, ,

The Employment (Miscellaneous Provisions) Bill 2017 – Far Reaching Implications for Employers

The Employment (Miscellaneous Provisions) Bill 2017 (“the Bill”) which is now at committee stage is expected to be enacted later this year. The Bill if enacted will have wide ranging effects for employers, in particular regarding “low hour” or “zero-hour” contracts. Below, we discuss a number of the more topical aspects of the Bill which we expect to be of concern to employers:-

  1. Terms of employment

If enacted, it will be a requirement for employers to provide employees with a written statement within five days of commencement of employment confirming the following:-

  • The full names of the employer and employee;
  • The address of the employer;
  • The duration of the contract;
  • The method of calculating remuneration;
  • The hours the employee is to be expected to work per week.

From a practical point of view and in an effort to avoid the sanctions under the Bill, it is advisable that employers should include the foregoing information in any offer letter being issued to a new employee. A contract of employment can then be issued inside the 8-week period as provided for in the Terms of Employment (Information) Act 1994.

In the Bill’s current format, where an employer is convicted for failure to comply with the foregoing, they may be liable on summary conviction to a Class A  (ie up to €5,000) fine and or a term of imprisonment not exceeding 12 months.

  1. Banded hours of work

In circumstances where the average hours an employee is working per week is greater than the contracted hours then in such circumstances, the employee on request is entitled to move to a higher band of hours. The reference period to be taken into account is proposed to be 12 months and the bands are as follows:-

Band                                                 From                                   

A                                                          3 to 6 hours

B                                                          6 to11 hours

C                                                          11 to 16 hours

D                                                         16 to 21 hours

E                                                          21 to 26 hours

F                                                          26 to 31 hours

G                                                         31 to 36 hours

H                                                         36 hours plus.


The above is of concern to employers and is expected to have a detrimental effect on businesses. In reality, it is widely expected that this new provision will force employers to close during quieter periods so as to avoid employees gaining rights under this provision. The concern is that if employees gain the right to move up in the bands then the employer may not be in a financial position to meet the increased wages over the longer term. The Bill is silent on the reduction of hours when the hours are not available at a later date.

  1. Employers to offer hours to part time staff

The Employment (Miscellaneous Provisions) Bill 2017 imposes an obligation on employers to offer additional hours that may become available to existing part-time staff. The provision in its current format essentially prevents an employer from offering such additional work to full-time individuals. This measure clearly has an overly burdensome effect on how an employer can run their business. The provision is wide and fails to address issues such as skills and training and puts unreasonable expectation on employers to provide such additional hours to staff that simply may not be trained or qualified to carry out such work. Furthermore, it is likely that the provision will have a serious impact on custom and practice within organisations. For example, in situations where it is customary that overtime is regularly worked by full-time staff, it will not be within the gift of an employer to allow full-time staff to continue in this form. It will be set out in legislation that any such available hours will have to be provided to part-time workers where there are part-time workers employed.

  1. Prohibition on zero-hour contracts

The Employment (Miscellaneous Provisions) Bill 2017 imposes a strict prohibition on zero-hour contracts. If passed zero-hour contracts will only be allowed in circumstances which are genuinely casual in nature and in emergency cover situations. Again, the restriction is overly restrictive and may well result in employers not being able to fill casual or part-time roles for fear of falling foul of the proposed legislation.

  1. Conclusion

It is clear from the foregoing that if passed the Employment (Miscellaneous Provisions) Bill 2017 will have far-reaching implications for employers. Given the overly onerous provisions in the Bill, it is regrettable that there does not appear to have been prior consultation with employers. In the circumstances, you may consider it appropriate to raise the issue with your elected representatives.

If you would like further information in relation to the above please contact Brian Kirwan at brian@amoryssolicitors.com, or telephone: 01 213 59 40 or your usual contact at Amorys.

Dated this 09th July 2018

Brian Kirwan
Amorys Solicitors, Suite 10, The Mall,
Beacon Court, Sandyford Business Park, Dublin 18,
Tel: 01 213 59 40, Email: brian@amoryssolicitors.com
Website: www.amoryssolicitors.com



Any valuer in the corporate finance area will tell you that valuing a shareholding in a private limited company is not an exact science.

Frequently, no market exists for the purchase of shareholdings in a private limited company save amongst existing shareholders.  In particular, most well-drafted shareholders agreements will require a shareholder to offer his/her shares to their co-shareholders for sale as the first step.   In such circumstances, the remaining shareholders will very often have a good idea what the shares are worth as they may be involved in the day to day running of the business and/or be familiar with valuations of businesses in the relevant industry/sector. Notwithstanding the foregoing, a valuation of a shareholding in a private company would be required for advisory and taxation purposes in such situations.

There is wide scope for significant variations in values when seeking a formal valuation and the first question a valuer usually asks is what the purpose of the valuation?  The objective and for whom the valuer is acting will determine whether s/he seeks to minimise or maximise the valuation and usually in the knowledge that it is the first stage in a negotiation.

A very brief overview of the four most commonly used methods when valuing shares in a small to medium company is set out below.

Selling Your Company How To Value Your Shares

Terms and Conditions of Business – One size does NOT fit all! (Infographic)

Terms and conditions of Business (“T&C’s”) whether they apply to the provision of goods or services, are essential for all businesses.  Too frequently, a business’s T&C’s do not accurately reflect how a business is carried on.  If a dispute arises between a business and its customer, uncertainty of any aspect of the T&C’s can disrupt a business and could lead to time consuming and costly litigation. In addition, it is important for business owners to note that uncertainty of any term or condition could be interpreted against it on the basis of the the “contra proferentum” rule in law leaving any business “on the back foot” should litigation arise.

Save the cost and time of dealing with avoidable disputes by ensuring your business’s T&C’s are a true reflection of how business is carried on “on the ground” and that they comply with current case-law and legislation.

Below are 4 important questions to ask yourself when reviewing your business’s T&C’s to ensure both you and your customer are “on the same page” when engaging your business:

Terms and Conditions of Business – One size does NOT fit all!


Ireland remains one of the most welcoming places in the world for international business and foreign direct investment and is a great place to invest, do business, work, and live. Below are our ten top points of information that any enterprise or investor looking to relocate or do business here should know.DOING BUSINESS IN IRELAND

10 Legal Tips for Start-up Businesses

  1. Make the deal between your co-founders clear from the outset.
  • Who gets what percentage of the equity/ shareholding of the company?
  • Is the percentage ownership subject to vesting based on continued participation in the business?
  • What are the roles and responsibilities of each founder?
  • If one founder leaves, does the company or the other founder have the right to buy back that founder’s shares? If so, at what price?
  • How much time commitment to the business is expected of each founder?
  • What salaries (if any) are the founders entitled to?
  1. Decide on the legal form (i.e. a company, a partnership or individual trader) that best suits your business at an early stage.
  1. Have a standard terms of business contract in favour of your company when you are dealing with your customers.
  • The key is to start with your form of contract.
  • Get sample contracts of what other people do in the industry.
  • There is no need to re-invent a contract.
  • Try and minimise or negate any representations and warranties about the product or service.
  • Include a clause on how disputes will be resolved.
  1. Carefully consider intellectual property protection. Is your business entitled to apply for trademark protection of its brand?  Is your product protected by the unregistered design right?  Is it proposed to register your design?  Would your product qualify for patent protection?  All of the foregoing questions should be considered prior to commencing to trade. Confidentiality in relation to your business and trade secrets is extremely important so think this through.
  1. Brand your company in a way that does not potentially infringe the intellectual property rights of other traders in your industry. Defending proceedings alleging your company is in breach of another company’s intellectual property rights is expensive and a decision may be made to re-brand at an early stage to avoid such litigation which can be expensive.  Tips:
    • Search Google for the name of your business and company name to see what other companies are using your name
    • Search in the Patent Office of Ireland and Trademark Office
    • Ensure your company’s name is distinctive and memorable.
  1. Keep up to date with employment law, have employment contracts for each of your employees and have employment policies in place and abide by them
  1. Know the difference between employee and independent contractor. Whether an individual works for your business as an employee or an independent contractor or not depends on how s/he is treated in practice.  Does your business’s worker work at one location for a fixed amount of hours at the company’s direction?  If so, your worker could be deemed an employee despite being labelled an independent contractor or on your business’s books and being treated as such for tax purposes.  The penalties for tax purposes can be huge.
  1. Carefully consider important tax issues:
  • Are you entitled to the Start-Up Refund for Entrepreneur Scheme (SURE) or any other entrepreneur relief?
  • Would it be worthwhile setting up under the Employment and Investment Incentive Scheme?
  • Would your company qualify for Research and Development credit and would your company want to claim same? Revenue recording requirements can be prohibitive
  • Understand the difference in treatment of employees and independent contractors
  • If you are employing employees – inform yourself of the operation and your duties under PAYE legislation
  • Should your company register for VAT or other taxes?
  1. Have a good Terms of Use Agreement setting out if cookies are used on your website and Privacy Policy for your website. A Terms of Use Agreement sets out the terms and conditions for people using your website.  Your Privacy Policy is a statement on your website setting out what you will do with the personal data collected from users and customers of the site, and how this data may be used, stored, sold or released to third parties.
  1. Ensure you have a good solicitor! Ensure you have a solicitor to draft all documents relating to loans given to you both by accredited investors and family members.  This will help protect your business from unscrupulous investors, as well as non-professional investors such as family members who may later say that your business plan was misleading or that the deal was different to what you intended same to be.  Having formal documents and the correct structure in place at an early stage will also make your business more attractive for investors.


Amorys Solicitors is a commercial and private client law firm based in Dublin with over 30 years’ experience advising startups and investors.

Good Luck!

Amorys Solicitors

Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18

Connecting you to creative solutions

Email: info@amoryssolicitors.com Tel: 01 213 59 40

Tax Considerations when Selling a Business

Generally speaking the sale of a business will take place either by way of an asset or a share sale (if the business is operated out of a company).  A sale of a business can also take the form of a hybrid between the two where the business is operated from a company. In such a situation a ‘hived-down’ form of the seller’s business –often a part of the business only with the assets the purchaser would like to buy- is transferred to a ‘new’ company and the shares in that company are sold to the purchaser.   If the business is operated through a partnership an asset sale is the only way in which a sale can be effected.

Deciding whether to structure a business sale as an asset sale or a share sale is complicated because the parties involved benefit from opposing structures. Generally, buyers prefer asset sales, whereas sellers prefer share sales. This article deals with the tax considerations of each of the three forms of sale from a Seller’s perspective.

Share Sale

  1. In a share sale, the buyer acquires the legal entity that operates the business. Currently, in a share sale, taxation of a seller’s gain is relatively simple: capital gains tax only is charged (currently at 33%) on the difference between the sale price and the purchase price of the shares.  A number of reliefs such as retirement relief may operate to reduce the overall capital gains tax payable in whole or in part.  As far as the Seller is concerned a Share Sale is the most straight forward transaction from a tax perspective.


  1. Generally speaking if the seller is an individual looking to exit a family business or retire for example, his/her objective will more than likely be to maximise the amount of cash s/he will receive from the business immediately after the transaction. A seller in such a situation will therefore be less likely to wait for the benefit of any tax losses which could be generated in an asset sale to materialise. In those circumstances the seller will generally look for the sale proceeds to be paid to him/ her directly by way of consideration for his/her shares so as to avoid double taxation which would generally arise on an asset sale.   A share sale will require increased tax due diligence on the part of the purchaser which could delay a sale and this is something that may be a material consideration for either or both parties.


  1. The tax charge on a share sale may be lower than on an asset sale if there is a higher base cost in the shares. Generally this will apply where the Seller first acquired the shares in the target company via a share purchase or post-incorporation subscription (i.e. a purchase) when the company had a value, rather than the original subscription on incorporation of the company.


  1. Generally speaking, the warranties that are required by a purchaser in a share sale are more extensive than those which may be required in an asset sale. Tax warranties are representations a seller makes to the purchaser in respect of the current and historic tax affairs of the business and should any of them prove to be untrue during a period certain (to be agreed) after the sale completes, the purchaser is entitled to damages from the seller once it can prove loss which generally is proof of a reduction in share value.  In a share sale a seller will need to give warranties in respect of every tax relating to the operation of the business whereas in an asset sale a seller can generally limit the warranties (and his/her liability) to the specific taxes that relate to the assets in question.


  1. Again, generally speaking in a share sale transaction a purchaser will require an indemnity from the seller in respect of every tax which could potentially relate to the business transaction within a certain period of up to five years (but usually 2) after the sale completes. An indemnity is different to a warranty in that it is an agreement by the seller to reimburse the company (i.e. not the purchaser) in respect of a particular liability should it arise.  In brief, an indemnity is not dependent upon proof by the purchaser that the market value of the shares at the time of the transaction would have reduced in value had the particular eventuality came to light.  Indemnities in share sale transactions will be a relevant consideration for sellers of long-established businesses engaged in significant and complex financial transactions where the potential for undisclosed tax liabilities to come to light after the sale is high.


Asset Sale

  1. In an asset sale by a company, ownership of the shares does not alter. The buyer purchases individual assets from the company.  For sellers, asset sales generally attract a higher overall tax bill because the gains on the sale of assets are first chargeable to corporation tax (currently up to 25%) in the company and, when distributed to the shareholders as a dividend, are subject to income tax (currently up to 48%).  Generally the operation of the foregoing rules motivate a seller to choose a share sale.


  1. Conversely, as there is less due diligence for the buyer to perform in an asset sale, the transaction can often be completed more quickly and more cost-effectively. Further, an asset sale has less chance of falling through as a result of an unexpected glitch during due diligence (and such “glitches” are not uncommon in share sales!).


  1. The tax calculation can be quite complex for asset sales as different categories of assets may have to be treated differently for tax purposes. If on a capital asset the seller has claimed capital allowances, for example, and then sells the asset for more than the book value, he may be liable to pay a “balancing charge” to Revenue which would ultimately reduce the net cash benefit the seller receives from a transaction.


  1. However as buyers sometimes prefer to buy assets rather than shares, a corporate seller can often negotiate a higher value for an asset sale than a share sale. The rationale for the foregoing being that there is value when a corporate seller retains the responsibility (and cost) of clearing liabilities and tidying up post-sale.


  1. An asset sale may trigger losses and/or balancing allowances in the seller company which can be utilised by the seller company after completion of the asset disposal.


  1. A share sale may sometimes not be practicable for a seller group of companies if a sale of the target company would ‘break’ a group and trigger a clawback of a previously-claimed group relief such as Capital Gains Tax group relief or the ‘associated companies’ exemption from stamp duty. An asset sale may provide a solution in these circumstances.

Sale of Shares in a ‘hived-down’ Structure

  1. A hive-down structure is a half-way between a sale of shares and a sale of assets. In this situation a corporate seller transfers particular assets to a new subsidiary (or ‘newco’), and the buyer purchases (the shares in) newco. The buyer gets a company holding the assets it wants with a short tax-history and pays stamp duty at 1% for the shares. The potential issues for a shareholder regarding double taxation could explained at paragraph 1 above under the heading ‘asset sale’ could arise however.


  1. It is possible for a seller company to transfer assets to a new subsidiary without giving rise to a chargeable gain for CGT (provided it is a 75% subsidiary); VAT (where it is the transfer of a business or part thereof) or stamp duty (provided there is a 90% group relationship between company and subsidiary).


  1. Points mentioned above in respect of share sales above are also relevant tax considerations for a seller in a ‘hived-down’ structure.


As you will see from our last article “Tax Considerations When Buying a Business” there are many competing objectives from a tax perspective for both a buyer and a seller in a business acquisition or sale.  The issues can be extremely complex and careful and early advice is strongly recommended to anyone thinking of selling the entire or part of their business.

An experienced solicitor can assist a seller in many ways in a business sale transaction.  Whilst it largely depends on the client’s objectives in any situation, an experienced solicitor could assist a seller in reducing his/her potential liability to a purchaser in respect of historic tax affairs of his/her business, by ensuring the seller structures a deal so as to minimise the amount of tax ultimately payable by him/her and by facilitating a seamless transition of the business as a going concern to the new owners and ensuring all relevant documents have been filed in the Companies Registration Office after completion.

NOTE:   This article does not deal with the Transfer of Undertakings Protection of Employees (TUPE) regulations.  These will be dealt with in a separate article shortly.

If you would like further information in relation to any of the above please contact Deirdre Farrell by email on deirdre@amoyssolicitors.com, or telephone:  01 213 59 40 or your usual contact at Amorys.

The content of this article is for information purposes only and is not intended to be legal advice.  Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18.

Shareholders Agreements – The Fundamentals (Infographic)

What is a shareholders’ agreement?

A shareholders’ agreement is an agreement between shareholders and sometimes the company. The basic concept of a shareholders’ agreement is to set out certain aspects of how the company is to be governed and operated and to provide for respective rights and obligations of shareholders as between each other. The principal advantage of entering a shareholders’ agreement is legal certainty for the parties. If at some point in the future a dispute arises between the shareholders, a well drafted shareholders agreement will set out how such a dispute is to be dealt with. To protect minority shareholders the agreement will generally cover a wide range of topics which we will look at in more detail below.

Matters to be dealt with by a shareholders’ agreement could alternatively be inserted in the company constitution, however this document will be in the public domain through the CRO. For this reason, a shareholders’ agreement is often preferred as it keeps commercially sensitive and other information out of the public domain. Furthermore, a constitution will only be binding on a shareholder in their capacity as a shareholder. A shareholders’ agreement allows for the imposition of rights and obligations on the shareholders. This can be particularly important in smaller companies where shareholders may be directly involved in the running of the business.

Shareholders Agreements - The Fundamentals


Buying or Selling a Business in Ireland

This article provides a summary as to what to expect if you are considering buying or selling a business in Ireland. The primary focus will be on the purchase/disposal, of shares/assets and the different structures and procedures you will need to consider.

Of primary importance in the acquisition/disposal of a business, is to establish which of the two most common structures is the most suitable for the deal, an asset sale agreement or a share sale agreement. The tax implications will often dictate which route is taken.

An Asset Sale Agreement is appropriate when a buyer wishes to purchase assets from a company and leave liabilities both actual and contingent, behind. This may enable a buyer to cherry-pick certain assets which are particularly suitable to the buyer’s business. An asset sale agreement may also allow the buyer some flexibility in regard to the employees of the target company. However, careful legal advice should be obtained as the Protection of Employees on Transfer of Undertakings Regulations (SI 131/2003) (the “TUPE” regulations) may apply, resulting in the buyer inheriting some or possibly all employees of the target company with all their legal and contractual rights.

A Share Sale Agreement may be the appropriate structure where the buyer wishes to acquire shares in the target company. There are many reasons why this might be the case, most importantly however, you should remember that with this structure all assets and liabilities of the target company remain in place, so a comprehensive legal and financial due diligence is essential.

Heads of Terms (“HOT’s”)

The HOT’s is a document which sets out the agreement as between a buyer and seller. It will record the essential elements of the agreement as negotiated. The HOT’s do not compel the parties to conclude the deal and they are usually expressed to be “subject to contract” and not legally binding. HOT’s are used as a record of the main terms of the agreement.

Due Diligence

The due diligence exercise is hugely important in any corporate/commercial transaction. It is usually commenced by sending a detailed pre-contract questionnaire to the seller’s solicitor, and, from a timing point of view, this will very often take place at the same time the asset/share purchase agreement is being drafted. It will cover all aspects of the asset sale/ target business. It is a method of verifying that the buyer is being sold what was agreed in the HOT’s.  Generally, the maxim “Caveat Emptor” is applicable to a transaction, i.e. “Buyer Beware”. This will be diluted by the warranties (see below) however, in a share sale transaction a full investigation into the affairs of the target company is needed. To list but a few, the buyer will need to carry out the following:-

  • A full financial review of the target company’s financial affairs;
  • A review of the corporate structure of the company;
  • A review of the insurance cover and any current claims;
  • An investigation of title to any properties included in the transaction;
  • A review of all employee contracts including a review of the position of the employees under TUPE;
  • Enquiries into areas specific to the individual target company/assets;
  • A tax review will be required to ensure that no unanticipated tax liability issues will arise.

The due diligence process should highlight any issues in the target company/relating to the assets, allowing the buyer to either walk away or protect themselves through the imposition of warranties and indemnities in the contract.

Funding The Purchase

This can take many forms including venture capital funding, private equity funding and/or bank loan transactions. This aspect of the transaction will require additional investment documentation and/or providing security to a bank.


A buyer will need to cover off certain risks by the insertion of warranties in the contract to ensure that they have a remedy if it later transpires that certain statements or representations were made which were not in fact true and which result in financial loss to the buyer.  A buyer will be entitled to compensation if the seller is in breach of a warranty.


The Disclosure Letter

The disclosure letter provides the seller with an opportunity to disclose against the warranties provided which reduces the seller’s exposure to post completion damages. The seller may qualify warranties by referring/disclosing specific problems the company may have in relation to insurance, litigation, employees, etc. If the seller does not adequately disclose, it may face an action for breach of warranty claim under the agreement. From the buyer’s perspective, issues disclosed through the disclosure process may result in the buyer seeking a reduction in the purchase price or walking away from the deal altogether.


On completion, the buyer’s solicitors will look for the following to be handed over:-

  • Executed Share Sale Agreement or Asset Sale Agreement;
  • Executed share transfer forms (where applicable);
  • Disclosure letter;
  • Resignation letters of the directors;
  • Statutory registers and company seal;
  • Release of any mandates;
  • Delivery of assets in an asset sale transaction;
  • Any other documentation that may be required dependant on the circumstances.

A board meeting will take place to allow for the approval of the foregoing and to approve any individual requirements as the transaction may dictate.

What to expect from your solicitor

A solicitor is usually instructed after heads of terms for the sale have been agreed and reduced to writing.  A good solicitor having relevant experience will identify potential areas of dispute between the buyer and seller at an early stage in the transaction so that they can either be legislated for in warranties or indemnities or taken into account in the deal by way of a reduction in purchase price, if necessary.  Prompt identification is key and will save you time and costs.


What Amorys Can Do?

At Amorys, we will carry out a detailed review of your requirements to ensure a suitable acquisition/disposal agreement is put in place. In collaboration with your accountants and tax advisors we aim to achieve a smooth transaction for you/your business. Our services extend to advising on merger and acquisition transactions for Small to Medium Enterprises (SME’s) including, management buy outs, carrying out due diligence and drafting the required legal documents.

If you would like further information in relation to any of the above please contact Brian Kirwan at brian@amoryssolicitors.com, or telephone: 01 213 59 40 or your usual contact at Amorys.

Please also see our article on the Tax Considerations When Buying a Business https://amoryssolicitors.com/tax-considerations-for-a-buyer-when-buying-a-business/

The content of this article is for information purposes only and is not intended to constitute legal advice. Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18.



(c) 1st August 2017

Brian Kirwan Amorys Solicitors, suite 10, The Mall, Beacon Court, Sandyford, Dublin   18, Tel: 01 213 59 40, Email: brian@amoryssolicitors.com Website: www.amoryssolicitors.com




, ,

Tax Considerations when Buying a Business


The tax structure of a business acquisition can be the deciding factor when assessing the merits of buying a business.

Broadly speaking business purchase transactions take the form of either a share or an asset purchase and both differ widely in terms of what tax considerations come in to play.

A Buyer could also buy shares from a ‘hived-down’ new company to which the Seller has transferred only the assets a Buyer would like to buy.  This structure is a combination of both a share sale and an asset sale but from the Buyer’s perspective it would be a share purchase.

Each buy-out structure has different tax implications for a Buyer and Seller.

A Seller may want a business sale to take place by way of a share sale so that he receives funds directly and is only chargeable to capital gains tax on the difference between the sales price of the shares and their base cost.  A Buyer may wish to purchase assets of a business only so that she does not inherit latent gains on assets (see below) or potential outstanding tax liabilities of a the target company.  Below is a ‘bird’s eye view’ of the tax considerations arising for a buyer in a share and separately, an asset, purchase transaction.  Our next article will deal with the tax aspects from the point of view of a seller.

What tax considerations do I need to be aware of if I am buying shares in a target company?

  1. Stamp duty: Stamp duty costs in such a transaction are generally lower as shares are subject to 1% stamp duty on their market value whilst assets are subject to a rate of up to 2% in some cases.  However, in cases of a share sale there is less flexibility to reduce the stamp duty, e.g. by arranging for certain assets to transfer by delivery.
  2. Exposure for hidden tax liabilities of a target company:
    This is generally a principal concern for a Buyer when buying a company.  Logically, a Buyer does not want to be liable for tax liabilities of a company that arose during a period for which s/he was not in control.   The longer the target company has been in existence, the greater the risk that there are hidden or undocumented tax liabilities for which the Company may be found liable at a later stage.
    The main objective for a Buyer is to ensure that a target company is ‘clear’ from any hidden taxation liabilities arising from for example, failure to file returns and pay penalties arising therefrom, failure to correctly account for value added tax (VAT), incorrectly claiming reliefs, etc.  Researching into these areas is called ‘due diligence’ and is a central component to any business acquisition.  Tax due diligence will help establish the purchase price and the type of tax warranties and indemnities to be included in the share sale agreement amongst other things.
    The advantage from a tax perspective of using the ‘hived down’ structure referred to above is that the new ‘hived down’ company would have a short tax history which would mean less risk for a Buyer for hidden tax liabilities.
  3. Exposure for Latent gains on the sale of company assets in the future: In a share purchase transaction, the assets of the target company retain their original cost price.  This means that if/when the Buyer (through the target company) sells its assets it will have to pay corporation or capital gains tax on the difference between the sale price of that asset and the original cost of purchase (if any).  If the original cost of purchase of that asset is less than its market value on the date of acquisition of the target company, the Buyer will be liable to pay tax on that ‘latent’ gain if it subsequently sells those assets for greater than or equal to the market value on the date it acquired the company.  Latent gains could therefore reduce the value of a Buyer’s interest in the target company if they are not considered at the outset of a transaction.


What tax considerations do I need to be aware of if I am buying assets from a target company?

  1. No exposure for latent gains on the sale of target company assets  : In an asset purchase transaction, a Buyer acquires the assets at their market value at the date of sale and avoids potential exposure to latent gains referred to above.  A Seller would more than likely prefer a share sale to avoid having to pay capital gains tax, having regard to the fact that its members would be subject to further tax (income or dividend withholding tax) when extracting the sale proceeds from the selling company.
  2. No exposure for hidden tax liabilities : In an asset buyout, hidden tax liabilities can be left behind in the target company without requiring the Buyer to rely on detailed warranties which may prove unrecoverable from the Seller at a later time (because of its liquidation or exit from Ireland).
  3. Value Added Tax liability on assets purchased:  A Buyer may need to pay value added tax at 13.5% on the value of the assets – for example commercial property which has been developed in the past two years or remains in the ‘VAT Net’.  If the Buyer is not registered for VAT or cannot reclaim VAT paid, it remains an additional cost of the transaction.  In many situations it is possible for a Buyer to pay VAT on the purchase of an asset and reclaim it on the same day resulting in a cash neutral position but each Buyer every situation is unique and detailed advices are required in this regard.
  4. Tax advantages of purchasing premises directly in the name of the Buyer: There may be tax advantages to a Buyer purchasing real property of a business directly and for him/her/them to grant a commercial lease to the target company. A buyer should enquire with their advisers as to the tax benefits of doing so before executing any Share Sale and Purchase Agreement.

As you will see from our next article there are many competing objectives from a tax perspective for both a buyer and a seller in a business acquisition.

There are many ways in which Amorys Solicitors can be of assistance to a prospective Buyer in a business purchase transaction.  We advise on all aspects of merger and acquisition transactions for Small to Medium Enterprises (SMEs) including advice in relation to the form and structure of an acquisition or buy-out, carrying out due diligence and drafting corporate contracts including Share Sale and Purchase, and separately, Asset Sale and Purchase Agreements. If you would like further information in relation to any of the above please contact Deirdre Farrell by email on deirdre@amoyssolicitors.com, or telephone:  01 213 59 40 or your usual contact at Amorys.

The content of this article is for information purposes only and is not intended to be legal advice.  Amorys Solicitors is a boutique commercial and private client law firm in Sandyford, Dublin 18.

© August 2017, Amorys Solicitors

, , ,

Transfer of Personal Data- the Max Schrems and Facebook case

Privacy Rights Campaigner Max Schrems claims the transfer of his personal data by Facebook from Europe to its US parent company is unlawful and in breach of his right to privacy under article 7 and 8 of the EU Charter of Fundamental Rights. Individuals in the European Union have a specific right to privacy under European law. Individuals in the US do not have the same protections. In the US personal data is subject to mass State surveillance which is a breach of European citizen’s rights. The Irish Data Protection Commissioner refused to investigate Mr. Schrems complaint, this was overturned by Court Order and the Data Protection Commissioner was directed to investigate Mr. Schrems’s complaint.


The complaint was then investigated by the Irish Data Protection Commissioner. A draft decision on this complaint was then issued by the Irish Data Protection Commissioner, who then issued High Court proceedings seeking to refer a number of questions to the European Court. The key question raised is whether standard contractual clauses approved by the EC to be used by parties when they are arranging for the transfer of personal data of individuals to other countries outside the EU provide sufficient protection for EU citizens.


Ten parties applied to be joined as amici curiae (parties who have an interest in the proceedings) to assist the High Court in relation to this case. The High Court ordered that the USA Business Software Alliance, Digital Europe and the Electronic Privacy Information Centre be joined as amici curiae on the basis that this will have significant economic and commercial consequences for companies and individuals. The USA BSA were joined as restrictions on transfer of data would have considerable adverse effects on US commerce. Business Software Alliance is a not for profit international trade association of global technology providers. EPIC is a public interest, not for profit organisation with expertise in privacy, freedom of information, and government surveillance and has appeared frequently in the US as amici curiae and before the European Court of Human Rights. EPIC is a member of the advisory panel of Mr. Schrems. Digital Europe is the principal representative body for Europe for the Digital Technology Industry and is a not for profit association. The US Government were also represented in the case.


The case was heard in the High Court in Dublin in March 2017 before Ms. Justice Costello for a number of weeks. Judgment has been reserved and will issue shortly.


If you have any queries or comments in relation to this article, please contact Davnet O’Driscoll at Davnet@amoryssolicitors.com