.

As in the case of the voluntary strike off scheme a restoration application can only be made where all returns are up to date and all penalties and late filing fees paid.

 

The first step in the application is to obtain a Letter of No Objection from the Companies Registration Office.

 

Then the application to the High Court will have to be made and if successful the Order of the High Court permitting restoration of the company must be served on the Registrar of Companies within 3 months.

 

The application to the High Court will be by way of Petition and will involve a grounding affidavit, notice of motion and petition. If successful a further Letter of No Objection will need to be obtained-this time from the Revenue Commissioners.

 

Conclusion

Company strike off and restoration can be a costly exercise, particularly where an application to the High Court is necessary and all company returns will need to be brought up to date and penalties paid as a starting point.

Filed Under: Irish Company Formation Tagged With: ,

Company Strike Off-The Voluntary Strike Off Scheme for Irish Companies

There are two forms of company strike off involving striking the company off the Register of Companies at the Companies Registration Office (CRO)-voluntary and involuntary.

company-strike-off

Voluntary strike off

Section 311 of the Companies Act 1963 allows the Registrar of Companies to remove companies from the Registrar as part of an administrative voluntary strike off scheme operated by the Companies Registration Office (CRO).

To request a strike off a company director must file a request on a form H15 requesting removal and the power to strike off is a discretionary one.

Voluntary Strike Off Criteria

To avail of the voluntary strike off mechanism a company must

  1. Have ceased trading or never traded
  2. The assets of the company must not exceed €150
  3. The liabilities of the company must not exceed €150
  4. Have filed all annual returns and paid any outstanding penalties up to the date of application for strike off
  5. Obtain a letter of No Objection from the Revenue Commissioners (dated within 6 months of the application)
  6. Advertise it’s intention to be struck off in a national newspaper within 6 weeks prior to the application.

This voluntary strike off procedure, whilst relatively straightforward, is slow and the Registrar of Companies will write to the Company on two separate occasions a month apart to confirm the request for strike off.

The Registrar of Companies must then advertise her intention to strike off the company and a month after this advertisement the company will be struck off and no longer exist.

Consequences of strike off

It is important to note that a company that is struck off, whether voluntarily or involuntarily ceases to exist as a legal entity.

If this occurs then a company which continues to trade could have far reaching and serious consequences for company directors such as-

  • Company property becomes property of the State on dissolution
  • Directors may be held personally liable for company debts as limited liability protection no longer exists
  • Possible application by the Director of Corporate Enforcement to have the directors disqualified or restricted as directors.

Involuntary strike off

Involuntary strike off of companies can occur in number of different scenarios. Involuntary strike off is looked at in greater detail elsewhere on this site.

Filed Under: Irish Company Formation Tagged With: , , ,

Personal Liability for Company Directors in a Company Liquidation-The Essentials

Company directors can be held personally liable for the debts of the company in exceptional circumstances.

personal-liability-of-company-directors

Fraudulent trading

This would occur if a director carried on business with the intent to defraud but the intent to defraud must be proven. This is known as fraudulent trading.

Reckless trading

Reckless trading can also lead to personal liability for directors. Reckless trading is where a director is knowingly a party to the carrying on of any business of the company in a reckless manner.

The most common occurrence of reckless trading is where it can be shown that the directors have permitted the company to incur liabilities without having reasonable grounds to believe that those debts would be paid.

Failure to keep proper books of account is another offence that can lead to personal liability but if the director can show that he took reasonable steps or appointed another competent and reliable person to keep the company accounts he can avoid liability.

Consequences for directors of an insolvent liquidation

Directors can be disqualified or restricted from acting as directors.

A restriction occurs when a liquidator applies for a restriction order seeking to have the director prevented from acting as a director for a period of five years.

A good defence to such an application is for the director to show that he acted honestly and reasonably.

Director Disqualification

Directors can be disqualified from acting as directors on a number of grounds such as

a) The conviction of an indictable offence or fraud

b) Breach of duty

c) Persistent default in relation to the relevant company law requirements

d) Having a declaration of personal liability made against them.

Other issues re insolvent liquidation

Other matters that directors need to be aware of in the liquidation of a company include

  1. Post commencement dispositions-payments made out of the company bank account after the appointment of a liquidator are void
  2. Fraudulent dispositions-if the effect of a disposition of company property is to defraud the company this disposition can be reversed by the High Court on application by the liquidator
  3. Fraudulent preference-any payment or disposal of a company with a view to giving a creditor a preference over other creditors is a fraudulent preference and is invalid.

Most of the acts referred to here must take place within six to 12 months of the commencement of the liquidation.

Filed Under: Business and Company Law Tagged With: , ,

Winding Up a Company in Ireland | Voluntary and Compulsory Winding Up

Winding up a company in Ireland can be effected by a voluntary winding up by the members or a “voluntary” winding up by the creditors of the company.

This latter winding up arises when a liquidator appointed by the members forms the opinion that the company is unable to pay it’s debts.

winding-up-a-company

1) Voluntary winding up

Members Voluntary Winding Up

The process of winding up a company by the directors is known as a members’ voluntary winding up which is provided for by sections 256-264 Companies Act 1963. In order to avail of this method of winding up the company must be solvent so technically it is not an insolvency procedure.

 

To wind up a company in this fashion the directors must meet and make a statutory declaration (under s. 256) that they have made a full enquiry into the affairs of the company and that they have formed the opinion that the company will be able to pay it’s debts in full within a period not exceeding 12 months from the commencement of the winding up.

 

This statutory declaration must be sworn at a meeting of directors before a commissioner for oaths or solicitor. It will also contain a statement of the company’s assets and liabilities at the latest date before making the declaration.

 

This declaration must be accompanied by a report from an independent person (usually the company’s accountant) stating whether he is of the opinion that the directors declaration above is reasonable and that the schedule of assets and liabilities is reasonable.

 

If it is subsequently proved that the company is unable to pay it’s debts within the period specified in the declaration of solvency, a Court may declare a director personally liable if the Court decides that the declaration was made without reasonable grounds.

 

After the directors’ statutory declaration and the independent report of the accountant/auditor the directors must call an EGM within 28 days of the declaration.

At this EGM the members pass a special resolution that the company be wound up voluntarily as a members’ voluntary winding up and appoint a liquidator. Within 14 days the directors then publish a notice to this effect in Iris Oifigiuil.

 

The company then ceases business save for whatever work is required to wind up the affairs of the company and distribute the assets.

 

If at any time the liquidator forms the opinion that the company is unable to pay its debts in full he must advertise and call a meeting of the creditors of the company.

The members voluntary winding up then becomes a creditors’ voluntary winding up.

winding-up-a-company1(This is part or our small business law in Ireland series of articles)

Creditors’ Voluntary Winding Up

Once the liquidator has done his job he calls a final meeting of members and provides an account of the winding up. This meeting must be advertised in 2 daily newspapers and he then makes a return to the Registrar of Companies.

 

The company is then deemed dissolved three months after the Registrar receives the liquidators report and an account of the final meeting.

This procedure is a liquidation started by the shareholders and where the company is insolvent. (And as pointed out above will be the procedure if the winding up starts off as a members voluntary winding up but he declaration of solvency cannot be sworn).

The steps for this winding up are
1) The board decide to appoint a liquidator to implement a creditors voluntary liquidation
2) The board call a meeting of shareholders and passes an ordinary resolution that the company cannot continue to trade and should be wound up voluntarily
3) The members pass a resolution for the appointment of a liquidator and winding up of the company
4) A meeting of all creditors is called to advise the creditors, to present a directors statement of affairs to creditors
5) To confirm the appointment of a liquidator
6) The liquidator then realises the assets of the company and distribute the proceeds to creditors in the order laid down by the company’s acts.

2) Compulsory winding up

This involves the High Court winding up the company on the petition of a creditor, member or the company itself.

The common grounds for such a petition are

1) The company is unable to pay it’s debts
2) Under s. 213 where it is just and equitable to wind up the company.

This type of winding up is similar to the other two voluntary situations outlined above except the appointment of the liquidator is by the High Court.


Filed Under: Business and Company Law Tagged With: , , , , ,

Buying and Selling a Business in Ireland-Key Decisions and Considerations

If you are thinking about buying or selling a business in Ireland the principal decision you will have to make at the outset is how you will structure the transaction.

There is essentially two methods of carrying out a transaction-

1)   A share purchase

2)   A purchase of the assets and liabilities of the business.

(This part of our Irish business law series which deals with some of the many issues surrounding small business in Ireland today.)

The most popular method is by way of share purchase but you do need to carefully weight up the pros and cons with your solicitor and accountant.

buying-a-business-in-ireland

Purchase of assets

This method of buying a business has the advantage of allowing you to choose which assets you will buy and which liabilities you simply will not take on.

It does run the risk though of being challenged subsequently by a creditor who has not been paid and whose liability you have not taken on as part of your purchase.

Comparison of the two methods

Asset Purchase

As the buyer you will choose which assets and which liabilities you are taking on.

However it is difficult to get your hands on any tax losses of the target company and you many end up paying stamp duty of up to 9% depending on what assets are included in the deal.

Share Purchase

With a share purchase you will only pay stamp duty at 1%, regardless of the value of the target business.

The employees of the company will be taken on as a matter of law as part of the transaction; you may however be able to benefit from any tax losses which pass from the target company.

All assets and liabilities pass as part of the share transaction so the potential for liabilities rising up to bite you down the road is high.

buying-a-business-in-ireland1

Due diligence essential

It is absolutely vital that proper due diligence is carried out before buying a company or business.

Depending on the size and complexity of the target business it may be necessary to carry out due diligence under the following heads (not an exhaustive list)-

  • Insurance
  • Legal
  • Accounting
  • Environmental
  • Statutory obligations (CRO obligations included)
  • Title

Other critical issues to be dealt with include

  • Warranties (statements given by the vendor to the buyer in relation to the business being acquired).

Warranties would normally cover matters such as the target companies accounts, pending litigation, taxation, employees, assets, liabilities and essentially all aspects of the companies affairs.

  • Disclosure letter ( a letter from the vendor to the purchaser which sets out where the target company has any issues in relation to the general warranties already provided).

This might include any problems the target company/business has in relation to employees, title to property, insurance, banking facilities and any number of other areas where the actual position on the ground deviates from the warranties given in the agreement to sell.

Filed Under: Business For Sale Tagged With: , ,

Shareholders Agreements-7 Essential Elements to Focus On

Shareholders agreements are very useful in companies where there is a minority shareholder(s) whose interests and rights can easily be ignored by being outvoted by the other shareholders, particularly in circumstances where the minority shareholder holds less than 25% of the shares.

A minority shareholder in this situation does not have the power to block the passing of a special resolution by the other shareholders who can ignore shareholders with less than 25%.

shareholders-agreements1

To counter this situation many shareholders will enter into a shareholders agreement to protect the rights of minority shareholders and this agreement will typically cover a wide range of topics which we look at below.

1)      Share subscriptions

When a new investment is made in a company the investor would be well advised to have a shareholders agreement drawn up which will govern how the company is to be run at the time of subscription.

2)      Sale of shares

The sale of shares if there is a dispute between only two shareholders can be problematic but provision for such a turn of events can be provided for in the shareholders’ agreement. This could be done by a number of different procedures called tag along, drag along, offer round, lock in or a combination of theses.

These type of arrangements are designed to provide a solution where shareholders have fallen out and cannot come to an agreement as to how to resolve it.

3)      Company operations

The agreement might also cover the operations of the company such as a right for a minority shareholder to appoint a director to the board of the company or to committees of the Board.

4)      Vetoes

One of the most important sections of a shareholders agreement is a vetoes section which lists out a series of transactions which cannot be carried out without the consent of the protected minority shareholder.

shareholders-agreements

5)      50/50 shareholders and deadlock

A critical part of any agreement will also deal with a situation where there are two shareholders with each having 50% and no agreement in relation to a substantive course of action.

6)      Non-compete covenants

It is common to include a non-compete covenant to prevent shareholders from competing with the company as long as they are shareholders. This would seek to cover competition with the company’s business, solicitation of company’s suppliers and solicitation of company staff.

Set out above are some of the most common clauses in a shareholder’s agreement.

7)      Other issues

Other issues that might be dealt with include confidentiality, arbitration, no partnership, assignment of rights and conflict with the Articles of Association of the company.

Filed Under: Irish Company Formation Tagged With: ,
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