bdo doing business in ireland

8/3/2019 BDO Doing Business in Ireland

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Doing Business inIreland 2008December 2008

BDO International


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DOING BUSINESS INIRELAND 2008

December 2008


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Introduction

The aim of this publication, which has been prepared for the exclusive use of BDO MemberFirms and their clients and prospective clients, is to provide background information for settingup and running a business in Ireland, in compliance with the legislation in force on 31 October2008. It is of use to anyone who is thinking of establishing a business in Ireland as a separateentity, as a branch of a foreign company or as a subsidiary of an existing foreign company, andto anyone who is considering coming to work or live permanently in Ireland.

The publication describes the business environment in Ireland and outlines the financial andlegal implications of running, or working for, an Irish business. The most important issues areincluded, but it is not feasible to discuss every subject in detail within this format. Accordingly,Doing Business in Ireland 2008 is written in general terms and is not intended to be comprehensive.If you would like to know more, please contact the BDO Member Firms with which you normallydeal, who can provide you with information on any further issues and on the impact of anylegislation subsequent to 31 October 2008.

BDO International is a worldwide network of accounting and consulting firms, called BDOMember Firms, serving international clients. Each BDO Member Firm is an independent legalentity in its own country. BDO International is a world wide network of public accounting firms,called BDO Member Firms, serving international clients. Each BDO Member Firm is anindependent legal entity in its own country. The network is coordinated by BDO GlobalCoordination B.V., incorporated in the Netherlands, with its statutory seat in Eindhoven (traderegister registration number 33205251) and with an office at Boulevard de la Woluwe 60,1200 Brussels, Belgium, where the International Executive Office is located.

Founded in Europe in 1963, it has grown to be the fifth largest in the world the BDO networknow has 671 offices in 111 countries, with more than 35 000 partners and staff providingprofessional auditing, accounting, tax and consulting services on every continent.

BDOs special skills lie in applying its local knowledge, experience and understanding of theinternational context to provide an integrated global service. In BDO, common operating andquality control procedures are not a constraint on innovation and independence of thought, butthe starting point. It is a vigorous organisation committed to total client service.

BDOs reputation derives from consistently offering imaginative and objective advice within theclients time constraints. BDO Member Firms take pride in their clients success and theirrelationships with them. It is a personal relationship that combines the benefits of professionalknowledge, integrity and an entrepreneurial approach, with an understanding of a clientsbusiness and an ability to communicate effectively. This ensures the highest-quality objectiveprofessional service, tailored to meet the individual needs of every client, whether they begovernments, multinational companies, national or local businesses, or private individuals.

Doing Business in Ireland 2008 has been written by BDO Simpson Xavier, the Irish Member Firm of

BDO. Its contact details may be found on page 50 of this publication.

BDO Global Coordination BV, December 2008

BDO and BDO International are trademarks of Stichting BDO.


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Contents

1. THE BUSINESS ENVIRONMENT ................................................................................................... 9GENERAL INFORMATION........................................................... ............................................................... .............. 9

Geography ...................................................................................................... ................................................. 9Government and political powers ........................................................................................................................ 9Population and language ...................................................... ............................................................... ............. 9Currency ...................................................................................... ................................................................ . 10Time, weights and measures ....................................................................... ...................................................... 10Economic data............................................................. ...................................................................... ............. 10Inflation ................................................................. ................................................................. ....................... 10

BUSINESS ENTITIES ....................................................... ................................................................ ...................... 10Private limited companies ................................................................ ............................................................. ... 10Public limited companies ............................................................... ................................................................. . 10Single-member private limited companies ................................................................. ......................................... 11Unlimited companies ........................................................... ................................................................ ............ 11Branch ..................................................................................................... ..................................................... 11Formation/incorporation and obligations on companies ......................................................................... .............. 11Capital structure ..................................................... ................................................................ ....................... 12Unincorporated bodies ................................................................................................ ..................................... 13Liquidation ................................................................................................................... ................................. 13Receivership ................................................................................................................... ................................. 14Business reorganisation ............................................................................................................. ...................... 14Bankruptcy ...................................................................... ................................................................. ............. 14

LABOUR RELATIONS AND WORKING CONDITIONS ........................................................ ........................................... 15Availability of labour ......................................................... ................................................................... ........... 15 Employee-employer relations ..................................................................... ....................................................... 15Trade unions .............................................................................................. .................................................... 15

WORKING CONDITIONS............................................................. ............................................................... ............ 16Equal pay ............................................................ ................................................................... ....................... 16Minimum pay ...................................................................................................... .......................................... 16Health and safety ............................. ................................................................ .............................................. 16Holidays and working hours ................................................................................................ ............................ 16Labour costs .................................................................. .................................................................... ............. 16Alternative employee benefits ..................................................................... ....................................................... 16SOCIAL SECURITY .......................................................... ................................................................ ...................... 17General.......................................................................................................................................................... 17

PENSIONS .......................................................................................................................................................... 17FOREIGN EMPLOYEES............................................................... ................................................................ ........... 17

Residence permits ................................................................. .............................................................. ............. 17Work permits / Green Cards .......................................................................................................................... .. 18

REGULATION OF BUSINESS ....................................................... ............................................................... ............ 19Price and competition control .................................................. ...................................................................... ... 19Consumer and environmental protection ............................................................................................... ............ 19Import and export controls ........................................................................ ....................................................... 19Business permission for non-EEA nationals ................................................................................................... ... 19

INTELLECTUAL PROPERTY RIGHTS........................................................ ................................................................ . 20Patents ......................................................................................................................... ................................. 20Trademarks ............................................................... .............................................................. ....................... 20Copyright .................................................................. ....................................................................... ............. 20

2. FINANCE AND INVESTMENT ....................................................................................................... 21BANKING AND LOCAL FINANCE ............................................................ ............................................................... . 21

The banking system .................................................................... ................................................................. ... 21Commercial banks .................................................................................... ...................................................... 21IFSC .................................................................................................... ......................................................... 21Short-term and long-term financing .................................................................... ............................................. 21Equity markets ................................................................... .............................................................. ............. 21

ACCOUNTING AND AUDIT REQUIREMENTS ....................................................... ...................................................... 21Statutory requirement .......................................................... ................................................................ ........... 21Accounting requirements .................................................................................................... ............................. 22Accounting records ................................................................ ............................................................. ............. 22


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Contents of financial statements .................................................................................................................... ... 22Consolidated financial statements ....................................................................... .............................................. 23Audit requirements ....................................................................................... .................................................. 24The accounting profession ........................................................... .................................................................. ... 25Auditing standards ................................................................................................. ........................................ 25

INVESTMENT OPPORTUNITIES AND INCENTIVES........................................................... ........................................... 25The economy ....................................................................... ................................................................ ........... 25Basic resources ........................................................................................ ....................................................... 26Trade blocs ........................................................................................................... .......................................... 26Investment incentives ................................................... ...................................................................... ............. 26IDA Ireland ............................................................. ............................................................... ....................... 26Enterprise Ireland ................................................................................................ ........................................... 26dars na Gaeltachta ................................................................. ................................................................. ... 27Shannon Development ............................................................................... ..................................................... 27Grant types ............................................................................................................... ..................................... 27

3. THE TAX SYSTEM ........................................................................................................................ 28INTRODUCTION ............................................................. ................................................................ ...................... 28

Territorial scope ....................................................................... .................................................................... ... 28Taxable persons ................................................................................... ........................................................... 28Taxing authorities ................................................................. ....................................................................... ... 28

PRINCIPAL TAXES .......................................................... ................................................................ ...................... 29Taxes on income and gains .................................................................................................................. ............ 29Taxes on transactions ................................................................ ..................................................................... . 29

GENERAL INCOME TAX STRUCTURE ................................................................ ...................................................... 29Income tax schedules .......................................................................... .......................................................... ... 29

4. TAXES ON BUSINESS .................................................................................................................. 30CORPORATION TAX........................................................ ................................................................ ...................... 30

Regulating Acts ............................................................. .................................................................... ............. 30Outline of corporation tax ................................................................... ............................................................. 30Territoriality and residence ................................................................. ........................................................... ... 30Resident companies ............................................................................................. ............................................ 30Non-Resident companies ............................................................................ ..................................................... 30Taxable period ........................................................................... .................................................................. ... 31Taxable income ........................................................................................................ ....................................... 31Capital gains................................................................... .................................................................... ........... 31Stock-in-trade (inventory) ........................................................................................... .................................... 32Close companies .................................................................... ............................................................. ............. 32Deductions ............................................................. ................................................................. ....................... 32Favoured transactions .................................................................................... ................................................. 33Losses .......................................................... ................................................................. ................................. 33Consolidation ........................................................................................................... ...................................... 33Group treatment ............................................................... ................................................................... ........... 34Tax rate ........................................................................................ .............................................................. ... 34Dividends ............................................................... ................................................................. ....................... 34Interest and royalties ..................................................................... ............................................................... ... 35Anti-avoidance ............................................................................................................ ................................... 35 Administration ........................................................................................................................ ....................... 36Taxation of foreign corporations ............................................................... ......................................................... 37

VALUE ADDED TAX ........................................................ ................................................................ ...................... 37Registration thresholds .......................................................................... .......................................................... 38Tax rates ................................................................ ................................................................. ....................... 38Property ........................................................................... ................................................................ ............. 39Non-residents ........................................................ ................................................................... ...................... 39Interest on overdue tax ....................... ..................................................................... ........................................ 39

RELEVANT CONTRACTS TAX...................................................... ............................................................... ............ 395. TAXES ON INDIVIDUALS ............................................................................................................. 41

INCOME TAX ....................................................................................................................................................... 41Territoriality and residence ................................................................. ........................................................... ... 41The meaning of residence and ordinary residence ................................................................... ............................. 41


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Cross-border workers .................................................................... ................................................................ ... 42Non-resident individuals ............................................................. ................................................................. ... 42Employment income (Schedule E) .................................................................. .................................................. 42Other income.................................................................... ................................................................. ............. 43Tax rates ................................................................ ................................................................. ....................... 44

CAPITAL GAINS TAX ....................................................... ................................................................ ...................... 44CAPITAL ACQUISITIONS TAX (CAT) .............................................. ................................................................ ......... 44

6. OTHER TAXES .............................................................................................................................. 46CUSTOMS DUTIES ...................................................... ........................................................... ............................... 46EXCISE DUTIES.............................................................. ................................................................ ...................... 46STAMP DUTY ....................................................................................................................................................... 46LOCAL TAXES...................................................................................................................................................... 46

7. SOCIAL SECURITY CONTRIBUTIONS ......................................................................................... 48INTRODUCTION ............................................................. ................................................................ ...................... 48CONTRIBUTIONS ........................................................... ................................................................ ...................... 48BENEFITS ........................................................................................................................................................... 48CONTRIBUTION RATES .............................................................. ............................................................... ............ 48

8. BDO SIMPSON XAVIER ............................................................................................................... 50


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Doing Business in IrelandDecember 2008

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1.The business environmentGeneral information

GeographyThe Republic of Ireland, sometimes known by its Irish name of ire, forms with the UnitedKingdom part of a group of islands situated at the continental shelf off the north-west coast ofEurope.

Politically, the Republic of Ireland consists of 26 of the counties of the island of Ireland. Theremaining six counties in the north east form Northern Ireland, which is part of the UnitedKingdom of Great Britain and Northern Ireland. Where the word Ireland is used in thispublication, it is to be taken to mean the Republic of Ireland.

The total area of the island is 84 421km2

of which Northern Ireland comprises 14 139 km2. The

climate is relatively mild and temperatures are uniform throughout the country. The coldestmonths are January and February with average daily temperatures between 4C and 8C while

July and August are the warmest (18 C to 20C).The capital of Ireland is Dublin (Baile tha Cliath), with a population of 1 187 176. Other majorcities are Cork (119 918) and Limerick (52 539).

Government and political powers

The Republic of Ireland is a parliamentary democracy that obtained its independence from thethen United Kingdom of Great Britain and Ireland in 1922 as the Irish Free State. It became arepublic in 1948 adopting its constitution in 1937 by a referendum. The President ( an tUachtarn)is the Head of State and is elected by adult suffrage for a period of seven years with a right to re-election for a second term. The current incumbent, H.E. Mary McAleese, is serving her secondterm.

The supreme legislative authority is the Oireachtas (parliament) consisting of two houses, theSeanad (Senate) with very limited powers, and Dil ireann consisting of Members of Parliamentelected by adult suffrage. The government is formed by a coalition between the Fianna Fil,Progressive Democrat and Green parties, and is presided over by the Prime Minister (anTaoiseach), Brian Cowan TD, of the Fianna Fil party.

The political environment is stable and has over recent decades been dominated by parties of acentre or a centre-right persuasion. Ireland has been a member of the European Union (EU)since 1973 and is also a member of most major international organisations. It retains a neutralstance on military matters.

Irish law is based on common law as modified by subsequent legislation and by theConstitution. In accordance with the Constitution, justice is administered in public in courtsestablished by law. Judges are appointed by the president on the advice of the Government.

Judges have guaranteed independence in the exercise of their functions and can only beremoved from office by resolution of both houses of parliament. All courts are governed by thejury system other than the Special Criminal Courts and the Supreme Court, where decisions aremade by judges.

Population and language

Ireland has a population of approximately 4 339 000 with the greatest concentration being onthe east and south coasts. Overall population density is 60 persons per km

2, which is markedly

lower than the European average. Currently, it is estimated that 35% of the Irish population isunder the age of 25. This compares with the European average of approximately 28%.

English is the predominant language in Ireland notwithstanding the fact that the Constitutionrecognises Irish (Gaelic), as the first official language.


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Currency

The unit of currency is the euro (international abbreviation: EUR), which replaced the formerunit of currency, the punt (IEP), at the beginning of the year 2002 at a parity of EUR 1 =IEP 0.787564. At the time of publication (early December 2008), the euro was quoted at EUR 1 =USD 1.2574.

Time, weights and measuresIreland uses Greenwich Mean Time, which is one hour behind Central European Time. Summertime (GMT +1) operates during a greater part of the year.

Ireland uses the metric system of weights and measures.

Economic data

Government economic policies are directed towards the creation of a stable economicenvironment, which is supportive of the needs of business. Irelands economic growth rates inrecent years have consistently been among the highest of the OECD countries. Unemployment(at 5.9% in July 2008) is relatively low.

Inflation

The annual rate of inflation in June 2008 was 5.0%.

Business entities

Private limited companies

Private limited companies are the most common form of business entity used in Ireland.Essential features of a private limited company are:

The liability of members is limited to the amount, if any, unpaid on the shares held byits members

The maximum number of members is limited to 50 with a minimum of one A members right to transfer his shares is restricted.

A private limited company is required to show the word limited (which may be abbreviated toLtd) in its name unless the company has formally applied to have it excluded from the name ofthe company. The primary legislation governing the incorporation of companies consists of theCompanies Acts of 1963 to 2006. The company itself will be governed by its Memorandum of

Association and the Articles of Association.

Every company must maintain a registered office in the Republic of Ireland. The share capital ofprivate limited companies may be denominated in any currency and the currency adopted isgenerally dictated by the companys commercial requirements. The minimum number ofmembers is one and the member must hold at least one share. The executive powers of thecompany lie with the directors who are responsible for the day-to-day running of the company.Every company must have a minimum of two directors, one of whom must be resident in theRepublic of Ireland (except where a bond is in place or a real and continuous link certificate is

obtained). Any individual may act as a director, provided he or she has not been disqualified bythe courts from holding such an office. A company is also required to have a company secretaryand individuals or corporate entities may hold this position. The secretary is normallyresponsible for administrative matters such as ensuring compliance by the company with thevarious filing obligations as set out in the Companies Acts.

Public limited companies

Public limited companies have many of the characteristics of private limited companies with thekey differences being:

Shares in a public limited company are freely transferable There is no restriction on the number of members but the minimum number is seven


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Shares may be issued to the public and may be listed on the stock exchange. As with private limited companies, the Memorandum and Articles of Association set out theobjectives and rules of the company. Similarly there is no limit on the level of the issued sharecapital, but a minimum of EUR 38 093 (USD 47 900) of share capital must be issued, of which25% must be paid up. The name of the public limited company must include the letters plc.

Only a public company may offer shares or debentures to the public, although these need notnecessarily be quoted or dealt with on a stock exchange.

Single-member private limited companies

A variation of the private limited company permitted under the European Communities (SingleMember Private Limited Companies) Regulations 1994 is the private limited company with asingle shareholder. This is often suitable for wholly owned subsidiaries and is an ideal vehiclefor inward investors since it reduces administration requirements and eliminates the need fornominee shareholders. Single-member private limited companies may also choose not to holdannual general meetings but in other respects are similar to private limited companies.

Unlimited companies

This is a form of business entity where the members are jointly and severally liable for the debtsof the company and thus have unlimited liability. A number of advantages arise from this formof body corporate and these can be summarised as follows:

An unlimited company may, without formality, purchase its shares from its membersand may reduce its share capital without recourse to the Courts

An unlimited company is not required to file a copy of its annual financial statementswith the Registrar of Companies (provided at least one of its members has unlimitedliability)

While in practice, unlimited companies are broadly similar to limited companies, theirusage is confined to situations where the members wish to avoid the public disclosureassociated with filing of financial statements with the Registrar of Companies, where anentity is required which may be disregarded or treated as transparent under the law of

the investing country.Branch

A branch is a division of a foreign company trading in Ireland, which has an appearance ofpermanency, a separate management structure, the ability to negotiate contracts with thirdparties and a reasonable degree of financial independence. EU regulations have beenimplemented which impose a similar registration rgime on branches as that imposed on localcompanies. Foreign companies setting up a branch in Ireland are required to file basicinformation with the Registrar of Companies. These include certified copies of the documents ofconstitution, particulars of the director and secretary and certain other information. In addition,the foreign company is obliged to file the same financial statements as it would if incorporatedin Ireland. These financial statements should include the results of the branch operation butseparate branch financial statements are not required.

A foreign company undertaking business in Ireland from a fixed place of business, not being abranch, must file a copy of the companys constitution together with a list of the directors of thecompany and the address of the place of business with the Registrar of Companies. On receiptof the above, the Registrar will issue a Certificate of Registration to the business. If a foreigncompany that has a place of business in Ireland (which is not a branch), would be regarded as apublic limited company if it were registered in Ireland, it is required to file annual financialstatements with the Registrar of Companies.

Formation/incorporation and obligations on companies

The incorporation of a body corporate is normally undertaken by specialised formation agents.A formation agent is required to file the Memorandum and Articles of Association and provide


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details regarding the directors and secretary to the Registrar of Companies. Private companiesmay commence trading immediately on incorporation but public companies need to wait untilthey have obtained a certificate from the Registrar entitling them to do so. The incorporation ofa company generally takes five days. The new shareholders can amend the Memorandum and

Articles of Association and appoint new directors.

In accordance with the Companies Acts 1963 to 2006 companies are required to keep properfinancial records. The directors are also required to prepare financial statements on a periodicbasis which give a true and fair view of the affairs and results of the company for its financialperiod.

Irish incorporated companies, subject to certain limited exceptions related to the size of thecompany, are required to have their financial statements audited by a registered auditor. Thedate to which financial statements are prepared is at the discretion of the company and can bechanged at any time by a resolution of the directors. Companies that meet certain criteria areabsolved from the requirement to have their financial statements audited, however.

Where a company has more than one shareholder, the Companies Acts require that an annualgeneral meeting (AGM) be held each year so that the financial statements can be laid before themembers. The first AGM of the company must be held within 18 months of the date of

incorporation of the company and thereafter within nine months of the end of the companysaccounting period. A single-member company may, if it wishes, dispense with annual generalmeetings.

The audited financial statements of the company form part of its annual return, which must befiled with the Registrar of Companies. On 1 March 2002, every company on the register wasallocated an Annual Return Date (ARD). The financial statements attached to a companysannual return must predate the date the return was made by no more than nine months. Annualreturns dated after 1

March 2002 must be filed with the Registrar of Companies within 28 days of

the date to which they are made up. Unlimited companies with at least one member havingunlimited liability are not required to annexe the annual audited financial statements to theannual return. The annual return will contain current information on the following:

authorised and issued share capital of the company shareholders of the company directors and secretary of the company and registered office of the company

The format of the financial statements to be filed with the annual return is prescribed in theCompanies Act 1986 and will vary depending on the size of the company, i.e. small, medium orlarge. Specific criteria based on turnover, balance-sheet assets and average number ofemployees are used in determining the category of the company. The larger the classification ofthe company, the greater the disclosure required. Consolidated financial statements of thegroup are not filed in abridged format regardless of the size of the group. There is, however, noneed to file the individual financial statements of the group members when consolidatedfinancial statements are filed. Similarly where the Irish company is a subsidiary of an EU-incorporated parent, it need not file its own financial statements providing that the parent

company supplies a guarantee in respect of the liabilities of the Irish subsidiary and a copy ofthe parents consolidated financial statements is annexed to the annual return of the Irishcompany.

Where a company or person uses a business name that is different from its legal name, thebusiness name must be registered with the Registrar of Business Names.

Capital structure

A companys authorised capital and the division of that capital into shares should be set out inthe companys Memorandum of Association. Shares of no par value are not permitted andshares may be of different classes having different voting, dividend and other rights. Ordinaryshares usually have voting rights with no restriction on dividend rights. Preference shares


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usually have the right to a fixed preferential dividend, with no voting rights unless dividends arein arrears or other specified circumstances exist.

Irish company law distinguishes between equity and non-equity share capital. Equity shares areessentially all shares that have a right to participate with no upper limit in income or capital.They form the basis for one of the tests for determining whether a parent-subsidiary relationshipexists between the two companies.

There is no requirement that some part of the share capital or debentures in a company be heldby Irish nationals as opposed to non-nationals.

Unincorporated bodies

Partnerships - general and limited

Almost any form of business may be carried on in the Republic of Ireland by a partnership. Apartnership is an association of persons wishing to carry out a business in common, normallysharing both management and profits. Most partnerships, other than those of accountants andsolicitors, are limited to 20 members. There is no requirement that all or any of the partners beIrish nationals and a body corporate may be a partner.

In general, the partners are not only jointly liable to the creditors of the partnership for thedebts of the firm but each partner is also personally liable for all the debts of the firm notsatisfied by the partnership assets. Unless otherwise agreed, in writing, partners share equally inprofits and losses. The rights and obligations of partners are governed by a partnershipagreement and by the Partnership Act of 1890.

It is also possible to establish what is known as a limited partnership, which is governed by theLimited Partnership Act of 1907. Such a partnership is comprised of at least one general partner(who has unlimited liability) and one or more limited partners. Limited partners are liable forpartnership obligations only to the extent of cash and property they contribute. Whilst generalpartnerships are not obliged to file their financial statements with the regulatory bodies, alimited partnership will be obliged to file its financial statements for public record with theCompanies Office if the general partner in the partnership is a limited company.

Sole proprietorshipAn individual setting up business as a sole proprietor is the most rudimentary business form.There are few legal formalities or costs associated with the operation of a business as a soleproprietorship and this form of business entity appeals primarily to small enterprises.

Because the business is undertaken directly by the owner, he or she is personally liable for thebusiness obligations and may be required to pledge personal assets as collateral whenborrowing funds.

Liquidation

A company can be terminated through the formal process of liquidation.

A liquidation can be initiated by resolution of the shareholders, followed in certain instances by

a resolution of creditors, or by way of application to the High Court.There are three basic types of liquidation:

members voluntary liquidation (solvent); creditors voluntary liquidation (insolvent); Court liquidation (usually insolvent).

A liquidator is appointed to carry out the process of liquidation, which involves:

the collection and realisation of the companys assets; the payment or part payment of its liabilities; the distribution of surplus assets amongst the members in accordance with the Articles

of Association;


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winding up the affairs of the company; and in insolvent liquidations the investigation of the conduct of the company and its

directors in the period preceding liquidation.

Following the completion of the liquidation and the filing of the final papers in the CompaniesRegistration Office the company is dissolved.

Receivership A receiver or receiver and manager over the assets and/or undertaking of a company may beappointed under the terms of a debenture document or by the court pursuant to certainstatutory powers.

The function of the receiver is to take possession of the assets that are the subject of thedebenture holders charge with a view to realising them and discharging the debt owing by thedebtor to the debenture holder(s).

A receiver and manager may also take over the management of the company to the extent of theassets that are the subject of the charge. A receiver and manager may in some circumstancescontinue to trade with a view to increasing the value of the companys assets or selling thebusiness as a going concern.

A receiver or receiver and manager will be discharged upon the completion of their work anddistribution of the available assets. Any surplus assets after paying off the debenture holder andany prior claims will be distributed to the company or to a liquidator if one is appointed.

Business reorganisation

Examinership is a court reorganisation procedure that offers protection to an insolventcompany from its creditors and at the same time facilitates the appointment of an Examiner toformulate a survival plan for the company, which usually incorporates a scheme of arrangementor compromise with the companys creditors and which requires to be ratified by the court.

Prior to appointing an Examiner the court must first be satisfied that there is a reasonableprospect that the company will survive as a going concern.

The Examiner has 70 days to formulate his proposals, which may be extended by a further30 days upon application to the court.

The proposals are voted on by the various classes of members and creditors before being putbefore the court for its approval. In order for the proposals to go ahead at least one class ofcreditor must vote in favour of the proposal.

Once the scheme of arrangement and compromise proposals are approved by the court, theprotection of the court is removed and the Examiner is discharged.

If the examination process fails the court may direct that the company be wound up.

Bankruptcy

An individual may be declared bankrupt in circumstances where he or she commits an act of

bankruptcy. The process involves the issuing of notices, summonses and subpoenas and thefiling of a petition in the High Court.

Once an individual is adjudicated bankrupt, his assets are vested in the Official Assignee (or acreditors assignee, if one is appointed), who is charged with collecting and realising thebankrupts assets, adjudicating on the creditors claims and paying the creditors in order ofpriority.

There are a number of consequences and prohibitions on an undischarged bankrupt, includingthat he or she may not serve as a company director, secretary, liquidator, receiver, examiner orauditor and may not operate a bank account.

Where a bankruptcy earns enough assets to discharge all creditors in full or where the bankruptsubsequently earns enough to obtain a full discharge, application is made to the court to annul


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or terminate the bankruptcy. Both before and after adjudication a debtor may apply under thebankruptcy jurisdiction to make an arrangement or composition with his creditors. If theproposed arrangement is accepted by the creditors and implemented after adjudication, thenthe bankruptcy is annulled. If the proposal fails however, adjudication may follow.

Labour relations and working conditions

Availability of labourThe total labour force in Ireland is approximately 2.24 million, of whom approximately1.46 million (68%) are under the age of 45. The actual number in employment is approximately2.135 million, of whom 70% are under the age of 45.

The labour market in Ireland offers inward investors a large pool of young, well-educated andhighly motivated workers. Irish people have a strong work ethic and this is reflected in the rateof employee turnover, which tends to be well below the European average. The structure of theIrish population is such that the availability of a young workforce is likely to continue well intothe next century. In the year 2006, 35% of people in Ireland were under 25 years of age; thiscompares with the European average of approximately 28%. While the Irish economy hastraditionally been dominated by agriculture, recent years have seen the expansion of the

manufacturing base to include hi-tech companies in the sectors of information technology andchemicals. In addition, the establishment of the International Financial Services Centre inDublin has fostered particular skills in the financial field.

Employee-employer relations

Labour relations in Ireland are characterised by consensus. Legislation provides considerablesafeguards for employees in their terms of employment as well as working conditions.

There are comprehensive laws and regulations governing the area of employment including lawson:

contents of the contract of employment minimum notice to terminate employment dismissals/terminations employment equality pensions holidays

Disputes between employers and their employees may be resolved by reference to certainstatutory bodies, such as:

The Labour Relations Commission The Employment Appeals Tribunal the courts

Trade unions

There are approximately 55 trade unions (North and South of the border) currently in existenceand 50% of the workforce belongs to a union. Historically, trade unions have been craft-based,but increasingly the trend has been for broad multi-occupational unions to be formed byamalgamation. The largest union, SIPTU, covers workers in a wide variety of industries andoccupations. While an employee has a constitutional right to join a trade union, there is agrowing preference in large multinational employers for non-union status. This trend isillustrated by the fact that only 6% of overseas companies locating in Ireland in the last threeyears have involved trade unions. Recent European Union legislation arising from the accessionby Ireland to the Social Chapter section of the Treaty of Maastricht, required the establishmentof workers councils by larger employers.

In order to facilitate good economic management, the Government has in recent years sought toset National Wage Agreements in conjunction with unions and employer groups, to maintain


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pay increases in line with inflation. In Mid-June 2006, the Sustaining Progress NationalPartnership & Social Partnership Agreement was finalised and has been calledToward 2016. These programmes have facilitated a period of industrial harmony for several years.

Working conditions

Equal pay

Irish legislation requires equal pay for men and women, not only for equal work but also forwork that can be deemed to be of equal value.

Minimum pay

Under the recent National Wage Agreements the minimum hourly wage from 1 July 2007 isEUR 8.65 (USD 10.90) per hour.

Health and safety

Irish safety legislation provides a legal responsibility on employers to provide:

a safe workplace with a safe means of access and exit safe equipment and safe systems of work information/training protective clothing and equipment a safety statement as to possible hazards and risks.

Holidays and working hours

Under legislation passed in 1997 known as the Organisation of Working Time Act, restrictionsare placed on the number of hours that employees can work. Implementation of this legislationis being phased in over a number of years to allow employers to adapt their work practicesaccordingly.

The main provisions of the Organisation of Working Time Act are:

a maximum 48-hour working week will apply to all employees a minimum daily rest period of 11 consecutive hours per 24-hour period a minimum uninterrupted rest period of 35 consecutive hours per week the minimum number of paid working-day holidays is 20 days.

There are nine statutory holidays in Ireland, commonly known as Bank Holidays.

Labour costs

The latest data from the Central Statistics Office show average weekly industrial earnings andhours worked per week as follows:

Table 1

Men Women Average weekly industrial earnings EUR 682.64 EUR 471.72

Hours worked per week 41.1 37.1

Alternative employee benefits

The Irish economy experienced rapid growth during the latter half of the 1990s with relativelylow rates of inflation. In order to ensure that employees with specialised skills were retained,employers have availed themselves of a range of alternative employee benefits that may beoffered to employees. These benefits may be offered in a way that is tax-efficient for both theemployer and also the employee, and include:

share options profit sharing


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pension benefits-in-kind PRSAs

The Irish Government in response to a lack of pension coverage and decreasing investmentreturns implemented a new retirement option in 2003 Personal Retirement Savings Accounts

(PRSAs). All employers are legally obliged to provide access to at least one PRSA and a facilitywhereby an employee can contribute to this PRSA scheme.

Flexible Benefits

There is a current trend in Ireland of offering employees a degree of choice in designing theirown benefits packages by offering flexible (flex) benefits programmes. These allow employees totailor benefits to their personal circumstances.

Social security

General

Social security in Ireland is provided by means of social welfare insurance known as Pay RelatedSocial Insurance (PRSI). It is compulsory for all employees aged 16 and over to be covered by

social insurance. Both employers and employees contribute towards the scheme and thecontributions are calculated as a percentage of earnings. The employer is responsible for theadministration and payment of both employer and employee PRSI contributions. PRSI is notpaid on benefits-in-kind or on occupational pensions.

Employer contributions range from 8.5% for employees earning less than EUR 356 per week to10.75% for employees earning in excess of EUR 356 per week. The standard contribution rate formost employees (PRSI Class A1) is 6%. See further Chapter 7.

Sickness insurance compensates income lost due to temporary incapacity for work. Theallowance is proportional to the applicants earnings.

Pensions

There are no compulsory pension provisions to which the employee, employer or self-employedperson has to adhere. Each individual can decide how much retirement pension he or shewishes to fund depending on means and circumstances. Pension contributions are tax-deductible within certain limits.

Foreign employees

Residence permits

EU nationals

Nationals of the European Union (EU), or of one of the other EEA member states (Iceland,Liechtenstein, Norway) or of Switzerland have the right to stay in Ireland, as have their familymembers. There are some limits on this right, however.

Such nationals can stay in Ireland for up to three months without restriction. If they plan to stayfor more than three months, they must register for a residence permit and be either:

employed or self-employed, or have sufficient resources and sickness insurance to ensure that they do not become a

burden on the social services of Ireland, or be enrolled as a student or vocational trainee, or be a family member of an EU national in one of the previous categories.


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Non-EU nationals

An individual who is not an EU or an EEA National may need to apply for a residence card andin certain instances will also require an entry visa, depending on his or her home country.

Where an entry visa is required, the individual must apply for a visa prior to arrival in Ireland.

Work permits / Green Cards

Rights of EU/EEA nationals

EU/EEA nationals are entitled to be treated like any other applicant when they apply for work inIreland. They are free to apply for any job vacancy, including jobs in the public sector. Theseinclude jobs in the Irish army and the Irish police force ( An Garda Sochna), but not the Irishdiplomatic service. Individuals who are qualified to practice a certain profession in their homecountry will generally find that they are qualified to practice the same profession in Ireland.They do, however, need to apply for recognition of their training.

Non-EU/EEA nationals who do not require work permits to work in Ireland

This category of person is entitled to apply for work in Ireland without a work permit if he or she:

is married to an Irish citizen, or is a parent of an Irish citizen and has been grantedpermission to reside in the state

has been granted refugee status by the Minister of Justice is studying at postgraduate level and is required to work as an integral part of his or her

course, e.g. doctors, dentists, etc. is a Swiss citizen coming to Ireland to work.

Work permits/green cards for other non-EU/EEA nationals

This category of person wishing to work in Ireland must apply for or have a prospective employerapply for a work permit or Green Card.

There are four categories of work permit. The first is a Green Card mainly for professionalsearning more than EUR 60 000 (USD 75 450) per year. Persons receiving a Green Card areentitled to bring their spouses with them. The Green Card is available for all occupationsmeeting the remuneration requirement, other than those deemed to be contrary to the publicinterest.

A second category of Green Card is available for jobs commanding a salary of betweenEUR 30 000 (USD 37 725) and EUR 60 000 (excluding bonuses). The industry sectors coveredinclude information technology, health care, construction professionals, research and naturalsciences, and finance. The employer must demonstrate that the expatriate is needed byadvertising the job, and only in exceptional circumstances will permits be granted to workersscheduled to earn less than EUR 30 000 per year.

A third scheme covers intra-company transfers. This allows multinational companies basedoutside Europe to transfer staff to work in Ireland. Individuals covered are those employed bythe company or group for at least one year and earning more than EUR 40 000 (USD 50 300) per

year.A fourth scheme covers spouses and dependants of migrants holding work permits. This schemeallows them to apply for work permits in their own right.

There are also flexible arrangements for foreign students graduating from Irish colleges andwishing to find work in Ireland. No work permit will be issued for any job paying below theminimum wage.

Employers breaching the rules regarding work permits may face fines of up to EUR 50 000(USD 62 875) or a prison sentence of up to five years.

An individual requiring a work permit must hold a valid permit before starting work. It is anoffence to work without one.


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It takes approximately six weeks to process an application for a Green Card. The Green Cardnormally covers a period of two years.

Other work permits take approximately four weeks to process, and may cover any periodbetween one month and one year. The cost of the work permit will depend on its duration. Theemployer can apply to renew it once it expires.

Work-permit or Green Card holders have all the employment rights of Irish or EU citizens for theduration of the permit.

Regulation of businessResponsibility for the basic legal framework for the regulation of industry and commerce restswith the Department of Enterprise, Trade and Employment, a department of Government. TheDepartment administers the Companies Acts 1963 to 2006, under which companies areincorporated, and a number of other statutes and regulations governing company affairs andinsolvency. The department is responsible for company law, patent, trademark and copyrightmatters and all matters affecting the regulation of insurance.

Price and competition control

There are no statutory price controls in Ireland.Irish competition law is now based almost entirely on EU legislation. The law is strict and coversthe validity of agreements, control of company acquisitions and mergers, powers of theauthorities and possible sanctions.

The Competition Act 1991 established the Competition Authority to oversee practices andmethods of companies affecting the supply and distribution of goods or the provision ofservices. Agreements between concerned parties to prevent, restrict or distort competition arevoid. Abuse of a dominant position in trade or services is prohibited.

The attitude of the Government towards monopolies is essentially neutral, in that regulationsrestricting monopolies are enforced only when the monopoly is shown to be against the publicinterest. Any agreement that has as its effect the prevention, restriction or distortion ofcompetition in trade in any goods or services in Ireland, is prohibited and void.

Consumer and environmental protection

There is significant legislation dealing with consumer protection and environmentalrequirements, in both manufacturing and service industries.

The Consumer Information Act 1978 established the Office of Director of Consumer Affairs toinvestigate any business practice that may restrict, distort or prevent competition in theproduction, supply or acquisition of goods or services in Ireland.

Import and export controls

Most categories of goods may be imported into Ireland but a limited range of goods fromcertain specified countries requires individual import licences from the Department ofEnterprise, Trade and Employment. The restrictions apply mainly to used clothing, explosives,firearms and ammunition, and some agricultural products. There are also restrictions in respectof animals, plants and certain other items that could be dangerous to health, safety or publicmorals such as asbestos and controlled drugs.

The major type of exports upon which restrictions are placed are certain types of strategic goodsand materials, minerals, certain animals and foods, archaeological objects, drugs and firearms.

Business permission for non-EEA nationals

All European Economic Area (EEA) nationals and nationals of Switzerland may establish abusiness in Ireland without the need to obtain specific permission. However, those outside this

Area need to obtain a specific business permission. The EEA is comprised of the member statesof the European Union plus Iceland, Liechtenstein and Norway. The permission covers a


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particular period of time, and residence in the Republic of Ireland is also granted for this term,following which it must be renewed.

In order to obtain business permission the following criteria must be met:

the proposed business must result in the transfer to Ireland of capital in the minimumsum of EUR 300 000 (USD 377 225)

the proposed business must create employment for at least two EEA nationals for a newproject or at the very least maintain employment in an existing business the proposed business must add to the commercial activity and competitiveness of

Ireland the proposed business must be a viable trading concern and provide the applicant with

sufficient income to maintain and accommodate himself or herself and any dependantswithout resorting to social assistance or paid employment, for which a work permitwould be required

the applicant must be in possession of a valid passport and national identity documentand be of good character

The application will include a business plan addressing the above issues. Business permissionis usually granted for 12 months initially and an application to renew can be submitted one

month before the expiry of the term. The first extension is usually for a further 12 months andsubsequent renewal may be up to five years. Audited financial statements and evidence ofcompliance with taxation requirements will also need to be submitted. The scheme isadministered through the immigration division of the Department of Justice, Equality and LawReform.

Intellectual property rights

Patents

Patents granted under the Patents Act 1964 and Patents Act 1992 provide protection forprescribed periods. However, applications can be refused or, if granted, be invalidated byevidence of prior publication or use. There are two separate types of Irish patent, short-termpatents of 10 years and long-term patents of 20 years. Long- term patents can take up to fiveyears or more to process and as the details of the process must be filed with the Patents Officeand are available for public inspection, many companies prefer not to apply for a patent but tokeep their process secret. Ireland is a signatory to the European Patent Convention, the PatentCooperation Treaty and the Community Patent Convention.

Trademarks

A trademark can now be obtained in respect of either a product or a service. It is granted by theIrish Trademarks Office in Ireland but EU law provides that it is now possible to apply for aCommunity Trademark. This involves a single application to the EU Trademark Office in

Alicante, Spain, and if this application is approved it is then valid throughout the EU, includingIreland.

An EU trademark is valid initially for 10 years but may be renewed for further successive periodsof 10 years each in perpetuity.

Copyright

Copyright exists without the need for application or registration in respect of original literary,dramatic, musical and artistic work. It also subsists in sound recordings, cinematographic films,television and sound broadcasts, and published editions of works and Irish legal tender. Ingeneral, protection is provided for the life of the author (if appropriate) plus 70 years. Copyrightprotection does not depend on the appearance of the copyright sign on the work, although itis advisable to use the sign where appropriate.


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2.Finance and investmentBanking and local finance

The banking system

The Central Bank of Ireland is the central bank of the Republic of Ireland and is responsible forsupervising the banking system.

Commercial banks

There are four major commercial banking groups with branches throughout the country. Thereare also merchant banks and finance companies that provide a range of financial servicesincluding corporate financial advice, leasing finance, hire purchase (instalment) finance andloan syndication.

IFSC

The International Financial Services Centre (IFSC) is located in the Custom House Docks area incentral Dublin. A wide range of financial services provided from this centre have in the pastqualified for a 10% rate of corporation tax. Entitlement to the 10% rate was dependent onobtaining an operating licence for the project from the Department of Finance, which is therelevant regulatory authority. Eligible trading operations in the centre include banking services,global money management, international dealing and back office operations. The 10% rate waswithdrawn on 31 December 2005 and replaced by the general 12.5% corporation tax ratethereafter.

Operations currently locating in Ireland can avail of the generally available low corporation taxrate of 12.5% for trading activities carried out in Ireland.

Short-term and long-term financing

Sources of short and long-term borrowing and access to venture and development capital areprovided by the banking system and the wide range of financial institutions mentioned above.Building societies (savings and loan associations) are the major private deposit-takinginstitutions that provide long-term finance for private house purchase and for businesspremises.

Equity markets

The Stock Exchange provides facilities for new issues of commercial and government securities.The Irish Stock Exchange established a new market in 2005 where small and medium-sizedcompanies seeking finance can be matched with investors. This market is called the IrishEnterprise Exchange (IEX). It currently has a total of 26 listings and its requirements closelyfollow the structure of the London-based Alternative Investment Market (AIM) , with theexception that an applicant to IEX will require a minimum market capitalization ofEUR 5 million (USD 6.287 million).

It is hoped that the IEX will in time mirror the success of similar markets in the United States

and the United Kingdom such as NASDAQ and AIM. Also Irish companies already listed on AIMare being encouraged to opt for a dual listing on IEX in order to increase their profile in Ireland.

Accounting and audit requirements

Statutory requirement

Partnerships and sole traders are under no statutory obligation to prepare annual financialstatements or to have them audited (although some form of financial statements is usuallyrequired for fiscal purposes). Companies incorporated under the Companies Acts are, however,subject to extensive statutory requirements, which are described below.


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Accounting requirements

The directors must prepare financial statements, lay them before the shareholders in generalmeeting within nine months of the end of the companys accounting period, and file a copy ofthe financial statements with the Registrar of Companies within 28 days of the annual returndate. The annual general meeting must be held:

within 15 months of the previous annual general meeting within nine months of the companys year end once in every calendar year

Subject to the provision that the first annual general meeting must be held within 18 months ofincorporation, it is not necessary to hold an annual general meeting in the year of incorporationor in the following year.

Accounting records

Companies incorporated under the Companies Acts are required to keep proper accountingrecords. These must contain the information necessary to disclose with reasonable accuracy, atany time, the companys financial position at that time, and to enable the directors to preparefinancial statements in compliance with the requirements of the Companies Acts 1963 to 2006.

The accounting records must be retained for six years and must record:

all sums of money received and expended and the matters in respect of which thereceipt and expenditure take place

all sales and purchases of goods the assets and liabilities

The accounting records must be kept at the companys registered office (which must be locatedin the Republic of Ireland) or at such other place as the directors think fit.

The only general law regarding the form in which accounting records are kept is that, if not keptin legible form, they must be capable of being reproduced in a legible form. Computer recordsare therefore acceptable provided that the company has the ability to print them out in hard-copy form.

Contents of financial statements

The financial statements must comprise of the following for both the company and the group:

an income statement covering the financial period a balance sheet as at the end of the financial period notes giving certain supplementary information and disclosures

The financial statements must give a true and fair view of the companys affairs and, subject tocertain size criteria, be accompanied by the auditors report. The audited financial statementsand a directors report dealing in general terms with the companys state of affairs and making anumber of statutory disclosures, must be sent to shareholders at least 21 days before theannual general meeting.

Financial statements must be drawn up according to generally accepted accounting principles inIreland (GAAP) and in the format described by the Companies Acts. Irish GAAP is identical tothat of the United Kingdom, as the Irish accounting profession works closely with itscounterparts in the United Kingdom in formulating standards.

In general, the disclosure requirements for financial statements are set out in the CompaniesActs, which reflect the requirements of the EC Fourth Directive and regulations governing groupfinancial statements. Certain additional disclosures are required by the Stock Exchange and byFinancial Reporting Standards.

There is a choice of vertical or horizontal formats for both the balance sheet and the incomestatement (profit and loss account).


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The balance sheet has to show assets, liabilities and provisions under specific headings and inthe order required by the Companies Acts. The reporting company is at liberty to expand therequired analysis but must give the prescribed minimum of information, except thatclassification that is immaterial in amount may be combined with another classification.

There are two permitted types of income statement, each giving different information. One formgives analysis on an operating basis (such as sales, cost of sales, gross profit, distribution costs,administrative expenses), while the other form analyses costs by type of expenditure (such asraw materials and consumables, changes in stocks, staff costs).

Once a particular format has been adopted, it has to be used in future years unless there arespecial reasons for a change. If the format is changed, the fact of and the reasons for the changemust be disclosed in a note to the financial statements in which the new format is first adopted.

Furthermore, the Companies Acts lay down certain minimum requirements for information to begiven in the notes to the financial statements, if not given in the financial statementsthemselves. This information covers a large number and variety of matters, such as accountingpolicies, departure from generally accepted accounting principles, fixed assets, capitalcommitments, contingent liabilities, transactions with directors and their connected persons

and particulars of subsidiary and related companies.The accountancy bodies jointly issue financial reporting standards (FRSs), which supplementthe requirements of the Companies Acts as to the form and content of financial statements. Theprovisions of FRSs are mandatory on members of the accountancy bodies and any significantdeparture with which the auditor does not agree should be referred to in the auditors report.The European Union has issued a regulation that now requires listed companies to preparetheir group financial statements using international accounting standards (IFRS).

Unlike the situation in countries such as Germany and France with fiscally dominatedaccounting systems, tax laws in Ireland have little effect on accounting methods. Businessprofits for tax purposes are determined by reference to financial statements prepared usingrecognised accounting principles, but such profits are subject to many statutory adjustments, sothat, for example, book depreciation of fixed assets must be ignored and the statutory capitalallowances for tax substituted.

Consolidated financial statements

The parent undertaking of a limited liability company should draw up consolidated financialstatements and include them in its annual financial statements. A reporting company isrequired to produce consolidated financial statements if it meets two of the following threecriteria during the financial year and the one preceding it:

turnover of at least EUR 15.24 million (USD 19.17 million) balance-sheet total of at least EUR 7.62 million (USD 9.58 million) average number of employees at least 250

Additionally, a parent undertaking is exempt from preparing consolidated financial statements

for its group on any one of the following grounds: the group is small or medium-sized and is not an ineligible group. A group is ineligible if

any of its members is a public company, a banking institution, an insurance company oran authorised person under the Financial Services Act 1986

the parent undertaking is a wholly owned subsidiary undertaking and its immediateparent undertaking is established under the law of a member state of the EuropeanUnion. Exemption is conditional on compliance with certain further conditions set out inthe Companies Acts. A parent undertaking is not exempt if any of its securities is listedon a stock exchange in any EU country


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the parent undertaking is a majority-owned subsidiary undertaking and meets all theconditions for exemption as a wholly owned subsidiary undertaking set out in theCompanies Acts

Audit requirements

At least one authorised auditor has to be appointed by the partners, by the shareholders

meeting or equivalent body, where at least two of the following three conditions are met by thecompany for two consecutive years;

the balance-sheet total is in excess of EUR 3.65 million (USD 4.59 million) turnover or comparable net sales in the annual financial statements are in excess of

EUR 7.3 million (USD 9.18 million) the average number of employees during the preceding financial period exceeds 50

While there is no general statutory requirement that the financial statements of anunincorporated business be audited, all companies incorporated under the Companies Actsmust, subject to certain size criteria, appoint an independent auditor. In certain other casesthere may be relevant legislation imposing audit requirements.

In order to be qualified for appointment as auditor of an incorporated company, a person must:

be a member of a body of accountants recognised for the purpose by the Minister forEnterprise, Trade and Employment and hold a valid practising certificate for such a bodyor

hold an accountancy qualification that is, in the opinion of the Minister for Enterprise,Trade and Employment, of a standard that is not less than that required for suchmembership as noted above and which would entitle that person to be granted apractising certificate by that body if he were a member of it, and is for the time beingauthorised by the Minister to be so appointed

The legislation also provides that officers of the company, relatives of officers of the company,persons who are partners of or in employment of an officer of the company, persons who wereofficers of the company during the period in respect of which financial statements are to be

audited and body corporate are barred from being appointed auditor.Most companies appoint practising accountants or firms of accountants as auditors and, inaddition, frequently look to them for other services, including advice on taxation and otherfinancial matters.

The auditors are required to make a report to the shareholders on the financial statementsexamined by them and on every balance sheet, income statement and all group financialstatements laid before the company in the general meeting. The auditors report must note:

whether they have obtained all the information and explanations which to the best oftheir knowledge and belief were necessary for the purpose of their audit

whether, in their opinion, proper books of account have been kept by the company whether, in their opinion, proper returns adequate for their audit have been received

from branches of the company not visited by them (where applicable) whether the companys balance sheet and (unless it is framed as a consolidated income

statement) income statement are in agreement with the books of account whether, in their opinion, the financial statements have been properly prepared in

accordance with the provisions of the Companies Acts 1963 to 2006 in the manner sorequired and give a true and fair view:

in the case of the balance sheet, it shows the companys affairs as at the end of thefinancial year

in the case of the income statement (if it is not framed as a consolidated incomestatement) of the profit or loss for the financial year

in the case of group financial statements, the affairs and profit and loss account of thecompany and its subsidiaries, so far as concerns members of the company


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whether, in their opinion, there exists at the balance-sheet date a financial situationwhere the net assets of the company are half or less than the amount of the companyscalled-up share capital, which would require the convening of an extraordinary generalmeeting of the company

whether, in their opinion, the information given in the report of the directors isconsistent with the financial statements (not applicable in the case of unlimited

companies)The auditor is also required if, in the course of, and by virtue of, carrying out an audit, he comesinto possession of information that leads him to form the opinion that there are reasonablegrounds for believing that the company, or an officer or agent of the company, has committedan indictable offence under the Companies Acts, to notify his opinion to the Director ofCorporate Enforcement and provide details of the grounds on which he has formed thatopinion.

The accounting profession

The accountancy bodies whose members are engaged in public practice and are recognised bythe Minister for Enterprise, Trade and Employment as qualified for appointment as auditorsunder the Companies Acts are:

the Institute of Chartered Accountants in Ireland the Institute of Chartered Accountants in England and Wales the Institute of Chartered Accountants of Scotland the Chartered Association of Certified Accountants the Institute of Certified Public Accountants the Institute of Incorporated Public Accountants Limited.

In addition to these five bodies, there is also the Chartered Institute of ManagementAccountants, the members of which are generally employed in commerce and industry and arenot qualified for appointment as auditors. The accountancy bodies have formed specialcommittees to promote accounting standards and auditing practices.

Auditing standardsThe audit requirement has been part of company law for many years and the techniques ofauditing are well established. The accountancy bodies, through joint committees, issue auditingstandards that prescribe basic principles and practices that their members are expected tofollow in the conduct of an audit.

The accountancy bodies have also issued auditing guidelines, which give guidance on suchtopics as planning, controlling and recording an audit, accounting systems, audit evidence,internal controls, the review of financial statements and examples of audit reports.

Investment opportunities and incentives

The economy

Ireland is a small open economy, which is characterised by the size of the contribution made bythe manufacturing and services industries to national output and by the importance ofinternational trade. Irelands exports account for 84% of its Gross Domestic Product (GDP).

Ireland continues to welcome incoming investment and offers selective incentives forcompanies establishing or expanding manufacturing and other operations. The Governmentalso welcomes foreign capital investment likely to create employment and there are norestrictions on foreign investment into Ireland.

Notwithstanding its geographical location on the periphery of Europe, the well-developedinfrastructure combined with moderate operating costs, low corporate taxes and generousfinancial incentives make Ireland one of the most profitable locations in Europe for overseasinvestors. Figures produced by the US Department of Commerce show that for over a decade US


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manufacturing operations in Ireland have achieved the highest return on US investmentoverseas of any location (25%).

The pattern of ownership in business is varied and mostly in the hands of private enterprise.Direct state intervention is in most cases affected through special state-sponsored bodies set upto deal with a particular activity. The most important state-sponsored bodies are those thatoperate major nationalised industries, for example electricity, gas, railways, and postal services.

Basic resources

Irelands natural resources include gas, peat, forests, fisheries, copper and zinc. Consequentlythe country is dependent on oil and coal imports. The main resources are its well-educatedpeople, its land and its clean environment.

Trade blocs

Ireland is a member of the European Union. Consequently it benefits from membership of theworlds largest free trade area the European Economic Area comprising 27 EU memberstates together with the three EFTA countries (Iceland, Liechtenstein and Norway).

Ireland has also signed the various EU treaties implementing the single European market andbenefits from the customs union with the European Union. As a member of the EuropeanMonetary Union, Ireland adopted the euro as its official currency on 1January 2002.

Investment incentives

Incentives offered to inward investors in Ireland consist of tax incentives and financialassistance. The major tax incentive in Ireland is the low rate of corporation tax available, whichis dealt with in Chapter 4 of this publication. Financial assistance, usually in the form of grants,is administered by a number of different government agencies each with its own particular areaof focus.

The four particular agencies involved are as follows:

IDA Ireland (formerly known as the Industrial Development Agency) Enterprise Ireland (formerly known as Forbairt) dars na Gaeltachta. Shannon Development

IDA Ireland

IDA Ireland is the primary government agency with responsibility for the promotion of directforeign investment in Ireland and development of the existing base of overseas companies. Itsportfolio includes in excess of 990 overseas companies employing in excess of 136 000 peopledirectly. Half of these companies have been in Ireland for over 10 years and the IDA hasoverseas offices in various locations throughout the world.

Grants are available from IDA Ireland for both manufacturing and internationally tradedservices. In general, IDA Ireland will provide a range of grant aid for new industry includingcapital grants, employment grants and training grants. Significant factors in determining the

total grant package will be the number of jobs created by the investment, the capital investmentby the investor and the geographic location of the industry. The IDA actively encouragesoverseas companies to locate outside the Dublin region.

Enterprise Ireland

Enterprise Ireland is the government agency whose primary responsibility is administering aprogramme of grant aid and incentives for Irish-owned companies in Ireland. It is alsoresponsible for the development of industry sectors based on natural resources, includinginward investors in the sectors. Enterprise Ireland grants are similar in type and

bdo doing business in ireland

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