Please click here to print

New UCITS Product Directive and Management Directive

The Product Directive
The new UCITS Directive 2001/108 known as the "Product Directive" came into force on 13th of February 2002. The Product Directive amends the 1985 UCITS Directive and substantially extends the instruments in which a UCITS fund can invest. Member States must adopt the Product Directive by the 13th of August 2003 and apply it by the 13th of February 2004.

Formerly, UCITS funds were restricted to investing primarily in listed securities and the Product Directive extends this range to include liquid transferable securities, cash instruments, money market funds, fund of funds, index tracker funds and certain derivative instruments.

One of the most significant developments of the Product Directive is to permit a UCITS to be established as a fund of funds.

Previously, a UCITS fund was restricted to investing only 5% of its assets in other specified categories of funds. Under the Product Directive, it is now permissible for a UCITS fund to invest up to 100% of its assets in other funds subject to various restrictions and limits on investment. However, investments will be limited to other UCITS funds and funds (both EU and non-EU) which are subject to prudential supervision and a level of shareholder protection similar to a UCITS.

A UCITS which is established to invest primarily in other funds will be required to disclose the maximum management fees of funds in which it invests in the annual reports and will be precluded from charging subscription and redemption fees for investment in any funds which are commonly controlled or managed or linked by common control and management.

The Product Directive also permits UCITS to be established as index tracking funds and UCITS Funds can now invest up to 20% of its assets in any one issuer (and 35% in certain circumstances) where according to the fund's rules, the objective is to replicate the index and provided the index is appropriately recognised and published.

The Product Directive now permits UCITS funds to invest in derivative instruments as an outright investment objective and policy rather than solely for the purpose of efficient portfolio management and to protect against exchange rate risks. It sets down parameters for investment in derivatives and provides that a UCITS must establish a detailed risk management process.

The Product Directive now enables UCITS funds to invest in cash deposits and in money market instruments which are traded on a regulated market and those which are not.

Another significant provision is that a UCITS cannot set up a subsidiary in a non-EU Member State as an investment vehicle. This effectively means that subsidiary vehicles established in such jurisdictions as Mauritius and Cyprus will no longer be available to UCITS funds.

There are a number of important transitional features and grandfathering provisions associated with the introduction of the Product Directive and product specific advice should be sought.

The Management Directive
Directive 2001/107, known as the "Management Directive", deals with the role of management companies to UCITS Funds and the introduction of a simplified prospectus regime. Member States must adopt the Management Directive by the 13th of August 2003 and apply it by the 13th of February 2004.

Significantly, the Management Directive permits a management company of a UCITS Fund authorised in any Member State to provide services in another Member State through the establishment of a branch in that other Member State. This is subject to approval by the authorities of the home Member State and enables the management company to effectively "passport" services into other Member States. Member States will not be able to make the establishment of a branch or the provision of services subject to any authorization requirements or capital adequacy requirements.

The Management Directive also introduces new capital adequacy requirements for management companies and for UCITS investment companies who have not appointed a manager. In addition, investment companies will be subject to a formal code of conduct and to rules in relation to the delegation of investment activities.

The Management Directive also introduces provisions for a simplified prospectus and a UCITS must now produce both a full prospectus and a simplified prospectus. The simplified prospectus must contain key information which will be finalised in implementing legislation and it may be used as a marketing tool for use in all Member States without alteration other than translation.

A more detailed Article on the Product and Management Directive is available in the Library section of our website http://www.kilroys.ie/library/financial/product_directive.htm.

Contact Hilary Griffey at hgriffey@kilroys.ie
Or
Contact Jennifer Fox at jfox@kilroys.ie

© Kilroys Solicitors 2003
ComReg announces the timescale to implement Mobile Number Portability in Ireland

On the 10th of January 2003 ComReg published its Information Notice detailing the implementation timescale for the introduction of Mobile Number Portability in Ireland (Document No. (03/03) ). From the 25th July 2003, mobile phone users will be able to switch between the three existing national networks, keeping their mobile phone number including the prefix.

The Information Notice sets out the details of the two Directions which have been made under the European Communities (Interconnection in Telecommunications) Regulations 1998 (S.I.15/1998) ("the Interconnection Regulations").

Direction 1- Number Portability Implementation Date.

By the 25th of July 2003 all 2G mobile network operators must have completed a full commercial launch of Mobile Number Portability. All relevant conditions must be inserted to their interconnection agreements by this date.

Direction 2 - Reporting Requirements to ComReg
All 2G mobile network operators must submit a Mobile Number Portability project report to ComReg on the 1st of each month until their project is commercially launched.

Legislative Background
EU and Irish Law currently identifies the need of allowing mobile subscribers to avail of number portability to ensure that development in the mobile communications sector is sustained and competition within the sector encouraged.

ComReg has stated that the two Directions have been issued under the Interconnection Regulations in order to stimulate a competitive market in the telecommunications services sectors whilst ensuring a satisfactory level of service for mobile users in a manner that promotes and sustains efficiency and competition.

ComReg has said that its intervention "is designed to ensure effective competition in accordance with Regulation 10(1) and 10(5) and a failure to comply with any such direction is an offence under Regulation 10(3)".

The implementation timetable anticipates the obligations of EU Directive 2002/22/EC on Universal Service and User Rights. Article 30 of this Directive provides (inter alia) that member states shall ensure that mobile service users may request the retention of their number when moving to another service provider.

This Article also obliges national regulatory authorities to ensure that interconnection pricing for number portability is cost orientated and not set at a level that will act as a disincentive for the use of the facility and that retail tariffs for number porting may not be imposed in a way that would distort competition such as the setting of specific or common retail tariffs.

Annex 1 of the Information Notice sets out the existing industry agreements dealing with: routing responsibilities and rules, the porting process and the mobile number portability database.

For further information or general enquiries contact:-

Patrick Ryan
Email: pryan@kilroys.ie

© Kilroys Solicitors 2003
New Merger Notification Regime comes into force

The New Regime
The new Merger Notification regime provided for under Part 3 of the Competition Act, 2002 came into force on the 1st of January 2003.

Under this new regime the Irish Competition Authority now has the legal authority and competence to review mergers above specific turnover thresholds as and from the 1st of January 2003.

The Competition Authority has issued a notice under Section 18(1) of the Competition Act, 2002 to give guidance to both businesses and their legal advisors on the approach of the Competition Authority to the interpretation of certain terms used in connection with merger notifications to the Competition Authority.

Pre Notification Discussions

 In addition the Competition Authority has announced that parties to a merger (whether notifiable or otherwise) may request the Mergers Division of the Competition Authority to enter into Pre-Notification Discussions. The procedure is set out in the Competition Authority website, www.tca.ie.

For further information please contact:

Kevin O'Brien
E-mail: kobrien@kilroys.ie

 © Kilroys Solicitors 2003
Compliance and Enforcement - an update

Company directors and officers should be aware of the key provisions contained in the Company Law Enforcement Act, 2001, as well as the new obligations proposed by the Companies (Audit and Accountancy) (Amendment) Bill, 2002.

The focus of this most recent legislation and the clear message of the Office of Director of Corporate Enforcement ("ODCE") is that companies must be compliant with the relevant legislative provisions.

If company directors and officers are found to be in breach they risk facing enforcement proceedings.

Recent developments:
There has been significant increase in the number of companies listed for strike-off. The main reason is a failure to file annual returns. This brings with it an increase in the number of applications for the restriction/disqualification of company directors.

The bulk of Auditors Reports (Section 74 Reports) received by the ODEC deal with the failure to file annual returns. The remainder appear to relate to the failure to keep proper statutory books and breaches of the prohibition on loans to directors and connected persons.

The first of the reports by Liquidators of insolvent companies (Section 56 Reports) were due to be received by the ODCE on or before 30th November 2002. This will inevitably lead to an increase in the number of court applications to have company directors disqualified.

A new obligation to prepare a Directors Compliance Statement as envisaged in the Companies (Audit and Accountancy) (Amendment) Bill, 2002 will extend beyond the company's compliance with company law to include taxation law and other relevant statutory requirements.

The board will have to approve the Compliance Statement and it will have to be published in the Annual Report. In addition it is proposed that the company auditors will have to review the Compliance Statement and sign off on whether it is fair and reasonable.

Conclusion
The role of the ODCE in policing and enforcing compliance with the requirements of company law is having and will continue to have a profound impact on all Irish companies. The responsibilities of company directors and officers as well as auditors and liquidators will be rigorously scrutinised and enforced.

The scope of the duties of an auditor have been very significantly extended. An auditor has a mandatory duty to report suspected indictable offences once those offences come to the auditor's attention.

Where an accountant is acting as Liquidator, there are even more stringent obligations under Section 56 and the matter of applications for restriction orders.

This new regime is here to stay. Companies, both large and small need to identify gaps in their compliance obligations and should work with their professional advisors to ensure that they are compliant or that they are addressing those areas where they are non-compliant.

In the long run, compliance makes good business sense.

For more detailed information on the issues raised please visit the more detailed article on our website at:
http://www.kilroys.ie/library/corporate/company_law_enforcement_update.htm

or contact:

 Joanne Griffin
E-mail: jgriffin@kilroys.ie

© Kilroys Solicitors 2003
Staff recruitment - the pitfalls

Recruiting the best person for the job is vital to the success of any organisation but employers must be aware of the Employment Equality Act, 1998 which outlaws discrimination on 9 specific grounds.

The 9 specific grounds are:

  • Gender
  • Race
  • Marital or family status
  • Sexual orientation
  • Disability
  • Membership of the travelling community
  • Age
  • Religious belief

Employers should ensure that they have a good recruitment procedure to get the relationship right from the start and also to avoid possible litigation claims. Here are some things to bear in mind.

Application Forms

Forms should contain only relevant questions e.g:

  • General information (name, contact details)
  • Employment record
  • Qualifications
  • Skills
  • Referees
Seeking details of age, marital status, child minding arrangements and photographs may be deemed discriminatory.

Employers should also remember the obligations that arise to obtain and process personal information in accordance with the rule contained in the Data Protection legislation. See the article on dataprotection here.

Advertisements

Best practice suggests that any advertisement should have a statement to the effect that "this Company is an equal opportunities employer." However, it would be essential to ensure that the recruitment process reflects this.

Interviews

Employers need to decide before the interview the information that is required and how to measure a candidate's responses. Interviews should be ideally carried out by more than one person and there should be a gender balance on the panel. All candidates should be asked the same core questions which should relate specifically to the requirements of the job. If in doubt about asking a question think whether the information is directly related to the job? If not, don't ask it.

Preferably, make and retain notes in response to each question and be prepared to have the choice of final candidate challenged. Employers should pick not only the best candidate for the position but be able to demonstrate and justify that the person selected was the best, based on the information presented at the screening and interview process.

Pre-conditions to offering an employment contract
It is prudent for employers to make the appointment subject to a number of conditions being satisfied: -
  • References. Ensure that all questions asked of referees relate solely to the person's ability to do the job.
  • Medicals. These should be carried out by the Company's doctor at its expense. The doctor should be well briefed on the requirements of the job so that people with a disability are not discriminated against.
  • Qualifications. Ensure that these are correctly stated.
  • Restrictive Covenants. Check that the prospective employee is not bound to any restrictive covenants from their previous job e.g. in relation to non-compete obligations.
For further information or general enquiries please contact: -

Emma Callan
Email: ecallan@kilroys.ie

 © Kilroys Solicitors 2003
Forthcoming Seminars If you would like more information on
forthcoming seminars or would like to register click on the appropriate seminar below:
- Employment
- Company Compliance