Doing Business Internationally: Ireland

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Christy: Hello, everyone, and welcome to today's webinar, "Doing Business Internationally: Ireland." My name is Christy DeMaio Ziegler, and I will be your moderator. Please join me in welcoming our host Helena Ledic, an associate general counsel for CSC in the Chicago office. Helena.

Helena: Thank you so much, Christy. I am delighted to introduce our two speakers for our "Doing Business Internationally: Ireland" webinar. I'd like to introduce you to Anne Flood. Anne is the Head of Global Capital Markets in Ireland. And then David O'Flaherty, who is the head of AIFM Services in Ireland. Anne.

Anne: Thank you, Helena. I'm delighted to be here today, and I look forward to discussing why Ireland has a location occasion for business, and I hope that everybody might learn something from this today. David.

David: Yeah, thank you, Anne. Thanks, Helena. Yeah, look, likewise really looking forward to today. I think there's just some really interesting content, and hopefully people will take away some more knowledge about how to set up structures and forms and why to do business in Ireland. So looking forward to speaking with everybody today.

Helena: Here's our agenda today for our Ireland webinar. We'll talk a little bit about CSC, and then we'll talk about why Ireland. We'll learn about doing business, those entry options for foreign investors, what your limited partnerships should know. David is going to walk us through fund structures, and then how CSC can help you.

For more than 120 years, CSC has been the partner of choice for companies around the globe, trusted to handle everything from incorporating a company through maintaining compliance to corporate transaction work, protecting digital assets from the threats of the online world, and everything in between. We offer the solutions and technology that keep businesses running in the background, allowing clients to focus on the important work of growing their business.

CSC has offices and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia-Pacific, and the Middle East. We're a global company capable of doing business wherever our clients are, and we accomplish that by employing local experts, such as Anne and David, in every business we serve.

Now let's talk a little bit about why Ireland. Ireland is formally known as the Republic of Ireland and is a bit smaller than the state of South Carolina. It shares an island with Northern Ireland. It's not part of the United Kingdom, but is a member of the European Union and uses the euro as a currency. Ireland ranks third on the 2022 Index of Economic Freedom list, behind Singapore and Switzerland. U.S. based multinationals employ approximately 25% of the private sector workforce and pay 80% of Irish business taxes. Multinationals based in Ireland have made it one of the largest exporters of pharmaceutical agents, medical devices, and software-related goods and services. Ireland has the largest trade surplus of any EU country.

Now that we've learned a little bit about Ireland, let's talk a little bit about why Ireland. So Anne, can you get us started off and tell us why Ireland has been the location of choice for so many U.S. firms for decades now? Talk to us about that.

Anne: Sure, Helena. I am very happy to. So there are many different reasons why Ireland is a very popular location for foreign investors and in particular for U.S. companies to do their business in. I guess one of the main reasons is Ireland has a very pro-business environment. It's also very politically stable for several decades now. And because we're such a small economy, we're a very open economy. So we really do rely on foreign direct investment for our economy to thrive. So in that case, there's a very pro-business environment in Ireland.

So some of the key features of that would be we've a very competitive rate of corporation tax, and in addition to that we also have a very extensive range of double taxation treaties as well, many of which they're particularly favorable for such industries such as the aircraft leasing, which with Ireland, for such a small country has become one of the world's leading centers for aircraft leasing worldwide. And that's been something that has been very popular since the 1970s when Guinness Peat or GPA was established.

So we also have it and it's not just tax I guess, which is probably one of the key features, but in addition to that there is a very young, educated workforce. So one of the statistics that I guess jumps out in relation to that is that about 45% of Irish people who are aged between the ages of 23 and 34 have completed some form of tertiary or third level education. And within the EU, Ireland has the highest proportion of STEM graduates, so graduates coming out of the sciences, technology, engineering, and math. So it's no real great surprise that many of the leading tech companies, fintech companies, pharmaceutical companies all have established a presence in Ireland and have long-established presences in Ireland for many years now.

So we also now, in recent years in particular, have become a very popular destination for foreign workers, so non-Irish workers to come here to work here. So if you look at many of the big corporations that have offices in Ireland, their whole talent pool is a mix of many different nationalities. In some of those organizations like it's between 50% and 70% of their local staff in Ireland would be non-Irish. So a very popular jurisdiction for talent.

There's also a very good support system, again coming from government policy over the years to invest in education and a further education in particular. So a lot of the universities are well known for providing very good educational facilities again for the sciences, for technology, and for those engineering and those type of courses. And those pool of talents are really needed to keep supplying the labor force. So again, this is a real advantage for companies who choose to locate here because not only do you need a good fiscal environment, but you need to have the people, you need to have the talent to work in those industries.

So I might hand over to you, David, just for any further thoughts on that.

David: Yeah, thanks, Anne. Yeah, look, I think you've captured a lot there on why it's such a great jurisdiction for companies to establish. I think one of the things I'd look at is it's that track record. Ireland has been attracting FDI for decades now. It's a small, open economy. Its competitive advantage is exactly that. It's been attracting companies over the years. It's got to bring in the companies because the domestic market is not as big as somewhere like say the U.S., where it has a massive domestic market. So I think that track record is key. And I mean that in the sense that you've got you mentioned the pharmaceutical industry. You've got the tech industry. You've got the financial services industry. You've got different offshoots of that. There's fintech. There's cybersecurity.

There's so much that has evolved, and Ireland has become a European hub for a lot of global firms and a lot of U.S. firms that have used it as a gateway to Europe. So okay, I want to expand into Europe. What's the best way doing that? Well, Ireland offers a compelling menu of services that can really be very attractive. And some people kind of talk about it if it's just tax, but it's not. It's tax. It's what you mentioned about the resources, the infrastructure, the access. We're members of the EU, the access to this amazing talent people across Europe, across all different jurisdictions. You've got companies that set up their global sales teams in Ireland and customer centers, and they're speaking multiple different languages.

So that track record, when you've got a company that's looking to come into Ireland, they can talk to the company that they're competing with in their home jurisdiction because they probably have a setup here. So there's a long history of companies moving to Ireland, where they set up an operation. Some of those sometimes are small. They're small, 15, 10, 5, 25 person operation. And then we go all the way up. There's companies in Ireland with 10,000 to 20,000 people that is not their HQ, where their HQ sits somewhere else, but they've used Ireland as a key hub for accessing Europe.

So when you combine all of those points of what you discussed, Anne, what I'm talking about, your track record, your political environment, your history, the English speaking, the access to the resources, and the supports that are in place, and then the companies that have gone before you are willing to speak to you as well and tell you how it worked for them, what didn't work for them, and how you avoid those problems, and that has been a really good formula over the years in attracting a very high percentage. I think we kind of as a percentage of GDP, as a percentage of employment, FDI has been significant, a really significant player.

So yeah, so I think it's all of those things, Anne. And yeah, I think anybody that's looking to establish an entity or a company or access Europe, whether it's on the fund side, whether it's on the corporate side, Ireland should always be on that short list because there's a number of compelling reasons to do so.

Helena: So Anne, why don't you tell us a little bit more now about the entry options for foreign investors, the private limited companies and then the DACs?

Anne: Okay. Thanks, Helena. Yes, there are so two most common form of companies that are open for foreign investors to use in Ireland. So the most popular type of company is called a private limited company. So that ends with the acronym LTD after the company's name.

So the private limited company, some of I suppose the main features of that are there's not the same level of regulatory requirements that is a common feature of a public limited company. There is a limit on the number of shareholders that a private limited company can have, and only one director is the minimum requirement. Although it's much more common that at least two or more directors would be appointed to the board. A private limited company can be set up as a subsidiary of a foreign company, but in itself is an independent legal entity incorporated in Ireland and must comply with all aspects of Irish company legislation, and if it's tax resident in Ireland must comply with all requirements under the Irish tax regulations as well.

A general private limited company is particularly flexible in terms of the business activities that it can carry out. So there's quite a wide scope that a private limited company can do, and this would all be contained in the company's constitution.

Again, there are no minimal capital requirements that are needed. So typically the minimum amount of shares that can be issued by a private limited company is just one share, and that can be one share of one euro. So no thin capitalization rules to be concerned about.

And a company must have a physical place of business in Ireland. So it's registered office must be a place that is in Ireland.

The other type of private limited company that is popular is a designated activity company or a DAC. So a DAC is also a private limited company, but one of the or, well, there's a couple of differences between what a DAC can do and what an ordinary private limited can do, and the main difference is that a DAC has a more defined business function in its objects clause in its company's constitution. So typically the types of companies that would use a DAC, as opposed to just a private limited company, would be, for example, a credit institution or an insurance company. But more popular in the sort of capital markets world, this is the most common form of company that is established if you're establishing an SPV or a special purpose company in Ireland for a securitization or a structured finance or an aircraft leasing company, for example.

So again, the activities of that company or the activities of the SPV will be defined in the company's constitution. So, for example, the company cannot go outside of the business that is specified in the constitution. So if you say your main business is aircraft leasing, well, you can't be an aircraft leasing and be a transportation or an electrical company, for example. You must only carry on the business that is specified in the constitution.

Also the other key feature of a DAC, as opposed to just an ordinary private limited company, is that a DAC can list debts and securities on a stock exchange. And again, it must also have a minimum of two directors. And its share capital must be authorized, and again no requirements in having a minimum level of the share capital.

So they're the two main features or the two main types of private limited companies that are open to foreign investors to use in Ireland. Okay.

Helena: Anne, tell us a little bit more about maybe the less common entry options for the foreign investors, the public limited companies, the LLPs, and then the branches.

Anne: Sure. So a public limited company, or a PLC as it's more commonly referred to, is the type of company that would generally only be required if a company needs to publicly list either its shares or its debt securities on a stock exchange. So there is no limit on the number of members that a PLC can have. And then it does need to have a greater level of regulatory compliance, as you would imagine if you're a PLC. And then there is also a requirement to have a minimum share capital of €25,000. A quarter of that must be must be paid up.

The other type of company that is also available is a partnership, so a limited liability partnership, which is a business that's carried out between one or more legal persons. And again, they can either be natural persons, or they can be corporate entities. And there must be at least two partners, one of which is the general partner, and the general partner carries unlimited liability and can be responsible for any losses that may be sustained by the partnership. And then the other type of partner is the limited partner. And one of advantages of an LLP is that they are tax-transparent, which means that their profits are not subject to Irish corporate tax.

And the other I suppose less popular, but they are certainly used in Ireland is to establish a branch of a foreign company. So these can be set up by companies based outside of Ireland. There is a requirement to register the branch with the Companies Registration Office in Ireland within 30 days of its establishment. A branch can cover several locations, but they do need to operate throughout the same management structure. And they don't have separate legal liabilities from the parent company in the home jurisdiction. And they also have requirements to submit annual financial returns to the Irish Companies Registration Office.

So they are the other types of companies that are open to investors.

Helena: Now let's talk a little bit about funds. So David, tell us what should asset and fund managers know about Ireland.

David: Yeah, good question, and this kind of slide gives some key bullet points around that. I think it kind of goes back to what I was saying earlier as well about the jurisdiction. The funds industry in Ireland is one of those kind of perks, one of those areas that Ireland has become a really dominant jurisdiction for servicing assets, for domiciling funds. And again, it goes back to that long track record. It's been doing this for a long time. We've now got, if you look at Ireland as a jurisdiction for asset managers and particularly the U.S. asset managers as well because a lot of those have established over in Ireland and have been using the jurisdiction for a long time, it's not only the funds that are domiciled to access European capital. They typically pick Luxembourg and Ireland as two of the main jurisdictions in Europe to access European capital. But also a lot of the funds that are maybe domiciled in other jurisdictions around the world are serviced out of Ireland.

So the infrastructure there, all the administrators, the depositary, the AIFM, the management companies, even the audit firms, they all have this long track record of working with asset managers across different fund services, and it doesn't matter whether the fund is domiciled in Ireland or whether it's domiciled in another jurisdiction.

So you can see here there's a couple of bullet points that are worth kind of noting there. Obviously, there's a huge number of people employed directly in the fund and asset management industry. Again, that's a long time being established, and that is all the global firms that have established in Ireland because it has become a center of excellence for funds.

You also have and I can go through this in a bit more detail in a few minutes, but you've also got a wide range of vehicles that managers can use and access and that are efficient for their needs and their investor needs. And then you've got that, as I said, the track record. I said Luxembourg and Ireland are probably the two key jurisdictions in Europe for domiciling and servicing funds. And the UCITS, the more retail, open-ended, liquid form, we've been setting them up in Ireland since the '80s and servicing them out of Ireland. The AIFs, which is more on the internal and investment management side, AIFMD came in 2013. Now we've developed significant expertise there. So across both jurisdictions, both Lux and Ireland, you've got this center of excellence for fund admin, depositary, AIFM, and a lot of different managers for different asset classes used in jurisdictions. So managers that are looking at private equity structures, they're looking at debt funds, they're looking at liquids as we said, or maybe the investor base is retail, they can go into the UCITS structures.

So look, we've seen it evolve over the years. I think there's plenty of reasons why managers come to Ireland and continue to look to Ireland as a place to set up their fund or have their fund service there because of that center of excellence.

Helena: David, when we talked about what fund managers need to know about being in Ireland, you alluded to some of the different types of fund structures. Can you dig a little bit more into these and walk us through that?

David: Yeah, no problem. No problem at all. Yeah, I mentioned that. I think if you look at it from a top level down, there's a lot of acronyms here for different names around different structures. But ultimately, what you have you've got two key areas of focus. You've got the UCITS world, which is more that open-ended, liquid, targeted towards retail investors. And then you've got the AIF world, which is the alternate investment funds, and that's for more the non-liquid asset classes. It's also targeted towards . . . There's a RIAIF and there's a QIAIF, which go towards retail and professional investors.

So there are those two umbrellas. It's AIFs and UCITS. And then, if you look at both of those, within the AIF world, which is primarily the focus of CSC across the different jurisdictions, it's that non-liquid asset classes, real assets. Within Ireland and under the AIF world, there's a QIAIF structure, which is the qualified investor structure. Then there's the RIAIF structure, which goes into the retail. And really what's happened, again I sound like I keep repeating myself, but it's this long history, this track record of establishing funds and domiciling them in Ireland, and over time it's evolved whereby the jurisdiction has met the demands of managers and investors to establish different types of structures that are most efficient for different types of managers, with different types of investors with different types of asset classes.

So you have in that QIAIF world a number of structures that are on the slide there, that kind of cover all the different types of asset classes and managers. And some of them are efficient for certain managers, and others are more efficient for others.

So you've got the ICAV, which was established back in 2015 and has really been the main vehicle legal structure, if you want, for managers. So if they're in that AIF world and they want to set up, domicile, a fund structure in Ireland, they're typically going to set up an ICAV. And again, there's a number of reasons. There's the tax transparency. There's the regulation around it. There's the familiarity now. It's a well-worn path of managers using it. And it's a very good structure for that alternative investment.

We also have the ILP, which came in more recently. We've had kind of the unregulated one, the 1907 Act, and this is more of a regulated structure. And again, that was an evolution, if you want, of the jurisdiction to make sure that we stay relevant, that managers as they set up their LP/P structures consider Ireland as a jurisdiction to do so as well. We already have that capability in Luxembourg as well. And again, as I mentioned earlier, the two jurisdictions are key, and both offer compelling reasons to be established there. But the ILP was the most recent addition to the Irish suite of structures.

You also have the unit trust and the common contractual fund. Again, not used as often, but some managers use them. This is where you don't have a separate legal entity established, and the management company or the AIFM may be required to act as kind of that board or represent the trust of the structure.

So what you ultimately have, Helena, is really a wide range, and there are more as well. They also complement what Anne spoke about earlier on, on some of the structures that she spoke through in the DAC and the PLC and the limited company because what you have as well is managers establish these structures. Some of these structures are quite complex. They have multiple entities and vehicles across multiple jurisdictions involved. And regularly we would see an ICAV sit on top of a DAC. So the assets might be held in the DAC or an SPV, and that feeds up into the ICAV. So there's a lot of different ways of putting these different structures together, and it all provides that compelling kind of menu of structures for managers or investors that are looking to establish a European structure.

Helena: Now that we've learned from Anne and David about the different types of entities and funds and different things that we need to know about Ireland, let's now talk about how CSC can help you in Ireland. So let's talk now about how CSC can help you. So Anne, why don't you get us started off with talking about entity Management in Ireland with CSC?

Anne: Great. So yeah, so at CSC, we are basically a one-Stop shop. So we can do everything to get you set up. We can get the company incorporated, and we can keep it running for the course of its lifetime.

So if we look at entity management, what does that mean? So as I mentioned earlier when I was talking about the different types of companies, it is a requirement to have a physical location in Ireland. So that's a registered office. So that's something that we can provide. We can do all of the corporate accounting, the reporting. Again, it is a requirement to produce financial statements for every company that is incorporated in Ireland that doesn't avail of an audit exemption, but the vast majority of companies will not avail of that. We also provide all of the services that are needed for SPVs. So there's a full range of administration services there for SPVs.

It is a requirement to have a company secretary. So all Irish companies are required to have a company secretary, and that can be a natural person, or it can be a corporate entity. So again, at CSC, that is something that we can provide. We also have a team of experienced directors who come from various different backgrounds and have various different experience and disciplines, so we can provide independent director services for the boards of our client companies. We can also assist with any payroll services that are needed. And then we will also provide any transaction documents that need to be executed during the course of a transaction, so we can provide that. And if the requirement to have a process agent is needed, that is something that we also provide.

So that's really everything that is needed to get a company set up and keep it in good standing. So that's everything there just under entity management.

So moving on, some of the other types of services that we provide for regulatory and compliance obligations, so we also can provide Central Bank reporting. Again, that's not needed for every type of company. As I mentioned earlier, that DACs are the most common type of company for SPVs engaged in capital markets transactions. There is a requirement for every Irish SPV to report to the Irish Central Bank on a quarterly basis. And so if it's a public securitization, it's called FVC reporting. And if it's not public, it's just required to provide SPV reporting. And again, that reporting goes to the European Central Bank.

We also provide all the liaison services. So we will engage with the appointed auditor to the entity and help prepare financial statements and do the full liaison that's required as part of the annual audit process.

Some other tax reporting services we assist with are FATCA and CRS reporting. Again, for SPVs, for the Market Abuse Regime, where there is requirements when an SPV has listed debt securities, we can provide the compliance services that are needed around that. EMIR registration as well is something that we can help with. And then, in relation to AML compliance services, we can provide the role of the MLRO. And then also for specific types of SPVs that are designated to be what are called Schedule 2 SPVs that are required to register with the Central Bank, we can provide a full suite of AML services that are associated and are needed for those SPVs.

Looking at it for the agency services, so this is something that we provide again to our DACs or our SPVs. So these are the types of services that are very typically provided for securitization, aviation finance type SPVs. So we can provide the role of share trustee for those SPVs that are orphaned entities. We can also provide cash management, so assist with opening of the bank accounts, provide signatories for the bank accounts, and provide all of the cash management services, so waterfall calculation, investor reporting, etc. We also provide facility agents and loan administration. And we could also do investor reporting, again customized to whatever our clients' particular transaction requirements are. And then we also provide the roles of paying agent and calculation agent, again for securitization, structured finance, and aviation finance type transactions.

So that's really the full suite that we would very typically see for securitization, for capital markets type SPVs, and there's the full range of corporate services there private limited companies or subsidiaries of holding companies that our clients would set up here in Ireland.

So I'll hand over to you now, David, just to cover the funds services that we provide.

David: Yeah, great. Thanks, Anne. Yeah, so on the fund side, it's a little bit different. When it comes to the funds, typically it's a regulated structure. So what you have is you've got required service providers, local service providers that need to provide certain services to that fund domiciled in Ireland typically. But we can also provide these services to funds that aren't domiciled in Ireland.

But the key ones I suppose that we kind of provide in Ireland is the AIFM, which is that alternative investment fund manager. A really important role established on the back of AIFMD in 2013, and then kind of really came into effect in 2015. And our own license was established in 2015. The services that the AIFM provides are very much oversight of what's happening in that fund. So I always look at this it's when you're describing the AIF business, is where does it fit in. It's a little bit different to what happens in other jurisdictions. The U.S. is slightly different, where it wouldn't really kind of have this functionality as much as the way it's described in Europe. But it really is that compliance function, if you want whereby, the AIFM provides comfort to the board of the fund, provides comfort to the Central Bank, ensures that the investors are protected. That's ultimately the goal, that everything around this fund is done correctly, that the different service providers around this fund are appropriate and suitable for the fund, that the reporting into the Central Bank is all done in a timely manner, that the activity within the fund that it matches the investment objectives and the documentation that's been put in place.

So it's a really important function and is increasingly becoming so as well, as time passes and with the evolution of regulation and oversight and the remit of the AIFM kind of continues to expand. And so we provide that in Ireland. We also obviously provided it in Luxembourg as well, which is probably important because, as I mentioned earlier, those are two key jurisdictions in Europe.

And then two of the other services that are key to a fund when it's established is that depositary service and the fund administration. So all three, the AIFM, depositary, and the fund admin, they're separate legal entities, and we're one of the few providers at CSC where we can provide all three in both jurisdictions, both Lux and Ireland. And again, key services, the depositary is making sure of the safe keeping of the assets, the cash accounts. And everything is again done correctly. Independently they are authorized by the Central Bank. The AIFM is authorized by the Central Bank, and the fund administrator is authorized by the Central Bank. So you get a sense of that high level of regulation that oversees these regulated funds.

So CSC provides all of those. In addition to that, there's some kind of auxiliary services that you have. You can look at MLRO. There's Annex IV reporting. We provide as well directorship services, company secretarial services as well.

So all of these bring that fund together. There's very few services that we don't provide to the fund. And we're seeing more and more that managers, when they come to the jurisdiction, it's a nice solution for them to have a lot of the different services. Even though they're provided by different legal entities within the overall CSC structure, it is all kind of housed under one roof. And it can be helpful in terms of a manager understanding the culture and the relationship management of a certain company. So someone like CSC, where we build up a good relationship, there's efficiencies there in managing that relationship then when it's all under one house.

So they would be kind of I suppose the main services we provide on the regulated side and, as I said, continue to expand on. But I think there's a really good offering there for anybody looking to set up a fund in Ireland.

Helena: Let's talk a little bit about CSC in terms of our global coverage. We have a distinct advantage when it comes to serving our clients where they are. We have regional hubs around the world with our in-country experts, such as Anne and David, who understand the ins and outs of the various jurisdictions. You'll work with a dedicated service team in your time zone fulfilling all your service needs. In all, our team is wherever you need us to be.

As you've learned from Anne and David with Ireland, we are the business behind business. As you can see from our solutions listed here, we're the partner of choice for global companies needing expertise in business administration and compliance, fund solutions, transactions and lending, capital markets, and domain security and brand protection. Whatever your company needs to stay in compliance, transact business, or become secure against the threats of the online world, CSC can help.