Acquisition Finance

Governing law

Acquisition agreements: in private acquisitions, the acquisition agreement will typically be governed by Irish law where the target is an Irish incorporated company. In public acquisitions, the offer or scheme documents are governed by Irish statute and the Irish Takeover Panel Act 1997, Takeover Rules, 2013 (Takeover Rules).

Financing documents: the facilities agreement is usually based on the Loan Market Association’s (LMA) standard-form leveraged acquisition facilities agreement. Whether the facilities agreement is governed by the laws of Ireland, or the laws of England and Wales or another jurisdiction, will usually depend on the composition of the lender syndicate, although on occasion the laws of the jurisdiction of incorporation of the target company may be chosen instead. The governing law of the related intercreditor agreement usually mirrors that of the facilities agreement. The governing law of the security documents is usually determined by the location of the secured assets and the relevant obligor’s jurisdiction of incorporation.

In proceedings taken in Ireland for the enforcement of the transaction agreements, the Irish courts will generally recognise the law(s) chosen by the parties to govern those transaction agreements by having regard to the Rome I Regulation ((EC) No. 593/2008) with respect to matters falling within the scope of the Rome I Regulation.

The Rome II Regulation ((EC) No. 864/2007) has force of law in Ireland, so the Irish courts will generally apply the law(s) chosen by the parties to the transaction agreements to govern non-contractual obligations arising out of those agreements.

The Irish courts may, however, refuse to enforce foreign laws that could be considered repugnant to Irish public policy.

Submission to jurisdiction

Regarding the recognition of judgments:

• the Irish courts will generally uphold a submission to the jurisdiction of the courts of an EU member state in line with the recast Brussels Regulation ((EU) No. 1215/2012);
• subject to the provisions of the Lugano Convention (the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters signed at Lugano on 30 October 2007), the Irish courts will uphold the submission to the jurisdiction of the courts of Iceland, Norway and Switzerland unless an unconditional appearance has been entered in another jurisdiction; and
• where neither the recast Brussels Regulation nor the Lugano Convention apply (eg, US court judgments), the Irish courts will enforce the submission by the parties to the jurisdiction of the courts of another jurisdiction, and such a judgment will be enforced by the Irish courts, if the following general requirements are met:
• the foreign judgment is for a definite sum;
• the foreign court had jurisdiction in relation to the particular defendant according to Irish conflict of law rules; and
• the foreign judgment is final and conclusive and the decree is final and unalterable in the court which pronounced it.

Under article 4 of the Blocking Regulation (Council Regulation (EC) No. 2271/96), no judgment of a court or tribunal and no decision of an administrative authority located outside the EU giving effect, directly or indirectly, to the laws specified in the Annex to the Blocking Statute or to actions based thereon or resulting therefrom will be recognised or enforceable before the Irish courts.

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Acquisitions

There are no restrictions on foreign direct investment in Irish companies; nor are there any ownership percentage caps based on the jurisdiction of the owner.

Acquisitions of interests in Irish regulated financial services providers (RFSPs) may require notification to the Central Bank of Ireland (CBI).

In addition, an airline seeking to obtain or maintain an EU air operating licence must satisfy the EU rules on airline ownership and control, including that nationals of EU member states own more than 50 per cent of an EU airline.

Cross-border lending

Cross-border lending to non-natural persons does not of itself trigger a licensing requirement in Ireland.

Where a letter of credit is being issued and the beneficiary is Irish, the issuer would need to be either:

• an authorised insurance company for the purposes of the Solvency II Directive (Directive 2009/138/EC); or
• a licenced bank which:
• is authorised by a competent authority in an EU Member State (and that competent authority must have notified the CBI of the bank’s intention to carry on the business of issuing guarantees and letters of credit in Ireland); or
• holds an Irish banking licence.

If the Irish borrower is a micro, small or medium-sized enterprise (within the meaning of Commission Recommendation 2003/361/EC), then if a syndicate member that is an Irish RFSP, or a financial services provider authorised in another EEA Member State to provide credit in Ireland, transfers all or part of its commitment to an unregulated entity, that unregulated entity may require authorisation from the CBI as a credit servicing firm.

For other regulatory requirements that might arise, see question 11.

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Acquisition financing in Ireland generally involves both senior debt and subordinated debt. On occasion, mezzanine debt is provided and is a feature in private equity-funded transactions with Irish private operating companies, particularly in the growth capital space.

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The Takeover Rules require that an announcement of a firm intention to make an offer (the Rule 2.5 Announcement) can only be made where the offeror and its financial adviser are satisfied that the offeror is able and will continue to be able, at all relevant times, to implement the offer. Where the consideration for the offer is cash or includes an element of cash, the offeror’s financial adviser must deliver a ‘cash confirmation’, whereby it confirms in writing that sufficient resources are available to the offeror to satisfy full acceptance of any cash element of the offer. To give this, they must be satisfied that funding is, and will remain, available for the duration of the offer. If the offeror is not ultimately able to satisfy the cash requirements, the offeror’s financial adviser may be forced to provide the financing unless the financial adviser can prove that it acted responsibly in giving the confirmation (ie, it took reasonable steps to satisfy itself that the cash was available and would be available at all relevant times).

This means that, if the offeror’s existing cash resources are to be used, the offeror’s financial adviser will need to be satisfied that such resources will remain available for the necessary period. If the offeror is a private equity investor, the offeror’s financial adviser will need to be satisfied that the offeror has the ability to draw down on its investors’ commitments.

If financing is provided by way of a new bank facility, the new facility must be signed prior to announcement of the offer and must be prepared on a ‘certain funds’ basis. This means that, for the duration of the certain funds period, the majority of potential events of default in the facilities agreement are suspended, precluding the lender from preventing drawdown. There are some exceptions to this where the default is within the control of the offeror or is of such significance that the lender could not be expected to provide the facility.

The concept of transactions being financed on a certain funds basis has become increasingly popular in private M&A transactions in Ireland, where the buyer’s financing of the transaction is unconditional (save for any conditions to the closing of the acquisition itself) and the seller will not accept any form of financing condition to the completion of a transaction.

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While the facilities agreement will generally include a ‘purpose’ clause, setting out the purpose for which the facilities are being advanced, a provision is also included confirming that the finance parties have no obligation to monitor whether the proceeds are actually applied in that manner.

If an Irish corporate borrower on-lends the proceeds to a person connected with a director of the borrower, that on-lending will need to be approved by way of a summary approval procedure before it can take place (the summary approval procedure involves a directors’ declaration (including as to solvency on a 12-month look-forward basis) and shareholders’ resolution).

Further, if a loan is made to a company for the purpose of an acquisition of shares in that company, or in its in holding company, and the company provides security for that loan, the prohibition in the Companies Act 2014 (the Companies Act) on the provision of financial assistance will be breached unless the summary approval procedure is followed. See question 15 for further information on the summary approval procedure in the context of the prohibition on financial assistance.

A payment made under a transaction agreement to, by or in respect of, a person:

• listed on or owned or controlled by a person listed on a list maintained by a sanctions authority or a person acting on behalf of such a person;
• located in or organised under the laws of a country or territory that is, or whose government is, the subject of country-wide or territory-wide sanctions (or a person owned or controlled by, or acting on behalf of, such a person); or
• otherwise a subject of or target of sanctions

then performance of certain obligations to that party, or dealing with payments to and from that party, may be prohibited under sanctions law, with any breach of sanctions law also resulting in prosecution and penalties.

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See question 2 regarding cross-border lending into Ireland.

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In general, interest paid by a borrower incorporated in Ireland is subject to withholding tax at the standard rate of income tax (currently 20 per cent). Many withholding tax exemptions exist as a matter of Irish law, including in respect of interest paid:

• in Ireland on a loan from a bank carrying on a bona fide banking business in Ireland;
• by a bank in the ordinary course of a bona fide banking business carried on by it in Ireland;
• on commercial paper, certificates of deposit and certain listed bonds; or
• by a company where the beneficial owner of the interest is a company that is resident for tax purposes in an EU member state (other than Ireland), or in a country with which Ireland has entered into a double taxation agreement, where that country imposes a tax that generally applies to foreign source interest receivable in that country by companies. However, this exemption does not apply where the interest is paid to the recipient company in connection with a trade or business carried on in Ireland by it through a branch or agency.

Relief from withholding tax on Irish-source interest may also be available under the terms of a double taxation agreement entered into with Ireland and the jurisdiction in which the lender, as recipient of the interest, is resident for tax purposes.

If the borrower is required to make a withholding from any payment due to the lenders, the borrower is required to gross-up the amount actually paid by it to the lenders. The tax indemnity provisions would not usually cover taxes in respect of which the lenders have been grossed-up.

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In the context of commercial lending, when considering whether a default interest rate is an unenforceable penalty, the Irish courts continue, for the time being, to follow the test formulated in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79: does the default interest rate represent a genuine pre-estimate of the loss that the lender would suffer? In that regard, the approach of the Irish courts to default interest now differs from the UK position, which was reset by the UK Supreme Court in the case of Cavendish Square Holding BV v Tatal El Makdessi and ParkingEye Ltd v Beavis [2016] AC 1172 and which now involves an assessment of whether ‘the impugned [default interest rate] is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation’. The Irish courts have, in recent years, held that a default interest rate of 6 per cent was unenforceable as it was not a genuine pre-estimate of the loss that the lender would suffer, and would have effectively doubled the interest payable on the debt. More recently, a default interest rate of 4 per cent contained in a bank’s standard form terms and conditions was also held to be unenforceable on the basis that it did not represent a genuine pre-estimate of the expected loss to the bank on a default.

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Indemnities are commonly provided in respect of tax (save to the extent that there has been a gross-up), stamp duty, currency conversions, events of default, failures to pay and failures to prepay in accordance with prepayment notices.

Indemnities are also provided to both the facility agent (in respect of various matters, including the investigation of defaults and acting on instructions it believes to be correct) and the chargee or security trustee (in respect of the taking, holding and perfecting of the security package, and related matters).

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Yes, provided that there is no contractual restriction on assignment (the facilities agreement may restrict the type of entity to whom debt can be transferred). Often a consultation right is provided to the parent of the obligor group, or the parent is given a consent right if the proposed assignee is not on a pre-approved lender list agreed at the outset.

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Historically, most facility agents and security trustees in Irish syndicated acquisition finance structures were regulated entities such as banks, but there are now a number of other providers in the market who offer agency services.

The activity of acting as a facility agent may involve the provision of payment services under the European Union (Payment Services) Regulations 2018 where the facility agent and the service recipient (eg, a syndicate member) are in Ireland.

If the Irish borrower is a micro, small or medium-sized enterprise (within the meaning of Commission Recommendation 2003/361/EC), then where a syndicate member that is an Irish RFSP, or a financial services provider authorised in another EEA member state to provide credit in Ireland, transfers all or part of its commitment to an unregulated entity, that unregulated entity may require authorisation from the CBI as a credit servicing firm, and if any activities that fall within the definition of ‘credit servicing’ set out in the Central Bank Act 1997 are carried on by the agent, the agent may also require authorisation (unless it is already regulated).

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The borrower is generally restricted from participating in a debt buy-back. If the borrower is allowed to participate in a debt buy-back, this will usually be on the terms of the LMA’s debt purchase provisions, will take place at less than par, and will result in the relevant portion of the commitment being extinguished. To the extent that a sponsor or any of its affiliates beneficially owns a commitment, that sponsor or sponsor affiliate will be subject to disenfranchisement provisions under the facilities agreement.

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The facilities agreement may contractually permit this. However, while exit consents have not been considered in detail by the Irish courts, care should be taken to ensure that the operation of an exit consent provision could not be seen to be coercive of the minority lenders, in light of the decision in Assenagon Asset Management SA v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090, where such coercion was found to exist and it was held to be unlawful for the majority bondholders to have assisted in the coercion of the minority. While that judgment was of the High Court of England and Wales, it would be of persuasive authority before the Irish courts should the courts be presented with a similar fact pattern.

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There are no specific costs or taxes associated with the provision of related company guarantees (or of guarantees generally).

Regarding restrictions generally, the following should be noted.

Financial assistance

See question 15 regarding the prohibition on the provision of financial assistance (including by way of guarantee) for the purpose of an acquisition, and the related summary approval (validation) procedure.

Transactions with directors

Under section 239 of the Companies Act, there is a restriction on a company’s ability to guarantee the liabilities of, among others, a person connected with one of its directors. The definition of ‘connected person’ is very broad, and includes another company controlled by that director. As such, the prohibition in section 239 should always be considered when a related party guarantee is being provided. A validation procedure, known as a ‘summary approval procedure’, is available.

Corporate benefit

The directors of a company must also be satisfied as to the commercial benefit in providing a guarantee, notwithstanding that the impact of the doctrine of ultra vires has been considerably reduced by the Companies Act. There is, however, Irish case law to support the view that there is benefit in a group company providing a guarantee of the obligations of other companies in its group.

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Subject to certain exceptions, under section 82 of the Companies Act, it is not lawful for a company to give direct or indirect financial assistance (whether by way of a guarantee, security, loan or otherwise) for the purpose of an acquisition of shares in that company, or in its holding company.

A summary approval procedure (a form of ‘whitewash’ procedure) can be carried out to validate the provision of financial assistance, but this can only be availed of by certain types of company. A private company that is a subsidiary of a public limited company cannot avail itself of the summary approval procedure, and neither can a public limited company. The procedure involves the making of a directors’ declaration (including as to solvency on a 12-month look-forward basis), and the approval by the company’s shareholders of the financial assistance by way of special resolution, in each case before the financial assistance is provided.

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An Irish corporate obligor will typically grant an all-assets debenture. Where the Irish obligor owns assets outside of Ireland, local law security is generally also taken. Where security is being taken from an Irish individual, that is granted on an asset-specific basis. Both fixed and floating security can be taken from an Irish corporate obligor, but an individual cannot grant floating security. The types of security interest granted (most usually under an all-assets debenture) are set out below.

When taking security over real estate, this can only be done by way of charge by deed, and it is not possible to create a legal charge over future-acquired real estate in Ireland. Future-acquired real estate should be the subject of a separate charge by deed when it is acquired.

When taking security over shares, the most common approach is to take an equitable charge, under which the chargor remains the registered shareholder but must deliver its original share certificates, together with signed but undated share transfer forms (with the name of the transferee left blank for use on enforcement), to the chargee or security trustee. It is also possible (but quite rare) for a legal mortgage to be taken under which title to the shares is transferred to the chargee or security trustee (and reassigned to the chargor once the secured liabilities have been repaid).

When taking security over bank accounts, consideration should be given as to whether fixed security (precluding the chargor from dealing with the account) should be taken, or whether floating security is to be taken (whereby the chargor is permitted to deal with the account). See question 34 regarding how fixed and floating security-holders rank on insolvency. Where the bank account is held with the chargee or security trustee, security is generally taken by way of charge. In other cases, it is usually taken by way of assignment.

Security over contract rights is taken by way of security assignment. Where the chargor does not relinquish control over the proceeds of receivables, the security will be fixed rather than floating in nature. Notice of the assignment should be given to the relevant debtors (to ensure that a legal, rather than an equitable, assignment is created).

Security over most forms of intellectual property is granted by way of charge. There are specific security regimes for taking security over agricultural stock (under the Agricultural Credit Act 1978) and over ships (under the Mercantile Marine Act 1955).

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Companies Registration Office and CBI

If security is created by an Irish company, a Form C1 (or a Form C1a and Form C1b) must be filed with the Irish Companies Registration Office (CRO) within 21 days (priority runs from the time of filing). There is a similar filing requirement with the CBI where the chargor is an Irish Collective Asset-management Vehicle. Where the chargor is a foreign company with a branch in Ireland, and the charged assets are located in Ireland, a CRO filing is also required (Form F8, or Form F8a and F8b). There are exemptions: security over cash, accounts with financial institutions, shares, bonds, other debt instruments, units in collective investment undertakings, money market instruments and (in the case of each of the foregoing other than cash) claims and rights in respect thereof, are exempt from the CRO and CBI filing requirements.

Property Registration Authority

Security over Irish real estate must be registered with the Irish Property Registration Authority (PRA) (the Land Registry section in the case of registered land, and the Registry of Deeds in the case of unregistered land).

Revenue Commissioners

Where the security includes a fixed charge over book debts, a notice under section 1001 of the Taxes Consolidation Act 1997 (TCA 1997) should be served on the Irish Revenue Commissioners (Revenue) within 21 days to avoid the chargee or security trustee being held liable for any arrears of VAT (value added tax), PAYE (pay as you earn), LPT (local property tax) and PRSI (pay-related social insurance) that the chargor may have at that date.

High Court

Where security is taken over shares in an Irish company, an affidavit is sometimes lodged with the Irish High Court, and a related ‘stop notice’ served on the secretary of the company whose shares have been charged, asking to be notified if the chargor purports to deal with the charged shares. Separately, where a fixed charge has been created by an individual or group of individuals over assets such as ships, aircraft, machinery and stock-in-trade, the bill of sale and the accompanying attestation affidavit must also be registered in the High Court Central Office as a personal chattel in accordance with the Bills of Sale Acts 1879 and 1883 within seven days.

Constitutional documents

Where security is taken over shares, it would be usual for the chargee or security trustee to request changes to the constitutional documents of the company whose shares are being charged to remove the directors’ right to veto a transfer of shares.

Notices of assignment

Notice of the security assignment should be given to the relevant debtors (to ensure that a legal, rather than an equitable, assignment is created) and those debtors should be instructed to pay all amounts to a designated account controlled by the chargee or security trustee.

Intellectual property registries

Where security is taken over intellectual property, the security must be registered against each trademark and patent in the registry in which it is registered, which may include the Irish Patents Office (IPO) and the European Union Intellectual Property Office (EUIPO). Security can also be registered over designs in both the IPO and the EUIPO.

Registrar for Shipping

Where security is taken over a ship, the statutory ship mortgage must be registered with the Registrar for Shipping. Failure to do so will not invalidate the mortgage, but an unregistered ship mortgage will rank behind any subsequent registered ship mortgages. There is no time frame stipulated for such registration; however, as the Registrar of Shipping registers statutory ship mortgages on a priority basis (ie, priority is determined by date of registration), registration should be attended to promptly.

Aircraft

Ireland has ratified the Cape Town Convention. If the chargor is an authorised user of the International (Cape Town) Registry (located in Dublin) the Cape Town Security Agreement can be registered. Priority is determined by date of registration.

Circuit Court

Where security is granted over agricultural machinery or agricultural stock by a company or by an individual, the specific chattel mortgage and the floating chattel mortgage, if capable of being registered, must be registered within one month of creation with the Circuit Court in each district where the chargor’s land, on which the chattels are situated, is located in accordance with the requirements of the Agricultural Credit Act 1978 (ability to register depends on whether or not the mortgagee is a ‘recognised lender’ under that Act). Until registration is made, the security is not effective.

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Once a charge is granted and any registration requirements are complied with, there are no ongoing requirements that need to be complied with to ensure that the charge remains valid and registered.

As mentioned in question 20, it is usual for the security package to be granted to a security trustee for the benefit of all of the lenders. Where the identity of the chargee or security trustee changes, filings will be need to update the relevant registries (including the CRO and the PRA) in which the security was registered. Where the security is held by a security trustee, changes to the underlying lender syndicate do not trigger a registration requirement.

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No. The provision of a guarantee or security by an Irish obligor should be approved by the obligor’s board of directors. A shareholders’ resolution is not usually required, unless the summary approval procedure is being availed of where the provision of the guarantee or security could otherwise breach the prohibition on financial assistance, or the prohibition on giving guarantees or security in respect of the liabilities of a person connected with a director of the obligor (those prohibitions are under section 82 and section 239, respectively, of the Companies Act).

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Security is generally granted to a security trustee for the benefit of all of the lenders. This means that, on a transfer or assignment where the identity of the security trustee is not changing, the security does not need to be amended. Where the security has been registered, and the identity of the security trustee changes, there is a requirement to make a filing with the relevant registries to reflect the identity of the new security trustee.

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In practice, a deed of release is provided by the chargee or security trustee confirming that collateral can be released. This would usually happen on repayment in full of the secured liabilities, or on a permitted disposal of a charged asset. A potential purchaser of such an asset would usually require sight of the executed deed of release before it will complete the purchase.

Where a deed of release is provided in respect of security that has been registered, a filing will also be needed to reflect the fact that the security has been released. In respect of security registered in the CRO, there is an additional layer of protection for the chargee or security trustee - the form to be filed on a release may be signed by either the chargor or the chargee or security trustee, but where it is signed by the chargor only, the CRO will write to the address listed for the chargee or security trustee where the security was registered to check that the chargee or security trustee has no objection to the charge being released, and will give the chargee or security trustee 21 days to respond.

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The Companies Act contains a number of rules addressing issues such as unfair preference and fraudulent transfers.

Improper transfers

Under section 608 of the Companies Act, the Irish High Court may order any person who appears to have ‘use, control or possession’ of the property (or the proceeds of sale of that property) of a company that is being wound-up, where the property was disposed of (including by way of security) and the effect of that disposal was to ‘perpetrate a fraud’ on the company, its creditors, or its shareholders, to deliver that property to a liquidator, creditor or contributory of the company, or to pay a sum to the liquidator in respect of that property.

Void dispositions

Under section 602 of the Companies Act, where a company is being wound up, a disposal of the company’s property after the winding-up process has started without the liquidator’s consent will be void unless the High Court orders otherwise.

Unfair preference

Under section 604 of the Companies Act, any one of a variety of steps (including the making of a payment, or the granting of security) made by a company that is unable to pay its debts as they fall due in favour of one of its creditors, with a view to giving that creditor a preference over the company’s other creditors, will be deemed to be an unfair preference and invalid if a winding-up of the company begins within six months (where the creditor is a ‘connected person’, that six-month period is extended to two years).

Disclaimer of unprofitable contracts

Under section 615 of the Companies Act, a company’s liquidator could attempt to disclaim a contract that it views as onerous and unprofitable. However, this is very unlikely to impact an acquisition finance arrangement, as the mere fact that the company’s asset position would be better off if it did not have to repay the debt would not be sufficient justification for a disclaimer - there would need to be unduly onerous or burdensome obligations associated with the contract.

Invalid floating charges

Under section 597 of the Companies Act, a floating charge created by a company will be invalid if it is created within the 12 months prior to the beginning of the winding-up of the company, unless it is demonstrated that the company was solvent immediately after it granted the charge. The 12-month period is extended to two years if the floating charge is created in favour of a ‘connected person’. This provision underlies the importance of obtaining representations as to solvency from obligors in an acquisition financing.

Case law

There is also case law (Re Frederick Inns Ltd [1991] ILRM 582 (High Court) 1 ILRM 387 (Supreme Court)) to the effect that where the directors of an insolvent company are aware of its insolvency, they hold the company’s assets in trust for the benefit of the company’s creditors. As such, it is possible that the actions of those directors (such as taking steps to dispose of the company’s assets) could be held not to have been lawfully and effectively done if carried out in disregard of the rights and interests of the company’s general creditors.

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The facilities agreement and intercreditor agreement in an Irish acquisition financing are usually based on the LMA standard forms.

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Lenders are not generally party to acquisition agreements in Ireland. Commitment letters usually provide for fully underwritten debt.

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Typical conditions precedent include the provision of:

• corporate authorisations (ie, board minutes and, where the summary approval procedure is being availed of (see question 15), shareholder resolutions);
• signed acquisition-related documentation;
• signed facility, intercreditor, and credit support documentation;
• legal opinions;
• group structure charts;
• reports;
• financial statements; and
• details of insurances.

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Flex provisions are not a key feature of acquisition finance in Ireland, but to the extent that they are included, they tend to be pricing-specific.

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Securities demands are not currently a key feature of acquisition finance in Ireland.

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Acquisition of a public listed company

Lenders will want to review the Rule 2.5 Announcement and the offer document or scheme circular to ensure that it is consistent with the terms and conditions set out in the Rule 2.5 Announcement. The underlying facilities agreement will impose restrictions on the terms and conduct of the offer or scheme.

Acquisition of a private company

Lenders will typically review the acquisition agreement to ensure that it has been reasonably negotiated in terms of warranty cover and the cap on liability. Lenders may also require that the seller warranties be repeated at completion as a condition of financing. Lenders will usually expect that, for the duration of the term of the facility, the buyer will have the ability to charge or assign the benefit of any part of or any of its rights under the acquisition agreement to the lender by way of security for the facility provided to finance the acquisition. The buyer may also be required to give warranties to the lender as to the effectiveness of this assignment. Lenders will usually insist that they be consulted before any condition to completion in the acquisition agreement is waived.

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Neither the term sheet nor the acquisition agreement relating to the acquisition of a private company are publicly filed. Where the target is an Irish company, a filing in respect of any changes to the board or the company secretary of the target company will be made in the CRO. In addition, changes to the shareholding of the target will appear in the target’s next annual return filed in the CRO and, to the extent that the target, buyer or seller file their financial statements with the CRO, details of the acquisition may be included in these financial statements. Information filed in the CRO is publicly available.

In relation to the acquisition of a public company to which the Takeover Rules apply, the Rule 2.5 Announcement will contain information on how the deal is to be financed, whether by way of external financing or by using the offeror’s own cash resources.

In addition, the Takeover Rules require that the offer document or scheme circular circulated to shareholders in connection with the proposed takeover contain: a description of how the offer is to be financed and the source of the finance; the names of the principal lenders or arrangers of such finance; and, if the offeror intends that the payment of interest on, repayment of or security for, any liability (contingent or otherwise) will depend to any significant extent on the business of the offeree, a description of the arrangements contemplated or, if that is not the case, a negative statement to this effect.

All documents or information relating to the offer sent to shareholders and all announcements made during an offer period must be published on a website as soon as possible and in any event by no later than 12 pm on the day following their publication or despatch to shareholders and must remain there during the course of the offer and must be sent to the Irish Takeover Panel (the body responsible for enforcing the Takeover Rules) and to the advisers to all other principals concerned with the offer or any competing offer. To the extent that a prospectus is required, once approved, it will be published on the CBI’s website and an advertisement of its publication must be placed in a newspaper circulating in Ireland.

If the offeror intends that the payment of interest on, repayment of or security for, any liability (contingent or otherwise) will depend to any significant extent on the business of the offeree and has therefore included a description of the arrangements in the offer document or scheme circular, the offeror must ensure that documents relating to the financing arrangements for the offer are made available for inspection and published on its website from the publication of the offer document or scheme circular until the end of the course of the offer. The Irish Takeover Panel may consider permitting the offeror to redact certain information in the financing documents if the information is commercially sensitive and the redaction would not render the document unintelligible; however, in practice, redaction is rarely permitted.

Where the target, buyer or seller company has a foreign listing, for example, on the NYSE or the NASDAQ, a copy of the transaction agreement may have to be publicly filed in order to comply with filing requirements in the jurisdiction of its listing.

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The Land and Conveyancing Law Reform Act 2009 (the 2009 Act) sets out procedures for the enforcement of security (whether the chargee or security trustee enforces as mortgagee in possession, or wishes to appoint a receiver). The provisions of the 2009 Act are mandatory when dealing with a ‘housing loan mortgage’, but can be contracted out of in the relevant security documents in commercial transactions, and this would be the case with Irish law governed security packages in acquisition finance transactions.

The circumstances in which collateral can be enforced against are, as a result, documented contractually between the parties. The relevant security documents (under which security is granted in favour of a security trustee in a syndicated transaction, and otherwise in favour of the lender as chargee) will set out when the security will become enforceable. Usually this is by reference to the events of default listed in the facilities agreement. Once an event occurs entitling enforcement action to be taken, the chargee or security trustee will either take possession of the property as ‘mortgagee in possession’ (this would be very unusual with commercial security) or appoint a receiver to manage the charged assets with a view to realising sufficient proceeds to discharge the loan. The receiver’s powers are set out in the security document, and the Companies Act also contains a further list of receiver powers. It is important to ensure that the relevant security document gives the receiver the power to take possession, manage and sell the secured property.

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Ireland has an examinership regime, which is a court moratorium and protection procedure introduced in 1990 with the aim of enabling a company in serious financial difficulties, but with a reasonable prospect of survival, to agree a solution with its creditors, shareholders and employees that will enable it to return to a financially sound footing.

Examinership tends to be availed of by active trading companies. A petition to place a company in examinership can be presented to the Irish High Court by the company, by its directors, by a creditor or by shareholders holding at least 10 per cent of the paid-up voting share capital of the company.

The company then enters a court-protection period of 70 days (which can be extended by 30 days), and an examiner is appointed to formulate proposals for a compromise or scheme of arrangement in relation to the company. A scheme of arrangement often involves the writing down of creditors’ claims and the introduction of new funds. Meetings must be held by the examiner with the company’s members and creditors, and a majority must approve the proposals before the scheme is referred back to the High Court for approval.

The rights of secured creditors are, for the most part, suspended during the protection period, and enforcement action cannot be taken without the examiner’s consent. Payments in respect of pre-existing liabilities are also put on hold. The examiner may dispose of assets and borrow monies. Those monies will rank ahead of any floating charge, but will rank behind any fixed charge. The examiner may also take steps that the company would otherwise, under a negative pledge, have been prevented from taking. The examiner is entitled to dispose of secured property - the holder of a floating charge from the company will have the same rights in respect of the proceeds as it had in respect of the charged asset. Where the sold property was subject to a fixed charge, the proceeds of sale must be applied towards the debt owing to the holder of the fixed charge.

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Where the company is under Court protection as part of an examinership process (see question 31), there is a general 70-100 day moratorium period.

In an insolvency, once a liquidator is appointed to the company, the powers of the company’s directors cease (subject to very limited exceptions), and the liquidator will gather in the company’s assets, realise those assets and distribute them in accordance with the ranking of the company’s creditors on insolvency (see question 34 in relation to that ranking).

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See question 22.

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On an insolvency, the liquidator appointed to the company is under a statutory duty to collect and gather in the company’s assets, realise those assets and distribute them in accordance with the ranking of creditors listed below. Assets that are subject to fixed security in favour of a creditor of the company are not available to the liquidator for distribution. Instead, the company’s financial position in the lead up to the liquidator’s appointment is likely to have triggered one or more events of default under the facilities agreement, entitling the lender(s) to accelerate. In such circumstances, the security trustee (acting on behalf of the syndicate of lenders) or, where there is no syndicate, the lender itself as chargee, will appoint a receiver to realise the secured assets. See question 30 for further detail on the appointment of a receiver. Also excluded from the pool of assets available to the liquidator for distribution are monies that must be set off, provided that there is mutuality of debits and credits as between the company and the relevant creditor.

Regarding the priority of other creditors, the ranking on insolvency is as follows:

• costs, charges and expenses incurred in the winding-up of the company, including the liquidator’s remuneration;
• preferential creditors (including the Revenue for certain taxes, local authorities for certain rates and employees of the company in respect of certain amounts owing to them);
• holders of floating charges;
• unsecured creditors; and
• members and contributories of the company.

The Revenue also has an effective priority under section 571 of the TCA 1997 for certain capital gains tax or corporation tax that may arise on the disposal of an asset by a chargee or security trustee on enforcement, or by a liquidator or a receiver on behalf of that chargee or security trustee.

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Yes. Section 618(2) of the Companies Act provides that recognition will be given to intercreditor and subordination agreements between a company’s creditors which agree a different priority of distributions on insolvency (as between themselves) to those set out in the Companies Act.

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In Irish insolvency proceedings, a creditor cannot claim for interest that has not formally accrued, or where the interest payment obligation has not matured.

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A secured creditor will enforce security held by it in one of two ways (assuming that it holds more than simply security over account balances in respect of which a contractual right of set-off exists). The secured creditor will either take possession (implied, rather than necessarily physical) of the assets or dispose of them and apply the proceeds in discharge of the secured debt. More commonly, the secured creditor will appoint a receiver to the secured assets. As a matter of Irish law, that receiver will be the agent of the chargor, and not the agent of the secured creditor. As such, any liability arising out of the action or inaction of the receiver is a matter for the chargor, not the secured creditor.

However, while a secured creditor will disclaim (in the security documents) any liability arising out of actions or omissions on its part if it becomes mortgagee in possession, there are certain matters in respect of which it will be affixed with liability, notwithstanding any provision of the security document to the contrary, if it proceeds as mortgagee in possession rather than appointing a receiver. As mortgagee in possession, the secured creditor would be required to account strictly to the chargor (ie, the secured creditor must account for any rents or profits derived from the secured assets, and also for any profits that it could have made if it had managed the property diligently). As mortgagee in possession, it would also be liable for the physical condition of the property, would be obliged to take reasonable care of the property and would have potential liability for any environmental damage occurring during the period for which it is mortgagee in possession.

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Current developments

The impact that Brexit will have on acquisition finance will depend on the terms of the final agreement reached between the EU and UK setting out the terms of the UK’s withdrawal. At the time of writing, the manner in which the UK will exit the EU (ie, whether there will be a no-deal Brexit, or whether the terms of the draft withdrawal agreement can be finalised) is unclear. The manner in which judgments will be recognised as between the UK and the remaining 27 EU member states will change, as the recast Brussels Regulation will cease to apply to the UK.

Trends

A trend that has emerged since 2017 is alternative lenders entering the market. Credit availability is shifting away from solely traditional lenders to a mixture of banks, mezzanine lenders and non-bank lenders. Non-bank lenders are typically investors and institutions that are willing to lend, and can include private equity firms, hedge funds, pension funds and insurance companies. Interest rates on non-bank lending are typically higher than those for traditional bank loans and the debt provided may be stapled to an equity warrant granting the lender a potential future equity participation if certain conditions are met.

In private M&A deals, acquisitions are generally financed through the buyer’s available cash or external bank debt or borrowing. The lender will provide a facility letter to the buyer with details of the loan that may be disclosed to the seller. Acquisitions, particularly by special-purpose vehicles, can also be financed or part-financed by equity capital - for example, from a private equity fund - and equity commitment letters will form part of the suite of legal documentation.

Private equity transactions are usually structured with a combination of debt and equity. Debt tends to be funded by a number of different banks to minimise risk exposure. Irish private equity funds also typically raise funds from financial institutions, pension funds, government agencies, quasi-state bodies, overseas development funds with a particular geopolitical interest in Ireland, corporate investors and private high-net-worth individuals. Foreign sponsors and government-funded private equity funds have played an increasingly important role in Irish private equity transactions, as funding from financial institutions (and in particular Irish financial institutions) decreased dramatically as a result of the financial crisis and such funding has only recently begun to recover towards previous levels.

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