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Walkers is pleased to announce that 18 attorneys across its global offices have been invited to join the partnership. In addition, 13 associates have been promoted to senior counsel.

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Eyes Wide Open: Singularis v. Daiwa - UKSC Upholds US$150m Quincecare Bank Negligence Judgment

An important ruling regarding the liability of financial institutions who are found to have been negligent in their dealings with their customers was handed down by the UK Supreme Court on 30 October 2019 in the case of Singularis Holdings Ltd (In Official Liquidation) (A Company Incorporated in the Cayman Islands) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50. The Supreme Court upheld the decisions of both the High Court and Court of Appeal that Daiwa, the former investment bank and broker of Singularis, had breached the Quincecare duty of care, which establishes that a bank owes a duty to use reasonable skill and care in executing its customer's orders.

Singularis had originally lacked sufficient funds to meet the costs of bringing this claim against Daiwa; its only substantial assets being those it was pursuing by way of litigation. Without third party funding, therefore, the claim for $204 million plus interest would never have gone ahead. Walkers, who have acted as Cayman Islands Counsel for Singularis and the Grant Thornton Joint Official Liquidators throughout the liquidation, advised on and successfully obtained sanction from the Grand Court of the Cayman Islands to enter into the litigation funding agreements which made this litigation possible.

The English courts found that Singularis successfully established that Mr Al Sanea, who was the company's chairman, director, president, treasurer and sole shareholder with dominating influence over the company's affairs, fraudulently deprived the company of approximately US$204 million of its money by directing Daiwa to pay those monies in eight separate transactions to two separate companies associated with Mr Al Sanea. Daiwa had breached its Quincecare duty of care to Singularis, and was therefore liable for Singularis' losses arising from these transactions, albeit with a deduction of 25% for Singularis' contributory negligence.

Daiwa's appeal to the Supreme Court was based on the issue of attribution; Mr Al Sanea was Singularis' duly authorised instruction giver and "controlling mind" and, accordingly, should his actions/behaviour be treated as one and the same as Singularis.

The Supreme Court took the view that the case "bristled with simplicity", confirming that Mr Al Sanea and Singularis were not to be treated as one and the same. Daiwa should have suspended payment until it had made reasonable enquires to satisfy itself that the payments were properly made. Its failure to do so was negligent. In coming to these findings, the Supreme Court developed two areas of law:

  1. it provided clarity on the nature and scope of the Quincecare duty of care owed by financial institutions to their customers, particularly in circumstances where fraud is, or ought to be, suspected; and
  2. it set out the approach to be taken by the courts when determining whether the (dishonest) actions of a company's "controlling mind" should be attributed to the company, in particular when considering defences to breaches of the Quincecare duty of care.

This case is an important decision in the insolvency of Singularis and will return significant assets to the liquidation estate.

Ireland - Beneficial Ownership Reporting – 22 November Deadline Approaching

The Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the “Central Register”) launched on 29 July 2019.

Irish incorporated companies and certain other legal entities (the “Relevant Entities”) are obliged by Part 3 of the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (S.I. 110 of 2019) (the “2019 Regulations”) to file details of their beneficial ownership with the Central Register.

The 2019 Regulations imposed a deadline of 22 November 2019 for Relevant Entities in existence prior to the introduction of the 2019 Regulations to comply with their beneficial ownership reporting obligations.

All affected Relevant Entities must take steps now to ensure that the necessary beneficial ownership information is filed in time via the Central Register’s online registration portal - https://rbo.gov.ie/. Paper submissions are not accepted and no fees are charged.

Relevant Entities incorporated on or after 22 June 2019 must file their beneficial ownership information with the Central Register within five months of the date of their incorporation.

Under the 2019 Regulations, it is a criminal offence for a Relevant Entity to fail to provide information on its beneficial ownership to the Central Register.

For further information relating to the requirements of the 2019 Regulations and the functioning of the Central Register, please consult our previous briefings on the topic (available here).

 

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Ireland - Investment Limited Partnerships Bill 2019 Progresses to Committee Stage

Following on from our July 2019 article on the Investment Limited Partnerships (Amendment) Bill 2019 (the “Bill”) (link here), the Bill progressed to the next stage of the Irish legislative process, known as Oireachtais Committee Stage, on 18 September 2019. This is a positive step in the direction of making Ireland a more attractive domicile for private equity and venture capital funds.

What is Committee Stage?
At Committee Stage, a detailed examination of each section of the Bill will be undertaken and the Government and opposition members will be given an opportunity to make changes to the text. If each section of the Bill is agreed to, the Bill will be set down for the next stage, Report Stage.

Committee Stage is the third stage of five stages in Dáil Éireann. If the Bill passes Committee Stage, it will still need to pass two further stages in the Dáil and five further stages in the Seanad (Senate) before being signed into law by the President of Ireland. The exact timing of this process is still unclear.

Background to the Bill
The purpose of the Bill is to reform Ireland’s existing investment limited partnership regime by amending the Investment Limited Partnerships Act 1994 (the “1994 Act”), which governs the existing regime. Investment limited partnerships under the 1994 Act were not as successful a fund structure as had been initially anticipated by its advocates.

The reforms which are contained in the Bill are predominantly aimed at (i) redefining certain rights and obligations relating to LPs and the GP; (ii) harmonising the rules relating to, and the characteristics of, the ILP structure with other Irish regulated fund structures and certain legal and regulatory developments since the Act was introduced; and (iii) adopting market standard practices and features from other popular fund domiciles.

Please see our July 2019 article for a more detailed summary of the key areas of reform and enhancements included in the Bill.

 

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Ireland - Update – CBI Issues Prohibition Notice for Breach of the Fitness & Probity Regime

Executive Summary
On 27 September 2019, the Central Bank of Ireland (“CBI”) published details of a prohibition notice issued to an individual pursuant to the Fitness and Probity regime (the “Prohibition”). The CBI issued the Prohibition following its determination that the individual provided false or misleading information to the CBI during their pre-approval control function (“PCF”) application. The Prohibition restricts the individual from performing any control function within an Irish regulated financial services provider (“RFSP”) for a period of two years.

Background
The Fitness and Probity regime requires individuals performing control functions in RFSPs to meet the CBI’s Fitness and Probity Standards. Applicants for PCF roles (e.g. directors and other senior roles) must submit an individual questionnaire (“IQ”) and receive CBI approval before commencing their position.

Prohibition Notice
The individual obtained PCF authorisation from the CBI. However, in their IQ and subsequent responses to CBI queries, the individual provided inaccurate information and ultimately the CBI determined, per the Prohibition notice, that the individual:

“provided information which he knew or ought to have known was false and misleading”.

The Prohibition notice further states:

“Honesty and integrity are explicit requirements for those seeking regulatory approval. This encompasses the fundamental requirement of truthfulness in an application for approval. The Central Bank is entitled to expect and insist on absolute candour and honesty and otherwise will not be in a position to fulfil the crucial gatekeeping function which is expected of it in its role of protecting both consumers and the financial system. An applicant for approval, seeking both the advantages and responsibilities for approval, must be taken to understand the unambiguous requirement for truthfulness, and candid and accurate information.”

The CBI states the rationale for the Prohibition as being twofold. Firstly to demonstrate to the individual the seriousness of the infraction and to deter them from future similar behaviour; and secondly to demonstrate the gravity of providing false and/or misleading information to the CBI to other RFSPs, individuals performing and applicants for PCF roles, and the financial services industry as a whole.

It is also useful to note the CBI’s determination of certain proposed mitigating factors put forward on behalf of the individual. Amongst other points, the CBI rejected the argument that the individual’s cooperation with the CBI’s investigation constituted a mitigating factor, noting that cooperation with the CBI is an expectation of a PCF.

 

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Ireland - Update – Beneficial Ownership Reporting Commences

The Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the “Central Register”) launched on 29 July 2019.

Irish incorporated companies and other legal entities (“Relevant Entities”) are obliged by Part 3 of the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (S.I. 110 of 2019) (the “2019 Regulations”) to file details of their beneficial ownership with the Central Register.

Existing Relevant Entities have until 22 November 2019 to file the details of their beneficial ownership with the Central Register. Relevant Entities incorporated after 22 June 2019 must commence providing information to the Central Register within five months of their incorporation. It is expected that separate regulations will be published providing for the establishment of a central register of beneficial owners of Irish Collective Asset-management Vehicles (“ICAVs”) which will be maintained by the Central Bank.

Relevant Entities must submit their beneficial ownership information through the Central Register’s online registration portal - https://www.rbo.gov.ie/. Paper submissions are not accepted and no fees are charged. Relevant Entities should confirm with their service providers which entity will make the filing on their behalf well in advance of the November filing deadline.

The concept of beneficial ownership in the 2019 Regulations remains unchanged from the 2016 Regulations with respect to companies and captures any natural person who, directly or indirectly, has a greater than 25% ownership or controlling interest in a Relevant Entity. Where it is not possible to identify any natural person who, directly or indirectly, has a greater than 25% ownership or controlling interest in a Relevant Entity, the Relevant Entity’s beneficial ownership register should be populated with the senior managing officials of the Relevant Entity. In the case of investment funds, this will generally be the directors.

For further information relating the requirements of the 2019 Regulations and the functioning of the Central Register, please consult our previous briefings on the topic here and here.

 

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