Recent Developments in Company Law

Development Land and Capital Gains

Tax Bringing up Baby: The Parental Leave Act, 1998

The Euro: How Will it Affect your Contracts?

The Freedom of Information Act, 1998

Making Sense of Symbolism: Copyright Protection and Trade Marks

A new Companies Act has been enacted, and important amendments to company law have been proposed this year.

Companies (Amendment) Act, 1999

This Act permits price stabilisation measures to be implemented in connection with new issues or offers of securities on the Irish Stock Exchange (intended, among other things, to facilitate such measures in the Telecom privatisation). It provides that measures adopted for the purpose of stabilising or maintaining the market price of securities will not contravene the insider dealing provisions of the Companies Act, 1990, as long as such measures conform with the new stabilisation rules.

Companies (Amendment) No 1 Bill, 1999

Under section 19 of the Companies Act, 1990, the Minister for Enterprise and Employment can in certain circumstances require a company to produce books and documents to an authorised officer. Section 21 of this Act prohibits any such records or information being published or disclosed except to a competent authority. The Companies (Amendment) No 1 Bill, 1999 adds a statutory tribunal of inquiry to this list of competent authorities.

Companies (Amendment) No 2 Bill, 1999 (as amended in committee)

This Bill provides for a modification of the examinership process permitting the court to appoint an examiner only if there is a reasonable prospect that the company concerned will survive. Removing the statutory audit requirement for certain private limited companies and partnerships. It contains provisions to tackle the perceived problems created by Irish-registered non-resident companies. Under section 42, a company shall not be formed and registered under the Companies Acts, 1963 to 1999 unless it appears to the Registrar of Companies that the company proposes to carry on an activity in the state. Under section 43, new companies will have to ensure that they have a company director who is resident in the state, while for existing companies a transitional period of 12 months is being allowed before such a requirement becomes mandatory. As an alternative, a company may provide a bond to the value of £20,000 as security for compliance with statutory requirements.

For further information please contact Emmet Scully.

'Development land' can be defined as land whose sale price or market value at the date of disposal exceeds its current use value. Current use value is calculated on the basis that no development can be carried out on the land in question (except for certain developments exempted in the Local Government Planning and Development Act, 1963).

Since 6 April 1992, the standard rate of capital gains tax on the disposal of development land is 40%, but the Finance (No 2) Act, 1998 introduced certain exceptions to the standard 40% CGT rate. A new 20% CGT rate applies to gains on disposals of development land where:

• The total consideration received by a person for the disposal of development land in a year of assessment does not exceed £15,000, or
• Where gains arise on disposal of land between 23 April 1998 and 5 April 2002 to a housing authority or in respect of which planning permission for residential development exists at the time of disposal. Residential development includes not only housing but also developments which are necessary for the proper planning and development of the area (for example, local shops and schools) and so are regarded as ancillary to the housing development.

Certain other points are worth noting about the 20% rate:

• The legislation does not require the land to be serviced
• The sale of land where the contract is conditional on planning permission for residential development being obtained can qualify for the 20% rate, and
• No distinction is made between outline permission and full permission.

Exceptions to the 20% rate:

• A gain on a disposal of development land in the period up to 5 April 2002 between connected parties will be liable at 40% ('connected' parties includes family members and companies under their control)
• If the contract for sale of land in the period up to 5 April 2002 is conditional on planning permission for any develop-ment other than residential development, the rate on the gain arising is 40%
• From 6 April 2002 onwards, the rate of tax on gains on disposals of land zoned for residential development will be 60%, whether or not planning permission exists. Small disposals will continue to be liable at the 20% rate, but gains on the disposal of all other development land will be taxed at 40%.

For further information please contact the Property Department.

Ever since the Parental Leave Act, 1998 came into effect on 3 December last year, parents have been entitled to take a period of unpaid leave from work in the early years of their child's life without their employment rights being affected.

'Parental leave' applies to anyone who is the natural or adoptive parent of a child born or adopted on or after 3 June 1996 and entitles such parents to 14 weeks unpaid leave to enable them to take care of the child. In order to be eligible for parental leave, employees must have completed one year's continuous service with their employer, and the leave must be taken by the time the child has reached five years of age.

Parental leave may consist of one continuous period of 14 weeks or various periods making up 14 weeks with the consent of the employer and the employee (or their respective representatives). Any employee proposing to take parental leave must give at least six weeks notice to their employer, specifying the date that the leave will start, its duration and the manner in which it is proposed to be taken. This must be confirmed in writing at least four weeks before the parental leave period begins.

For their part, employers can postpone granting parental leave if it would have adverse effects on the way they conduct their business, profession or occupation (for example, because of seasonal variations in the volume of work, the unavailability of people to carry our the employee's duties and so on). In these circumstances, the parental leave can be postponed for up to six months.

When the period of parental leave has ended, employees are entitled to return to the job they held immediately prior to taking the leave or, if that job was not their normal job, they are entitled to return to their normal job. Where it is not reasonably practicable for the employer to allow this, then the employee must be offered suitable alternative employment. Where this occurs, the terms and conditions of employment must not be substantially less favourable than those in the employees' current job contract.

The Parental Leave Act, 1998 also allows what is called 'force majeure leave', where employees are entitled to paid leave for urgent reasons if certain family members have fallen ill or suffered injury and where the employee's presence is urgently needed. Such force majeure leave cannot exceed three days in any 12-month period or five days in any 36-month period.

Where an employee takes force majeure leave, he must inform his employer of this as soon as reasonably possible. This notice must confirm the dates on which the force majeure leave was taken and contain a statement of the facts entitling the employee to take such leave. The form of notice to be given is set out in the Parental Leave (Notice of Force Majeure Leave) Regulations, 1998.

For further information please contact Emmet Scully.

The adoption of the euro as the unit of currency in Ireland has already begun to have an effect on companies, although actual euro notes and coins will not be in circulation until 1 January 2002. One of major questions facing Irish businesses is whether a contract which contains references to Irish punts will continue to be enforceable once this ceases to be the national currency. This issue is known as 'continuity of contract'.

The relevant piece of European legislation, Council Regulation (EC) No 1103/97 on certain provisions relating to the introduction of the euro, says that: 'The introduction of the euro shall not have the effect of altering any term of a legal instrument or of discharging or excusing performance under any legal instrument, nor give a party the right unilaterally to alter or terminate a legal instrument. This provision is subject to anything which the parties may have agreed'.

So far this seems clear enough: the mere fact that a contract refers to Irish punts can't be used as an excuse to get out of an existing contract. But what do we mean by 'This provision is subject to anything which the parties may have agreed'?.

The changeover has also been addressed by another piece of European legislation (Council Regulation (EC) No 974/98) on the introduction of the euro, which says that during the transition period from 1 January 1999 to 31 December 2001 legal instruments (such as contracts) may contain references to either euro or Irish punt amounts with no effect on the validity of the contract. After the transition period, amounts in legal instruments will be read as being references to the euro at the official conversion rates. In principle, then, the fact that a contract refers to Irish punts should not affect its validity.

After the euro comes into force, Irish punt amounts in contracts will be treated as if they referred to the equivalent euro amount. This, however, is subject to the freedom of the parties to agree otherwise and there is no requirement that specific reference must be made to the euro in a contract. It is therefore possible that widely drafted 'change of circumstance' clauses or 'force majeure' clauses may have an effect.

For contracts governed by laws of countries outside the EU and which do not have any equivalent legislation on this point, it may be necessary to fall back on various principles of international law, namely: a) that each country has control over what is to be its national unit of currency at the time; and b) that a debt in a particular currency of a country is an obligation to pay the debt in the legal tender of that country at the time of payment. It is likely, therefore, that legal systems outside the EU will accept the substitution of national currencies by the euro. But whether such legal systems will uphold the continuity of the contract or allow parties to vary or terminate the terms of the contract is uncertain and will clearly depend on the governing law of the contract.

In addition, there are certain practical aspects of contracts which will be altered by the changeover, such as references to DIBOR (Dublin Interbank Offered Rate) which was replaced from 1 January 1999 by EURIBOR (European Interbank Offered Rate). References to offered rates in new contracts should be to EURIBOR or some other rate that is unaffected by the changeover, although it is arguable whether the courts would interpret references to obsolete rates as being to the nearest comparable rate still in operation so as to favour continuity of the contract.

In relation to payment under a contract, after the transition period the Irish punt will no longer be the national unit of currency and therefore obligations must be discharged in euros. However, during the transition period, debts expressed in Irish punts or euros must be paid in the currency which is stated, unless the parties agree otherwise.

Force majeure

Although the courts have not yet had to consider the question, there may be some situations in which contracts expressed in Irish punts may not continue in force following the transition period. The most likely of these is where the parties to the contract have agreed that this should be the case. But contracts often contain clauses which say that in certain circumstances the contract will cease to have effect, such as in times of war or national disaster. Despite the fact that such clauses are sometimes widely drafted and need not refer to the euro as such, it is unlikely that they will be triggered by the transition to the euro as it is both foreseeable and it will usually still be possible to perform the contract, albeit in a different currency to that which was envisaged by the parties.

There is also the common-law principle of frustration, under which a contract will not be enforceable if it has become impossible to perform or if intervening events have radically altered the nature of the contract. It is at least arguable that some types of contracts - for example, those which were entered into to take advantage of differences in currency rates, such as cross-currency swaps and derivatives contracts - may be deemed unenforceable by the advent of the euro, although this has not yet been addressed by the courts.

The advent of the euro poses many questions, and it may well cause some confusion in the initial period. The checklist for contracts would be: a) to examine existing contracts to see if the obligations are likely to be upheld, and b) to ensure that references to currencies in new contracts are 'euro-friendly'.

For further information please contact Emmet Scully.

The long-awaited Freedom of Information Act finally came into force on 21 April last year. The Act has four main aims:

• To give people right of access to records held by public bodies
• To give people the right to amend misleading, incomplete or incorrect personal information held by a public body
• To allow for the publication of information about the workings of government departments
• To give people the right to require reasons as to why a particular administrative decision was made.

One of the most notable features of the Act is that it refers to 'records', so verbally-communicated information or information within the knowledge of particular individuals does not fall within its scope. In addition, not all records will become accessible under the Act. There are exemptions (provided for under section 19), and these include records relating to courts or tribunals (other than those of an administrative nature), government meetings, law enforcement and public safety, State security and commercially-sensitive information.

These exemptions do not prevent access to a record where it is in the public interest to grant access. This would occur in circumstances where that public interest outweighs the right to privacy of that individual to whom the information relates. What should prove interesting in the future is the right of access to commercially-sensitive information which is subject to the public-interest test (the decision on whether or not to grant access is made by the head of the public body concerned).

The Act is broad and should help to throw some light on areas which were previously shrouded in an atmosphere of secrecy. One area in particular which will undoubtedly become subject to more open scrutiny is government information, which, given recent events, should result in some interesting scenarios.

For further information please contact Emmet Scully.

The proper use of symbols such as ©, TM and ® is often misunderstood, partly because usually no explanation is given and partly because each has a specific legal meaning. This article is intended as a brief guide to making sense of these symbols.

Copyright protection

There is no legal requirement under Irish law for a work to have any specific identifying symbol for Irish copyright law to apply. However, nearly 100 countries (including larger nations such as Australia and the USA) have signed up to the Universal Copyright Convention, which provides that the use of the © symbol together with the name of the copyright owner and the year of first publication will give a work the protection of the law of copyright in that country - for example, © LK Shields, Solicitors, 1999. To ensure protection in these countries, especially in the era of international communication via the Internet, it is advisable to use this formula on any and all works which you want to protect. This will also indicate a claim to copyright which you are willing to protect.

Trade marks

There are two different types of symbol commonly used with trade marks, TM and ®, both of which imply a different status. The symbol TM does not denote any registration and is merely a way of notifying the public that a particular word is used as a trade mark and therefore may be protected by common law. It is also useful because it shows that the word or phrase is being used as a trade mark and not merely as a generic term.

Some countries, such as the USA, require registered trade marks to be used with designations such as the symbol ® in order for protection to be given. However, Irish registered trade marks do not need this and the only requirement for protection is that it be entered in the Register of Trade Marks. Indeed, it is an offence to indicate that a trade mark is registered or that the particular goods in question are protected by registration when this is not the case. But there is an exception in the legislation: namely, where the trade mark is registered in another country, this may not be an offence. Nevertheless, care should clearly be taken in using the symbol on goods sold in Ireland with a trade mark which is registered in another country but not in Ireland so that the use of the trade mark is not misleading.

In general, Irish law does not require the use of any of these symbols as a prerequisite for protection. In particular, the © symbol and the TM symbol are useful in that they notify the public that the work is regarded by the creator as worthy of protection and may be helpful in persuading a court in infringement proceedings that the infringer could not be said to have used the item concerned in innocence. It may also help to deter potential infringers.

For further information please contact Eoin Cunneen.