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: -
Anthony
Layng
Email: alayng@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 |
