Section 110 of the Taxes Consolidation Act 1997 creates a tax neutral regime for bona-fide securitisation and structured finance purposes. Ireland is not unique in having a specific regime for securitisations. Indeed the importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union.
While section 110 companies are not subject to Central Bank authorisation, there are a number of conditions which a company must meet in order to be regarded as a qualifying company for the purposes of section 110 of the Taxes Consolidation Act 1997 (“TCA 1997”).
One of those conditions is that the company notifies Revenue of their intention to be a qualifying company by completing a Form S.110 no later than 8 weeks from the date the company commences its business as a qualifying company for the purposes of section 110 TCA 1997. As it is a requirement of section 110 TCA 1997, it is appropriate that the Form S.110 be submitted to the Revenue Commissioners.
Additionally, the activity of individual section 110 entities by virtue of its structure as a Special Purpose Entity (SPE) might be affected by certain regulations based on specific activities that they carry out. The obligations of SPEs under the relevant regulations are intended to increase transparency on their activities and address specific risks, such as in the areas of investor protection and Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT).
SPEs may be required to publish a prospectus under Regulation (EU) 2017/1129 (the “Prospectus Regulation”), where an issuance of securities fall under its scope. The Central Bank is the Competent Authority in Ireland with responsibility for the scrutiny and approval of prospectus documents under the Prospectus Regulation. Subject to certain exemptions, a prospectus must be produced by all companies (including SPEs) when securities are to be offered to the public and/or admitted to trading on a regulated market in the EEA. The Central Bank scrutinises the prospectus to ensure it meets all of the disclosure requirements set out in the legislation and must approve the prospectus prior to commencement of the listing or offer of the securities to the public.
Additionally, SPEs that carry out activities listed under Schedule 2 – a comprehensive list of financial activities of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 - are subject to supervision by the Central Bank for Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) purposes. Schedule 2 firms are subject to the Central Bank’s minimum engagement model and are supervised in accordance with this model. During the course of this supervision, where weaknesses in the AML/CFT frameworks are identified in Schedule 2 firms, the supervisors issue findings that the Schedule 2 firms are required to implement.
The Central Bank issued a ‘Dear CEO’ letter outlining their expectations of firms in relation to AML/CFT and Financial Sanctions requirements in December 2020. This letter can be accessed through the following link: www.centralbank.ie/docs/default-source/regulation/how-we-regulate/anti-money-laundering-and-countering-the-financing-of-terrorism/legislation/dear-ceo-letter---compliance-by-entities-which-are-required-to-registered-under-section-108a-of-the-criminal-justice.pdf.
Other requirements that may apply to SPEs include relevant investment fund regulations where an SPE is linked to an investment fund resident in Ireland, and an obligation to register with the Companies Registration Office and comply with relevant company law requirements.
In terms of the frequency of the data available on section 110 firms, all securitisation and non-securitisation section 110 SPEs are obliged (either under ECB Statistical Regulations or under the national powers) to report quarterly statistical information to the Central Bank of Ireland for the purpose of monitoring economic and financial developments in Ireland and the euro area. Further information on the reporting requirements of Special Purpose Vehicles and Financial Vehicle Corporations is available at the websites of the Central Bank and the European Central Bank respectively.
Finally, the Deputy may also be aware that the Central Bank has also published analytical work on SPEs including a Central Bank Economic Letter describing the structure and activities of the SPE sector in Ireland: www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2018-no-11-shining-a-light-on-special-purpose-entities-in-ireland-(golden-and-hughes).pdf?sfvrsn=4.
