Why the Mediation Act is welcome

Following our recent review of the advantages of mediation, in this article, we will look at why the processes and procedures set out in the Mediation Act 2017 are welcome.

Obligations for solicitors to advise Clients on Mediation

The Mediation Act 2017 imposes new obligations on solicitors, including a statutory declaration. Under the Act, practising solicitors are required, prior to issuing proceedings on behalf of a client, to do the following:

  1. Advise the client to consider mediation as a means of attempting to resolve the dispute
  2. Provide the client with information in respect of mediation services, including the names and addresses of persons who provide mediation services
  3. Provide the client with information about the advantages of resolving the dispute otherwise than by way of the proposed proceedings, and the benefits of mediation
  4. Advise the client that mediation is voluntary and may not be an appropriate means of resolving the dispute where the safety of the client and/or their children is at risk
  5. Inform the client of the matters concerning confidentiality and enforceability of mediation settlements as set out in the Act

Section 14(2) provides that the originating document by which proceeds are instituted shall be accompanied by a Statutory Declaration made by the solicitor evidencing (if such be the case) that the solicitor has performed the obligation under Section 14(1) in relation to the client and the proceedings to which the Declaration relates.

While it may be thought that the mandatory nature of the provisions of Section 14 are somewhat incompatible with the Solicitor and the client having to consider when is the appropriate time to consider Mediation, having regard to the nature of the proofs available to the parties, the section does little more than oblige Solicitors to provide minimal advices to the client.

The Section clearly also applies to debt collection litigation.

Mediation Settlements can now be legally binding

We now have clarity about achieving a legally binding agreement in mediation. Any party to the mediation now has the right to decide if a legally binding agreement is required, drafted by the mediator, as an outcome of mediation. This is given statutory footing by Section 11 of the Act. Subject to this, a Mediation Settlement, as a compromise, “shall have effect as a contract between the parties”, save where it is expressly stated to have no legal effect until it is incorporated in a formal legal agreement or contract to be signed by the parties.

Limitation Periods are now extended

The Act extends limitation periods by the period commencing on the day on which the agreement to mediate is signed (presumably meaning the date on which all parties have executed) and ending on the day which is thirty days after either a mediation settlement is executed or the mediation is terminated. The mediator is obliged to inform the parties in writing of the date on which the mediation ends.

Conclusion

The statutory obligation now placed on solicitors to advise clients on Mediation has resulted in an increase in the number of Mediations and the demand for Mediators. The Act has provided solicitors and clients with a practical and cost-effective solution to deal with disputes quickly whilst avoiding the potential public exposure which can occur when litigating through the courts. Mediation will not be an appropriate resolution for all disputes, however it is a useful tool to consider before the issuing of court proceedings is contemplated.

In our next and final article on this topic, we will look at the role of each party in Mediation. For more information, contact: 

Ciara Lehane, Solicitor
clehane@jwod.ie

 

 

 

Mergers and Acquisitions: Pre-Transaction Steps

This article is the second in a series of publications by J.W. O’Donovan’s Corporate Team on the practical aspects of running a successful mergers and acquisitions transaction. To read the first, click here. 

Most people would assume that the starting point for the sale or purchase of a company is the agreement by the seller and buyer of a heads of terms for the transaction. However, there are a number of matters that should be considered at an early stage, even prior to any specific transaction being identified. These include:

  1. Review of Corporate Structure

A business owner who anticipates a sale of its business in the near to medium term should review its corporate structure to identify the target entity. It may be appropriate for any aspects of the business that would not form part of the sale to be ‘hived-off’ into other structures. Many long-established businesses have complicated group structures due to previous events such as management buy-outs. It may be advisable to simplify these by striking off or winding up dormant companies or merging subsidiaries with their holding companies.

  1. Tax Planning Considerations

It is critical that a business owner considers the potential tax arising on a sale of the business long before any sale is likely to occur. There are reliefs available but the criteria can be quite technical and specific advices should be obtained to ensure that such reliefs are availed of, to the maximum extent possible. An example might be where the owner’s spouse works in the business – if he or she is appointed as a director they may qualify for entrepreneurial relief or retirement relief on a sale of shares; such shares can be transferred between a husband and wife without any tax arising.

Aside from the personal reliefs that may be available on a sale of a business, many business owners are now choosing to hold a portion of their shares through a personal holding company as that holding company would be able to avail of an exemption from capital gain tax on a sale of such shares.

In order to qualify for some of the available reliefs, it may be necessary for the relevant structure to have been in place for a number of years prior to a sale. It may also be necessary to move any non-trading assets outside of the group (a ‘hive-off’ as described above).

  1. Vendor Due Diligence

One of the first steps that a buyer will take in a transaction will be to commence a due diligence exercise to examine the financial, operational and legal aspects of the target business. Significant issues identified in due diligence can result in indemnities being sought from the seller or a renegotiation of the commercial terms of the transaction. As a result, it can be advisable for a business owner who anticipates a sale to carry out its own ‘vendor due diligence’ exercise so that any issues in the business can be identified and remedied prior to a transaction commencing.

This exercise would cover matters such as:

  • review of internal financial reporting. If adequate management accounts and other financial records are not available it can make it difficult to justify a valuation when negotiating with a buyer,
  • review of commercial agreements to identify gaps in documentation, expired contracts in need of renewal and change of control clauses allowing the other party to terminate in the event of a sale of the business,
  • review of internal processes such as health and safety and data protection compliance,
  • review of employee contracts and policies to ensure all employees have been issued with a contract or memorandum of terms of employment and that each employee has received their legal and contractual entitlements.

Even if an anticipated sale does not materialise, the business will be on a better footing as a result of carrying out this internal review.

  1. Finance & Target Identification

On the buyer side, before engaging with a seller it is advisable to ensure that the necessary finance to carry out an acquisition is available. In recent years, a number of alternative lenders have entered the Irish market and have provided the finance for acquisitions. However, their requirements can be different from those of the pillar banks and it makes sense to engage with all potential lenders at an early stage in order to establish if they will be a good fit.

A buyer may also want to spend some time identifying potential targets in the relevant market and assessing their suitability for acquisition. Gaining a detailed understanding of the benefits that would result from a proposed acquisition in terms of potential synergies and efficiencies and growth in market share can be very important in ensuring a transaction is approved internally and in obtaining sanction from external lenders, where applicable.

  1. Identifying advisors

Both the seller and buyer will need to select advisors with the appropriate expertise to ensure their interests are represented and the transaction runs as smoothly as possible. For the seller in particular, firms that previously provided legal and financial services to the business may not have experience in large transactions and it may be necessary to appoint new advisors for the purpose of carrying out the transaction. In such event, it is important to ensure that the existing advisors work closely with those taking the lead on the transaction to pass on their relevant knowledge regarding the business.

Most large accountancy firms will have in-house tax advisory services but, in some instances, a separate tax advisor may be required. Furthermore, in some instances, minority shareholders may choose to take independent legal or tax advice.

In our next article in the series, we will cover the preparation of the heads of terms for a transaction.

For more information, contact:

 

To mediate or not to mediate: What are the advantages?

Mediation is now a central element in dispute resolution architecture. It is a flexible process conducted confidentially in which Mediators quickly and expertly help people in conflict to reach their own agreement together. Mediation was historically only used in Family Law issues. However, the commencement of the Mediation Act 2017 has resulted in an increased awareness and willingness by the judiciary to look to Alternative Dispute Resolution in appropriate circumstances.

The Legislation

The Mediation Act 2017,  which commenced on 1st January 2018, provides a statutory framework to promote the resolution of disputes through mediation as an alternative to court proceedings. The underlying objective of the Act is to promote mediation as a viable, effective and efficient alternative to court proceedings, thereby reducing legal costs, speeding up the resolution of disputes and reducing the disadvantages of court proceedings.

Certain types of disputes have been excluded, for example: – Arbitration, disputes which fall under the jurisdiction of the Workplace Relations Commission and Judicial Review proceedings.

Mediation in General

Section 6 sets out the relevant principles governing Mediation:

  • The parties may engage in Mediation as a means of attempting to resolve the dispute
  • Participation is voluntary
  • The existence of proceedings does not prevent the parties engaging in Mediation
  • Any party may withdraw from the Mediation at any time (including the Mediator)
  • A party may be accompanied to the Mediation and assisted by a person who is not a party to or obtain independent legal advice at any time during the Mediation
  • It is for the Parties themselves to determine the outcome of the Mediation and the fees and costs of the Mediation shall not be contingent on its outcome

What are the advantages of Mediation? 

Speed: Mediation offers a way to avoid the courts and seek an earlier agreement quicker rather than litigating through a congested courts system.

Cost Effective: The costs associated with resolving a case through mediation are generally substantially lower than costs associated with progressing cases through the courts. The costs are usually shared between the parties.

Confidentiality: Mediation is a private, confidential process which can benefit commercial entities who are seeking to protect their business and reputation during disputes. Accredited mediators are bound by confidentiality and either side of a dispute are only bound to disclose information voluntarily during mediation, whereas there is less disclosure control and more public exposure in a court setting.

Offers greater level of control: Mediation offers the ability for both parties in a dispute to maintain a greater sense of control over the process and settlement. Mediators are also able to explore more creative solutions to disputes, and aim to seek a mutually satisfactory outcome. A court setting normally results in a judge imposing a settlement on the parties involved.

Seeks a mutually-agreeable solution: Business relationships and reputations are critical to maintain. Finding a mutually-acceptable resolution to a dispute – particularly where a business relationship is expected to continue following that dispute – is a must for many and mediation offers this potential outcome. A collaborative approach to resolving a dispute can ameliorate any ill will in the relationship, whereas a court-imposed settlement often leaves one party aggrieved.

In our next article on this topic, we will look at the advantages of the Mediation Act 2017. For more information, contact: 

Ciara Lehane, Solicitor
clehane@jwod.ie

 

 

Introduction to Mergers and Acquisitions

Despite a business environment held hostage to the Brexit threat for the last three years, J.W. O’Donovan has seen continued growth and activity in the sale and purchase of Irish private companies. There has been particular activity around inward investment by foreign-based multinational companies either looking for an established business in Ireland or looking to further build on existing footholds they might have in the State.

We are often approached by clients and potential clients looking for guidance and advices on a potential sale or purchase of a company. For many, it is their first time involved in such a process. It can be a very daunting and, for some, overwhelming introduction to what has become a relatively forensic legal and financial process.

With that in mind, the Corporate team at J.W. O’Donovan will, through a series of upcoming dedicated articles, share some of the ins and outs of a typical share sale and purchase in relation to an Irish private company. In the first of the series, we look at the basic components of transactions of this type.

What is involved in a a private company sale or purchase? 

In terms of setting out what is involved in a private company sale or purchase in Ireland, a transaction can generally be broken down into its essential elements as follows:

  1. The Target company(s)

This is the company or indeed group of companies that are referenced generally as the “Target” entity, although it is actually the shares in the company that are being acquired.

2. The parties involved comprising the Seller(s) being the shareholder(s) in the Target company and the Buyer

The Seller can be an individual or holding company of the Target. Quite often, it will be a holding company for tax planning purposes, which enables an ultimate beneficiary to maximise reliefs available between grouped companies. We will touch on this again in later articles.

3. Pre-Heads of Terms discussions and negotiations

This stage includes a high level business review to evaluate price offering for the shares.

4. The Heads of Terms

The Heads of Terms is a document setting out the commercial terms reached between the parties.

5. Financial Due Diligence

At this stage, the buyer’s financial advisors will do a thorough analysis of the financial wellbeing of the Target company.

6. Legal Due Diligence

The buyer’s legal team will also do a complete review of key areas of the Target company including corporate structures, commercial agreements and HR records and policies.

7. Negotiation and transactional documentation

The primary documents including Share Purchase Agreement, Deed of Tax Covenant and Disclosure Letter are drawn up.

8. Approvals of Regulatory Authorities

Approval is sought from Regulatory Authorities such as the Competition and Consumer Protection Commission, where required.

9. Completion and transfer of funds

Once the transaction documentation is signed and funds are transferred to the sellers, the transaction is complete.

10. Post-completion integration

After the transaction completes, the two companies are then integrated on an operational level.

These are the components in their basic form but a transaction may have a number of ancillary or additional components. These may include pre-transaction corporate restructures such as the establishment of special purpose vehicles or the transfer of assets out of Target company to a special purpose vehicle or existing connected company.

No two transactions are the same. There are too many variables involved that dictate the manner in which a transaction proceeds. One fundamental difference between transactions and the parties involved is the contrast between the buyer’s objective and the seller’s objective.

A buyer is likely to be motivated by expansion plans with the target company being seen as a good bolt-on to an already established business in the same sector. A seller’s objective can sometimes be broader. For example, it may be the realisation of an investment, or a decision to move out of a particular market. Whatever the reason, from the outset of the process, both parties need to be clear on their objectives – what do they want to achieve, for how much and by when?

In our next article, we will go into more detail on the Pre-Transaction steps to be considered before engaging in the Sale/Purchase process.

If you would like more information on this topic, contact John Sheehan, Partner at jsheehan@jwod.ie or 021 7300200.

JWOD Managing Partner to sleep out in aid of Focus Ireland

JWOD Managing Partner,  Jerome O’Sullivan, is to take part in Focus Ireland’s Shine a Light Night, sleeping out for one night on Spike Island. The annual event, which takes place on Friday October 18th,  sees business leaders raise much-needed funds to combat the homelessness crisis in Ireland. The Sleep-out, which raised €1 million last year, will also take place in the Law Society of Ireland, Blackhall Place.

Focus Ireland is a national charity working with families, children and young people who are homeless, or at risk of homelessness, providing access to information, housing, childcare and a range of education services. In 2018, Focus Ireland provided support to over 15,500 people.

If you would like to sponsor Jerome’s participation in the Sleep-out, you can contribute here.

JWOD appoints Ciara Lehane as newest solicitor on litigation team

We are delighted to announce that we have appointed Ciara Lehane as solicitor on the litigation team at JW O’Donovan. This new appointment comes as the firm experiences increased activity in defence litigation among our corporate clients.

Ciara joins our Litigation department, after spending three years practicing in the area of defence litigation at a leading Dublin firm. Ciara specialises in civil litigation and has significant experience dealing with the conduct of defence litigation on behalf of insurance companies in the areas of motor liability, employers’ liability, public liability and defamation actions. She is a fluent Irish speaker and is enrolled on Clár na Gaeilge (a register of fluent Irish speaking solicitors maintained by the Law Society of Ireland).

Speaking about her new role, Ciara said: “I’m delighted to join JWOD, at a time when business in Cork city and the surrounding region is thriving. The area of defence litigation is fast-moving, and I look forward to the opportunity of working with the experienced team at JWOD and with their valued clients.”

Welcoming Ciara to the team, Jerome O’Sullivan, Managing Partner of JWOD said: “As we continue to see growth in our litigation practice, it is a pleasure to welcome Ciara to the JWOD team. Ciara brings with her specialist knowledge in the area of defence litigation, which will be of considerable benefit to both our team and clients”.

JWOD advises on strategic acquisition of Irish food testing company

J.W. O’Donovan Partners John Sheehan, John Fuller, David Pearson and Ciara McDonnell recently advised on sale of a majority holding in Advanced Laboratory Testing to Mérieux NutriSciences, as Mérieux seeks to expand its footprint further in Europe.

Mérieux NutriSciences is a world leader in the field of Food Safety and Quality, while Advanced Laboratory Testing is a leading player in the food testing market, and was first established in Kildare, in 2013.

Mérieux’s acquisition of Advanced Laboratory Testing marks the company’s entry into the Irish food safety market. The announcement is a continuation of a trend seen in the last two years of companies based on mainland Europe purchasing entities in Ireland for the purpose of expansion.

For more information on this acquisition, please click here.

To find out more about our expertise in the area of Corporate and Commercial Law, please click here.

Planning and Development Act 2000 (Exempted Development) (No.2) Regulations 2019

On 1 July 2019 new planning regulations came into effect governing the use of short-term tourist related lettings such as Airbnb in areas where rent pressure zones apply.

The Regulations were introduced in an effort to ease the housing crisis by freeing up properties which are currently used for Short Term Lettings or Airbnb and introducing them back into the traditional long-term rental sector.

Short-Term Letting is defined in the Regulations as ‘the letting of a house or apartment or part of a house or apartment, for a period not exceeding 14 days’.

The Regulations introduced the requirement for planning permission in respect of short-term lettings as this is now considered a material change of use for properties which are located in high demand areas. However, where property owners do apply for planning permission it is likely that this will be refused by the Local Authority in rent pressure zones, which will effectively ban short-term lettings in these areas.

Exemptions:

The Regulations provide exemptions to the requirement for planning permission in respect of short-term lettings where the property is the owner’s principal private residence (‘PPR’).

In particular where the property owner rents part of their PPR as a short-term let while they are still resident there, this is exempt under the Regulations and no planning permission is required.

However, where the property owner is temporarily absent from the house and they let the entire premises for short-term letting, this is considered to be an exemption only where the letting is capped at 90 days per year, with a limit of 14 days per letting. Anything in excess of this will require planning permission for change of material use of the property.

Second property:

Where a person owns a second property located in a rent pressure zone and intends to let it on a short-term basis, they must retain planning permission for this property to be used for tourism or short-term letting purposes. No exemption applies in respect of the second-property and all short-term lettings require planning permission.

Registration:

Property owners who are availing of short-term lettings but fall under the exemptions in the Regulations must notify their local authority using the prescribed forms. In particular where a property owner is letting part of their PPR on a short term basis or is letting their entire property for less than 90 days per year, they must indicate this to their local authority at the beginning and end of each year and provide supporting evidence as to why they are exempt from requiring planning permission under the Regulations in respect of their short-term letting arrangements.

 Enforcement:

The Planning Authorities in each functional area are now responsible for monitoring and enforcing compliance with the new requirements. Planning Authorities can take extensive actions where there has been a material change of use of a property and where planning permission has not been retained or complied with. Non-compliance with the Regulations carries a maximum penalty of a €5,000 fine and/or 6 months imprisonment.

If you would like more information on this topic, please contact:

Ciara McDonnell, Partner

Recent landmark case gives further clarity around ‘reasonable accommodations’ for employees with a disability

There has been much debate surrounding what constitutes ‘reasonable accommodation’ for employees with a disability. A recent landmark Supreme Court decision, Nano Nagle School v Marie Daly, addressed three of the main issues in its decision, as follows;

Section 16 – Tasks v Duties:

Section 16(1) of the Act provides that an employer is not required to retain an individual in employment if that person is no longer fully competent to undertake their duties.

The Court emphasised that this provision cannot be read in isolation and that section 16 of the Act must be read in its entirety. In particular it noted that s.16(1) must be read in harmony with s.16(3) which provides a duty on an employer to make ‘reasonable accommodation’ and to take ‘appropriate measures’ to facilitate an employee maintaining their position with a disability.

What constituted an ‘appropriate measure’ was always a matter for the courts to decide and up until now the courts had taken the view that a delegation of ‘tasks’ was considered an ‘appropriate measure’ but that delegation of ‘duties’ went beyond this. The Supreme Court emphasised that there is no real distinction between tasks and duties. Accordingly, there is no reason why certain duties cannot be removed or ‘stripped out’ once it doesn’t place a disproportionate burden on an employer. The test must be one of fact, reasonableness and proportionality and the duty of determining what is reasonable accommodation is one for the deciding tribunal.

Free-standing Obligation:

The Court was critical of the Labour Court’s finding that there existed a ‘free-standing’ obligation on an employer to carry out an evaluation of all the available options, irrespective of whether the employee is capable of doing the job. The Supreme Court held that an obligation is not free-standing, and failure of compliance will not, in itself, give rise to compensation. The Court emphasised there is no mandatory duty of consultation with an employee in each and every case and the Act does not provide for compensation simply by the absence of consultation as this could not in itself constitute discrimination under s.8 of the Act. The Court observed however that a wise employer will provide meaningful participation in vindication of his duty under the Act.

United Nations Convention on the Rights of Persons with Disabilities:

The Court addressed the applicability of EU law to the case and noted that the United Nations Convention on the Rights of Persons with Disabilities (“CRPD”) was approved by the EU Community and ratified by Ireland in 2018. It stated that in accordance with Article 261(2) TFEU, international agreements such at the CRPD were binding on its institutions and therefore prevailed over Acts of the European Union. Accordingly, any EU Directives which relate to disability one to be interpreted in harmony with the U.N Convention and more specifically that the EU concept of disability was explicitly aligned with the CRPD.

Conclusion:

The decision offers some clarity and guidance for both employers and employees and highlights the importance of the following key points:-

  1. There is no free-standing obligation on employers to consider the viability of re-organisation of work and redistribution of tasks among other employees;
  2. There is no duty to create a different position to accommodate an employee with a disability;
  3. There is no distinction to be made between ‘tasks’ and ‘duties’;
  4. An employer can delegate duties to another employee;
  5. The UNCRPD is applicable and prevails over Acts of the European Union.

If you would like more information on this topic, contact David Pearson, Partner at dpearson@jwod.ie or 021 7300200.

 

Recent High Court case highlights importance of independent legal advice for business tenants

A recent High Court battle between Dublin Port Company and Automation Transport Limited raised some interesting issues concerning the execution by a business tenant of a renunciation of its legal rights to a new tenancy on expiry of an existing tenancy.  Under Landlord and Tenant law, subject to certain exceptions, business tenants who have been in occupation of a property for at least five years are not obliged to vacate the property when their existing lease expires and can claim a new tenancy for a further period of between five and twenty years at market rent.

One of the situations where a landlord can refuse a new tenancy is where the tenant has executed a renunciation of its statutory right. However, for the landlord to be able to rely on the renunciation, the legislation provides that the tenant must have received independent legal advice prior to signing the renunciation.

This case centred mainly around the fact that there were a number of errors in the Deed of Renunciation executed by the tenant and doubt was cast on whether in fact it referred to the premises which was the subject of the case. Ultimately, based on the evidence, the judge was satisfied that the errors were not sufficient to invalidate the renunciation.

The tenant also challenged the Deed of Renunciation on the issue of independent legal advice. Initially, it was claimed by the tenant that no such advice had been received, but it seems it was later conceded that this advice may have been given. Significantly, the judge found that where a tenant signs a document which states that he received independent legal advice, he is bound by the statement even if it is factually untrue. He based this finding on the legal principal known as “estoppel by misrepresentation”. This essentially means that a party to a contract can’t evade his obligations on grounds which arise from a misrepresentation he made to the other party, i.e. he can’t benefit from his own misrepresentation.

This is a significant finding as sometimes tenants sign renunciations containing a statement that they have received independent legal advice even where no such advice was given (perhaps in an effort to save on legal costs). Tenants should be aware that if they sign such a document, they will not be able to claim at a later date that they are not bound by it on the grounds that no such advice was actually received.

For landlords, the case merely reinforces the importance of:-

(a)        ensuring that a renunciation is signed by a tenant if the landlord wants to avoid statutory renewal rights accruing;

(b)       insisting that the tenant obtain independent legal advice (even where the tenant does not wish to seek such advice);

(c)        insisting that the tenant provide written confirmation of having received independent legal advice; and

(d)       where possible, getting confirmation from an identified legal adviser that such advice has been given.

If you would like more information on this topic, contact JWOD Managing Partner, Jerome O’Sullivan on josullivan@jwod.ie or 021 7300200.