Ireland has over several decades built up a critical mass in the infrastructure of specialist services around SPVs including advisers, directors, listing agents and trustees which enables the jurisdiction to support and service the widest range of structured finance deals.
As a member of the EU and the OECD, Ireland has a highly regarded legal and regulatory regime. Similar to the US and the UK, Ireland is a common law jurisdiction.
SPVs are established as companies in Ireland and are subject to Irish laws, regulations and tax. Establishing a company in Ireland involves inherent legal obligations and requirements which provide certainty, protection and security to all parties to the arrangement and are valued by investors.
Bankruptcy remoteness is a key feature in most securitisation transactions. Investors and lenders need assurances that their investment is actually secured on a defined pool of assets or cash flows and cannot be compromised by a possible bankruptcy or the liabilities of other entities associated with the company issuing debt.
This is achieved by establishing an orphan company structure where the shares in the company are held in trust for charitable purposes by an independent share trustee. Bankruptcy remoteness is required by rating agencies and is also a requirement of the European Central Bank for eligibility of certain bonds as collateral.
Section 110 provides that the calculation of profits of a Section 110 company for tax purposes effectively mirrors its commercial accounting profit. It also provides that, subject to compliance with anti-avoidance legislation, a deduction is available for profit dependent interest. Taken together, these provisions typically result in tax neutrality for a Section 110 company.
Regulation and supervision
Ireland’s SPVs are set up as Irish companies that are tax neutral and bankrupt remote. They are subject to a range of regulation and supervision both locally and internationally.
In Ireland, SPVs are subject to the Irish legal and regulatory environment which includes:
- Irish company law.
- Irish tax law.
- Irish Stock Exchange listing rules if applicable.
- Regulatory quarterly reporting to the Central Bank of Ireland.
Irish SPVs are also subject to the EU regulatory regime including:
- Transparency Directive, Prospectus Directive, Capital Requirements Directive and Markets Abuse Directive.
- Financial Vehicle Corporation (FVC) disclosure rules.
- European Market Infrastructure Regulations (EMIR) for derivatives entered into by SPVs.