Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I will deal with the question on charities. In certain financial transactions it is common practice for the shares in a special purpose vehicle, SPV, to be owned by a charitable trust. In Ireland the only type of purpose trust is a charitable trust. This ensures, first, that the SPV is not consolidated into the accounts of the originator, thereby ensuring the originator is in a position to make further loans and, second, that the originator can achieve bankruptcy remoteness in respect of the assets transferred to the SPV. The use of a purpose trust for these purposes is a common occurrence internationally in certain financial transactions and a charitable trust is the only purpose trust under Irish trust law.

As a general rule, Irish bankruptcy remote vehicles are established as orphan companies. A typical structure for an orphan company consists of an Irish private limited company, the SPV, the entire issued share capital of which is held on trust for charitable purposes. The shareholders can be individuals or nominee shareholder companies, all of whom hold their shareholding under declaration of trust executed in favour of the Irish charities. It is important to note that the charity is a shareholder in the company and does not hold assets or liabilities. All assets and liabilities are held by the special purpose vehicle. The business is carried on by the company, not the charity.

The charitable status does not confer any tax benefit on the SPV, that is, the section 110 company. The use of a charitable trust is a technique used internationally to achieve the aforementioned objectives. Any residual profit left in the SPV is then paid by way of dividend to the charitable trust. The charities regulator is reviewing this issue. I can give the Deputy a copy of the speaking note.

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