Simon Harris (Wicklow, Fine Gael)
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I move amendment No. 9:

In page 55, between lines 7 and 8, to insert the following:

Definitions
87. (1) In this Part—“charge”, in relation to an ICAV, means a mortgage or a charge, in an agreement (written or oral), that is created over an interest in any property of the ICAV (and in section 88(8) and sections 93 to 98 includes a judgment mortgage) but does not include a mortgage or a charge, in an agreement (written or oral), that is created over an interest in—

(a) cash,
(b) money credited to an account of a financial institution, or any other deposits,
(c) shares, bonds or debt instruments,
(d) units in collective investment undertakings or money market instruments, or
(e) claims and rights (such as dividends or interest) in respect of any thing referred to in any of the foregoing paragraphs;
“property”, in relation to an ICAV, includes any assets or undertaking of the ICAV.

(2) Any exclusion provided in subsection (1) to what is defined in that subsection as constituting a “charge” may be varied by order made by the Minister if the Minister considers that it is necessary or expedient to do so in consequence of any Community act adopted after the commencement of this section relating to financial collateral arrangements.
(3) For the avoidance of doubt, in the case of a mortgage or charge created over both—

(a) an interest in anything specified in any of paragraphs (a) to (e) of subsection (1),
and
(b) any property, assets or undertaking not falling within any of those paragraphs,
the mortgage or charge shall, other than to the extent to which it is created over an interest in anything specified in any of the foregoing paragraphs of subsection (1), be regarded as a charge within the meaning of this Part.”.

This is a new Part which mirrors provisions on charges and debentures for companies as set out in Part 7 of the Companies Bill 2012. The first amendment deals with charges and the second with debentures, Chapter 2. Both Parts reflect the established law on charges and debentures for investment companies. The Central Bank will maintain a register of charges in a manner similar to that of the Companies Registration Office in the 2012 Bill. The priority of charges will be determined in a similar manner to that provided for in company law. The register of charges will be available free of charge for inspection on a website maintained by the Central Bank.
Amendment No. 9 provides for the interpretation of certain terms in the new Part. The expression “charge”, which includes a mortgage under current law, is expressly stated not to include a mortgage or charge over an interest in cash, money credited to an account of a financial institution, or any other deposits, shares, bonds or debt instruments. This is in accordance with the exception of the registration requirement envisaged under the Collateral Directive, 2002/47/EC, on financial collateral arrangements.
Chapter 2 deals with the registration and priority of charges. Two separate procedures for the registration of charges are envisaged. The first, the one-stage procedure, is similar to the procedure under the current law, namely, that particulars of all charges created must be delivered to the Central Bank within 21 days of their creation. The second, the two-stage procedure, provides that an initial notice can be sent to the Central Bank stating the intention of the ICAV to create a charge, followed up by a further more detailed notification in 21 days of the creation of the charge stating that fact. Where the priority of charges is not governed by some other regimes, such priority will be determined by reference to the date of receipt by the Central Bank of the particulars of that charge.
Amendment No. 10, dealing with section 88, provides for the registration of charges created by ICAVs. The section drawn is from section 409 of the Companies Bill 2012 and originally from section 99 of the Companies Act 1963, as amended by section 122 of the Companies (Amendment) Act 1990. It provides that all charges created by an ICAV must be registered in accordance with this section. Subsections (3) and (4) detail the one-stage and two-stage procedures.
Amendment No. 11, dealing with section 89, derives from section 410 of the Companies Bill 2012 and provides for the duty of the ICAV to register charges under section 88 and the right of other parties to effect registration.
Amendment No. 12, dealing with section 90, reflects section 411 of the Companies Bill 2012 and deals with situations where an ICAV purchase property which is subject to a charge. Since this section only requires charges created by an ICAV to be registered, this section is necessary to ensure charges that were created by an individual but for which the liability for repayment is assumed by the ICAV are registered by that ICAV.

This ensures that the records of charges on an ICAV property will be more complete. Failure to comply with these requirements will be an offence.

Amendment No. 13 provides for a new section 91 which sets out the priority of charges. This section is modelled on section 413 of the Companies Bill 2012. Subsection (1) provides that priority be given to the creditor who files first in time in order to minimise the potential for fraudulent abuse and thereby protect creditors. This priority will be subject to any overriding priority applicable to certain assets under already established law. Subsection (2) clarifies that where several charges are registered on the same date, the charge that is registered earliest in time and on that date shall have priority. Subsection (3) clarifies the meaning of the date of receipt of the specified particulars in the context of two different procedures for registering charges. Subsection (4) provides that priority as to charges will also be subject to any contrary agreement between the creditors such as inter-lender or priority agreement, often entered into by financial institutions where more than one such institution lends to a particular ICAV. Subsection (5) provides that the Central Bank does not have to enter details of a negative pledge in the register of charges. Subsection (6) defines a negative pledge clause as an agreement not to borrow money from a third party or otherwise create another charge.

Amendment No. 14 provides for a new section 92 and concerns the registration and priority of judgment mortgages. Subsection (1) provides that a judgment converted into a judgment mortgage shall be void against the liquidator and any creditor of the ICAV unless the procedure for registration of a judgment mortgage in subsection (2) is followed.

Amendment No. 15 provides for a new section 93 which sets out detail on the register itself and is modelled on section 414 of the Companies Bill. The register will include details of the date of creation of a charge or the acquisition of a property and the date of receipt by the bank of the information and any other matters specified by the bank. The bank will determine the form of the register and make it available on a website for inspection by the public.

Amendment No. 16, setting out a new section 94, provides that a certificate of registration shall be given in respect of any charge registered under this Part. This provision is drawn from section 416 of the Companies Bill.

Amendment No. 17 sets out a new section 95 dealing with the entries of satisfaction and release of property from charge. It is modelled on section 417 of the 2012 Bill and requires a statement.

Amendment No. 18, providing for a new section 96, is based on section 418 of the Companies Bill and provides for an extension of time for registration of charges and rectification of the register. The section permits an application by the ICAV or an interested person to be made in court for late registration where there has been a failure to file the specified particulars of a charge within the 21 days where the omission was accidental or does not prejudice the interests of creditors or shareholders.

Amendment No. 19 proposes a new section 97 providing that copies of all instruments creating charges must be kept by the ICAV at the same place as the register of members. The section provides that it is an offence not to comply with this requirement. This mirrors the provision in section 418 of the Companies Bill.

Amendment No. 20, setting out a new section 98, provides that charges must still be registered notwithstanding the Netting of Financial Contracts Act 1995, which facilitates the use of swap instruments and provides that a mortgage or charge to secure a liability under a financial contract is legally enforceable against the charger.

As I outlined on Second Stage, the rationale for these provisions is the desirability of transposing the relevant provisions of the Companies Bill to the ICAV legislation. That is what I am attempting to do here by mirroring the most up-to-date Companies Bill, which we expect to be enacted by the end of the year.