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Information Technology

Website Owner and Internet Service Provider Liability for Obscenity and Defamation-The 2 Big Problem Areas

website-defamation

Website owners and internet service providers ought to have 2 big fears:

  1. Defamation and
  2. Child pornography and obscenity.

Defamation

The Electronic Commerce Act 2000 makes it clear that the normal rules of defamation apply to information transmitted online and published on websites.

However they may have a defence if they are unaware that the material published is defamatory; once on notice of the defamation though they will have no defence.

For this reason it is prudent for website owners to utilise well drafted limitation and exclusion of liability clauses and incorporate them into their standard terms and conditions.

Owners and operators of chat rooms and bulletin boards need to be vigilant in this regard because of the access of 3rd parties to their site.

Child pornography and obscenity

The main act dealing with this issue is The Child Trafficking and Pornography Act, 1998 (amended in 2004).

This act is very broad and wide ranging and even covers ‘depictions of children’ with no need to prove that the images are actually children.

For this reason website owners must make provisions in their terms and conditions to ensure that contributors to blogs, chat rooms etc are aware of this and should be forced to scroll down through the terms and conditions and signal acceptance before being allowed to post comments, material etc.

Website owners and internet service providers should ensure that their terms and conditions include:

  • Users of the website agree not to post offensive, libellous, defamatory or unlawful material
  • The website owner reserves the right to monitor 3rd party postings on their site but do not exercise editorial control
  • The website owner may change or remove any unlawful material posted
  • The website owner does not accept liability for any linked content.

Website owners and internet service providers should also have clear procedures for dealing with complaints.
By Terry Gorry
Google+

Categories
Information Technology

The 6 Things Every Small Business Ought to Know about Electronic Commerce

Electronic commerce is enormous and is set to grow exponentially.

electronic commerce law

And you may be determined to get in on the act and take a lead from Amazon.com, Google, Ebay, Paypal and other online giants.

You need to be aware of the law in this area.

The Electronic Commerce Directive (2000/31/EC) was transposed into Irish law by the “Electronic Commerce Regulations” (Statutory Instrument 68/2003).

The Electronic Commerce Regulations 2003

These regulations implement an EU directive which covers the whole area of electronic commerce and the provision of services and goods online.

A key feature is that once a provider of these goods or services is established in a member state of the EU he is entitled to provide his goods/services into any other member state. Nevertheless in Ireland our common law rules regarding the formation of contracts will continue to apply.

1.     Country of origin principle

This states that providers of goods/services will only have to comply with the rules of the country in which those service providers are established.

2.     Information before contract

One of the principle effects of the Regulations is the list of information which must be provided by businesses operating online.

This list includes

  • The name of the business
  • The address where established
  • Details of the business including email
  • Details of how people can elect not to receive unsolicited commercial communications
  • The trade register applicable to the business, if the business is registered on a trade register
  • Any supervisory/regulatory authority governing the industry
  • Vat no. of business
  • Prices must be shown clearly and unambiguously.

Internet law has a huge impact on internet marketing and the various laws surrounding how we communicate by email and other electronic forms in our marketing efforts.

3.     Rules for commercial communications

All commercial communication should be clearly identified as such

  1. The sender should be clearly identified
  2. Details about how the recipient can register their choice re unsolicited communication should be provided
  3. Promotional offers should be clearly identifiable as such
  4. Competitions and/or games should have their rules of participation clearly accessible.

Internet law also requires that other information and the steps taken to communicate are done within certain boundaries.

4.     Other information required re consumer contracts concluded online

  • The steps needed to be taken to conclude the contract
  • The means for correcting input errors before placing the order
  • Whether the concluded contract will be filed by the service provider
  • However this does not apply when the contracts are concluded exclusively by email.

5.     Procedures to be followed when contracting online with consumers

When the order is placed by the consumer the supplier should acknowledge its receipt without delay by electronic means.

The order and acknowledgment are deemed to have been received when the party to whom it is addressed is able to access it. It is not a defence to refuse to open email when you know it contains acceptance of an offer for example.

6.     Liability of Internet Service Providers

The Electronic Commerce Regulations also lays down rules in respect of internet service providers.

An ISP is not liable for the information it transmits where it is merely acting as a conduit for such information (But the ISP must be passive in this regard).

ISPs are also excluded from liability regarding hosting of websites when the information is provided by third parties. However the ISP will not be excluded from liability when they know that the information being hosted concerns unlawful activities.

ISPs are also exempt from being sued re breach of copyright where they cache information which is copyrighted.
By Terry Gorry
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Categories
Starting a Business

30 Questions to Ask When Buying a Franchise in Ireland

franchise law ireland

Are you thinking about buying a franchise?

Finally setting up your own business and you’ve been told that franchising is a “safe bet”?

The failure rate for small business start ups is high, very high. So can franchising stack the odds in your favour?

Franchising can be a great way to start your own business.

And the failure rate for franchises is much less than for non franchise start-ups.

But you still need to do your homework and ask and be satisfied about many questions which you might not think about in your enthusiasm to start your own business.

Franchise Agreement

The franchise agreement from a major franchisor will generally be on a take it or leave it basis.

That is the franchise agreement will not be negotiable as the franchisor can’t afford to negotiate individual franchise agreements with each franchisee.

But that does not mean that you should not ask the right questions and satisfy yourself that the situation that arises when there is a dispute or the franchisee is incapacitated or dies is provided for.

Here are 30 questions to ask:

1. What law governs the franchise agreement?

Many successful franchises in Ireland are not Irish companies but the law applicable for an international franchise may well be another jurisdiction.

2. What happens if the franchisee dies?

Is there provision in the franchise agreement for the franchisor to provide staff to run the business to keep the show on the road?

3. Is there a renewal option when the franchise agreement ends?

If there is are you happy to commit to sign a franchise agreement in say, 10 years time, having no opportunity to see the new agreement? What are the terms?

4. Can you sell the business?

Can the franchisor veto your purchaser?

5. When the franchise agreement is terminated is there a non compete clause?

For how long?

6. If the franchise agreement is terminated and the premises is yours, how much will it cost to debrand?

7. Is the training and system manual up to date?

When was it last updated?

8. Is there an advertising fee payable? Can it be justified?

Is there marketing spend on the brand?

9. Is there a management services fee? How is it calculated?

10. Does the franchisee have to inform the franchisor of any improvements he has made to the system?

11. Is the franchisor the owner of the trademark? And if not will he provide a licence to the franchisee for the use of any trademarks and intellectual property?

12. Who will own the premises?

Will the franchisor provide any advice in relation to location and premises? Is this provided for in the franchise agreement?

13. How long has the franchisor been carrying on business?

How many company owned outlets?

14. If the franchisor is supplying goods is there a credit limit?

Will a minimum stock of products be imposed? Is a vehicle required?

Will it have to be branded?

15. What books and records will the franchisee have to supply to franchisor?

16. Will a confidentiality agreement be required?

17. Who will pay for initial and ongoing training?

18. Is there a territory?

Is it exclusive?

Is it stipulated in the franchise agreement?

19. How long will the franchise agreement last?

Is it compliant with competition law requirements?

20. Is training provided for staff?

Is it ongoing?

21. Is more than 10% of the initial fee for use of the name and trademark?

Can this be justified?

22. What initial stock will be needed?

Will the franchisee have to purchase equipment, stationery from the franchisor?

23. What ongoing obligations has the franchisor as per the franchise agreement in relation to problem solving, management, finance and marketing, provision of staff in an emergency, research and development and maintaining and improving the manual?

24. Will franchisee be required to advertise locally?

25. Does the franchisor have the right to communicate with the franchisee’s customers?

26. Has the franchisor the legal right to purchase the franchise from the franchisee?

On what terms?

Is that in the franchise agreement?

27. Is the franchisor entitled to appoint a manager if the franchisee dies or is incapacitated?

28. Who is entitled to terminate the franchise agreement? On what terms?

What events will bring this about?

29. What will happen when a dispute arises?

Is arbitration provided for in the franchise agreement? Litigation?

30. Does the franchisee have to enter into any restrictive covenants in the franchise agreement?

When looking at a franchise agreement with a view to buying either a new franchise or an existing franchise, a close perusal of the franchise agreement with these questions foremost in your mind is a good starting point.

But only a starting point.

You will need to engage a solicitor before signing any franchise agreement.

Hopefully these questions may assist you in deciding whether a franchise is for you.

If you are happy with the answers to the 30 questions above here is one more critical question to ask:

Does the franchisor make more money from selling franchises than running, marketing, and promoting a real business?
By Terry Gorry
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Categories
Intellectual Property

What Is Intellectual Property and Why Should Your Small Business Care?

intellectual property law

You might have heard the phrase “intellectual property” bandied about.

And you might have thought: “well, that doesn’t affect me-it’s only big companies that need to worry about that”.

Think again.

Intellectual property can, on occasion, be the greatest single asset that a company owns.

The growth of the value of intellectual property such as trade marks, copyright and domain names has led many savvy small business owners to look at their own business and its intellectual property.

Intellectual property, like any other form of property, can be bought and sold in a similar fashion.

What is intellectual property?

Intellectual property includes trade marks, copyright, passing off, counterfeit goods, confidential information and domain names.

There have been many high profile legal battles concerning intellectual property. A high profile battle in Ireland involved Sean Dunne, the property developer and the ownership of the D4Hotels domain name.

This involved a legal dispute between Dunne and a former manager as to who was entitled to ownership of the domain name.

It is understood that a significant sum of money was involved in the resolution and settlement of this dispute.

Karen Millen and Dunnes Stores

The fashion designer, Karen Millen, also brought legal proceedings against Dunnes Stores in relation to the unregistered design of garments that Dunnes were selling in their stores.

This was interesting from an intellectual property viewpoint as Karen Millen did not register a trade mark for the design in question. However the court recognised her rights in the unregistered trade mark.

McDonalds are another high profile company who guard their intellectual property rights jealously.

And it is equally important for small business in Ireland to do likewise as for some companies, the only significant asset that they own is their intellectual property right be it a trade name, a domain name or copyright in written material or photographs.

Domain names

It is important to note that whilst the registration of a domain name is a simple enough process, it is prudent for the owner of a domain name to also register the same name as a trade mark.

Because you can own a domain name but not own the trade mark for that same formation of words.

Intellectual property covers a wide spectrum of commercial activity. It may well be the case that your business has some valuable intellectual property which you may not recognise.

So take a look around your business at your trade name, business name, trade marks, copyright material, domain name(s) and see if you need to take steps to protect it.
By Terry Gorry

Categories
Intellectual Property

How to Protect Your Domain Name(s)

domain-name-law

Your domain name may be one of the most valuable pieces of intellectual property your business has.

And protecting your asset is a smart, and essential, strategy.

Domain name disputes are becoming an increasing problem for business with the proliferation of website, eCommerce and new businesses going online and trading on the internet.

And infringements occur regularly in the shape of trade mark disputes, cyber squatting and related issues.

It is crucial for any business to have a smart commercial strategy regarding their trade marks and domain names.

Domain Name Basics

Domain names can usually be registered quickly and inexpensively. Top Level Domain(TLD) is the suffix such as ie or uk or fr-it denotes the country.

Within TLDs there are 2 sub-categories

1. Generic TLDs (gTLD) such as .com,.net,.org,.biz. These domain names do not have to be distinctive and do not indicate geographic origin.

2. Country Code TLDs (ccTLD) which are administered by the domain registry of the relevant country; in Ireland this is IE Domain Registry ltd (www.iedr.ir).

In Ireland you must display a real and substantive connection with Ireland when applying for a domain name before iedr will approve your application.

You may also need to show a connection with the business that you are referring to in your domain name application.(Check out IEDR.ie)

Domain name disputes

Domain name disputes have been resolved generally in one of 2 ways-either in court or by reference to the alternative dispute resolution procedure provided by ICANN.

This body has adopted the UDRP (Uniform Domain Name Dispute Resolution Policy) which apples to generic TLD name disputes.

Some country code administrators have incorporated this procedure into their registration agreements.

This UDRP procedure has been very successful and has resolved many domain name disputes; however it does not provide for damages and so a company that needs immediate injunctive relief and damages will be advised to head for court rather than the UDRP procedure.

Generally the relief provided is simply to have the domain name transferred to the plaintiff.

To win relief at the UDRP you will need to show 3 things

1. the complainant must show that the name is confusingly similar to the name in which the complainant has rights
2. the existing holder has no legitimate interest or rights in the domain name
3. the complainant must show bad faith on the part of the holder of the domain name.

The holder of the domain name can reject the complainant’s case if he could show bona fide use of the name, non commercial use with no intention to profit, evidence that the respondent is known by the domain name.

UDRP also recognise the phenomenon of ‘Reverse Domain Name Hijacking’ which is the occasion when the plaintiff uses the policy in bad faith in an attempt to deprive a registered holder of a domain name of that name.

In ccTLD disputes the domain name registry require further proofs before they cancel or transfer a domain name.

They would need to see some aspect of passing off or trade mark infringement also.

These disputes can be litigated before the appropriate courts as occurred in Jan. 2009 when Sean Dunne, Property Developer went to court in a dispute to obtain D4Hotels.com from John Brennan who had registered the domain name in his own name whilst running D4 hotels group in Ballsbridge.

The IEDR introduced a dispute resolution procedure in 2003 in respect of .ie disputes which you can learn more about on their website.

Conclusion

It is clearly impossible to register all domain names and trade marks which they may feel they need to protect their intellectual property.

Sometimes it is more cost effective to purchase the name from the ‘offender’ rather than go to court or UDRP.

It is important to recognise the difference between trade marks and domain names and it is prudent for a company to register each of their domain names as a trade mark.

Because otherwise their domain name could be registered as a trade mark by a 3rd party.
By Terry Gorry
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Categories
Debt Collection

How to Collect a Debt-Debt Collection Procedures in Ireland

Do you have some outstanding debts that you could really put to good use in your business?

This piece will tell you how to collect a debt and give you a good overview of debt collection procedures in Ireland. (If you don’t want to do this yourself and need professional help to collect your debts contact me here).

The pressure on the cash flow of many businesses and sole traders, especially with the banks in Ireland effectively closed to many SMEs, can lead very quickly to a major cash flow problem.

The 1st question you need to ask yourself is: “is my creditor a “mark”?

In other words, is he/she worth pursuing? Once you have decided he/she is, then the procedure is pretty straightforward.

However your time may be better spent working on your business and handing over your difficult and worthwhile creditors to a solicitor.

Anyway, before you make any decisions, take a look at the procedures for debt collection in Ireland…

The monetary amounts for the jurisdiction of the District Court, Circuit Court, and High Court are set to change on 3rd February, 2014 as a result of the Courts and Civil Law (Miscellaneous Provisions) Act 2013.

When the commencement order for Part 3 of the Act is signed the amounts will change as follows:

District Court will have jurisdiction up to €15,000; Circuit Court will be increased to €75,000 (but €60,000 in personal injury cases), and High Court in excess of this amount.

Here are two 2015 articles about how to bring legal proceedings in the District Court and how to obtain judgment in default in debt claimsThe procedure in the District has changed slightly since I wrote those articles, with a Statement of Claim now required, not a Civil Summons, and the monetary jurisdiction increasing to €15,000.

Common questions in relation to debt collection in Ireland are set out below.

Questions which crop up most often include-

  • How do I pursue a debt?
  • Why can I not issue debtor proceedings for rent owed for my house?
  • Can I issue debt proceedings in the District Court myself?
  • What should I do when I receive debt collection letters?
  • What is the best way to deal with debt collection agencies?
  • Should I use a debt collection agency when trying to collect a debt?
  • What is a Judgment mortgages?
  • Where to bring enforcement proceedings for debt collection?

District Court proceedings (sums less than €15,000)

Where you are owed a sum of less than €15,000 and have exhausted your debt collection procedure of issuing demand letters and are clearly having no success the next step in the debt collection process is to issue and serve a Statement of Claim on your creditor claiming your debt.

If no intention to defend the claim notice is filed in the District Court then you are free to apply to the District court office, filing the correct documents, for a summary decree/judgment.

The documents you need to get judgment/summary decree are-

  1. An affidavit of debt sworn by yourself or by someone on your behalf (e.g. company accountant, company secretary)
  2. 2. A completed decree form.

If the District court is satisfied to enter judgment then you will get your signed decree from the District court and this can be sent to the Sheriff for enforcement.

A defendant can seek to have this decree set aside or varied on grounds of fraud, misrepresentation, surprise, mistake or other sufficient grounds.

Circuit Court proceedings (sums less than €75,000)

Again when no defence or appearance is received to your issuing of proceedings (Civil Bill) in your debt collection efforts you are free to lodge the necessary papers in the Circuit Court office to obtain judgment.

The papers to be lodged in the Circuit Court office are more extensive and you really need the help of a solicitor to do so.

But because the amount of debt that the circuit court will be dealing with will be up to €75,000, then it will be well worth it to get a legal professional on the case.

If the debt is defended and contested then it goes to court hearing and assuming you win an award you can obtain the court order from the County Registrar.

And just like the debt collection procedure for the district court, you can get the sheriff for the area to execute the court order.

High Court (sums greater than €75,000)

To carry out your debt collection for sums of this magnitude you must issue a High Court Summary Summons.

Assuming that no appearance has been entered by your creditor then you can proceed to lodge the necessary papers with the Central Office of the High Court judgments section which will allow you to obtain judgment in default of appearance.

This is a technical and demanding process which will require the assistance of a solicitor.

Once judgment has been obtained it should firstly be served on the defendant. Judgments of all courts can then be registered in the Central Office of the High Court and will appear in trade gazettes such as Stubb’s Gazette.

This prospect of adverse publicity can encourage a creditor to pay you promptly.

There are various procedures then for summoning before the appropriate court the debtor for the purposes of ascertaining what property and assets the debtor owns. This is a similar procedure which occurs in relation to bankruptcy.

If and when you obtain a court order or judgment against your creditor in your debt collection process another further step is to obtain a judgment mortgage on some valuable property of the creditor.

Enforcement of Judgments

There is no monetary jurisdiction on the District Court when it comes to the enforcement of judgments.

So, regardless of which court judgment is obtained, it can be enforced in the District Court.

However, before attempting to enforce judgment there are a number of essential steps to be taken:

  1. serve the judgment on the defendant. Personal service is required for an individual; for a company you can leave it at the registered office of the company or serve by post to that office.
  2. registration of the judgment in the Central Office of the High Court. This is not essential but the threat of appearing in Stubbs Gazette and other trade journals can be an encouragement to the debtor.
  3. examination of the debtor of the debtor as to means.

Enforcement of Judgment in the District Court

So, you have obtained a judgment against a debtor and now you wish to enforce it in the District Court or you have had a judgment given against you for a debt and you are confused as to what happens next.

It is important to understand that there is no limit on the jurisdiction of the District Court when it comes to enforcement of a Judgment so Judgment/Decree obtained in the District Court, Circuit Court or High Court can be enforced through the District Court procedures.

What happens next? How is the judgment enforced?

Serve the Defendant

A Judgment or Decree is simply a statement of the amount owing but it is no of itself an order to pay or an execution order.

So the first step after obtaining judgment is to serve it on the Defendant.

Register the Judgment

The Judgment can be registered in the Central Office of the High Court and published in trade gazettes such as Stubbs.

Sometimes the threat of publication of a judgment can encourage a debtor to attempt to come to some arrangement.

Examination of the Debtor as to Means

Examination of the debtor is a procedure where the Debtor can be summoned to the District or High Court to be examined as to his/her assets and property.

It is worth noting that the examination procedure cannot be carried out against companies, only natural persons.

For examination to take place a Sheriff will have to have returned “no goods” or “nulla bona” on the execution order or you as creditor will have to swear an affidavit that you believe the Debtor has no goods.

The solicitor for the creditor will issue a summons for the attendance of the debtor and if served by hand must be served at least 14 days before the Court date; if served by registered post it must be served 21 days before the hearing date.

The summons will have attached to it a Statement of Means which must be filled out by the debtor and lodged in the District Court office at least 1 week before hearing.

The solicitor for the creditor will need to lodge

1. The original Decree

2. An affidavit of residency confirming that the debtor lives where the summons has been served

3. A certificate of amount due.

Instalment Order

It is up to the Judge then to decide how much the debtor should be paying based on the statement of means and will make an order called an Instalment Order requiring the debtor to pay a fixed amount monthly or weekly.

However if the debtor has no means then an instalment order is very unlikely to be made.

Debtors’ Statements of Means are generally accepted by District Court Judges unless you as creditor can show that the Statement is inaccurate.

This instalment order must then be served on the debtor and will remain in force for 12 years from the date that Judgment was granted.

If the instalment order is not complied with the creditor can issue a Summons for Failure to Comply with An Instalment order.

This next appearance in Court by the Debtor may lead the Judge to granting a Committal order committing the debtor to prison.

However since the Caroline McCann/Monaghan Credit Union case it is much more difficult to commit a debtor to prison and the Court must be satisfied that the Debtor will not pay as opposed to being unable to pay.

After Instalment Order

If you are successful in obtaining an instalment order against the Debtor you have a number of options in attempting to enforce your judgment/decree.

Methods of Enforcement

The most common methods of enforcement of your judgment/decree include

  • judgment mortgage
  • execution order
  • attachment and commital
  • garnishee orders (attachment of debts)
  • appointing a receiver
  • order charging a partner’s interest
  • charging order over stocks and shares
  • sequestration

Getting a judgment against a debtor is one thing-enforcing it is quite another.

Once you have obtained your judgment against a debtor there are a number of avenues open to you to attempt to enforce that judgment including

  1. Judgment mortgage
  2. Execution orders
  3. Attachment and committal
  4. Garnishee order (attachment of debts)
  5. Appointment of  a receiver
  6. Charging order over shares
  7. Order for possession and delivery up
  8. Sequestration
  9. Charging a partner’s interest.

10. Bankruptcy

Judgment Mortgage

It is possible to register a judgment mortgage on property of the debtor, even the family home. You can then apply to the appropriate court to force the sale of the house and get paid out of the proceeds.

However the courts are reluctant to force the sale of the family home. It is important to realise that a judgment mortgage can be registered on a family home even without the consent of the non debt owing spouse.

To obtain the judgment mortgage you need to go to the appropriate court and file various documents such as details of the name of the cause, the names and addresses of the parties, the trades or professions of the parties, the location of the lands, the amount of the debt and costs and a statement from the party who is owed the money which must be sworn.

Once the judgment mortgage is obtained then it can be registered in the Land Registry or the Registry of Deeds.

Once the judgment mortgage is registered the creditor can issue proceedings for the sale of the property and if he is successful in this application then the court makes an order for sale and this sale is supervised by the Examiner of the High Court.

For this part of your debt collection procedure you will generally need the help of a solicitor. But for anyone involved in small business it is no burden to carry to understand how the debt collection process works and your role in it.

Execution orders

Execution orders, also known as “fieri facias” or “fi fa”, is the most common method of enforcement and utilizes sheriffs to attempt to seize goods of the debtor.

You will firstly need to obtain an execution order, either from the High Court or District Court and send it to the Sheriff for execution.

There are 2 independent Sheriffs in Dublin and Cork; in the other counties the County Registrar carries out the functions of a sheriff.

A sheriff has the powers of

  • seizure of moveable goods (but not goods on lease or hire purchase)
  • right of entry onto premises provided he does so peacefully and believes that there are goods on the premises.

An execution order from the District Court is valid for 6 years; from other Courts the period is 1 year.

If the sheriff is unable to seize goods he will return the execution order and mark it “no goods” or “nulla bona”.

Attachment and committal

It is possible to apply to the District Court to obtain an order for committal of the debtor to prison for failure to comply with an instalment order.

However this whole area has changed since the decision in the Caroline McCann v The Judge of the District Court and others with Monaghan Credit Union Limited case by Ms. Justice Laffoy where Flac challenged the constitutionality of imprisoning a debtor for failure to pay.

The finding of unconstitutionality of section 6 of the Enforcement of Courts Orders Act 1940 has led to a change in the law and basically a debtor is unlikely to be sent to prison now for inability to pay (as opposed to an unwillingness to pay).

Garnishee order (attachment of debts)

If a debtor has monies due and owing to him but has no goods it is possible for a creditor to obtain an order for attachment of debts to have repayment of the debt repaid to him instead of the debtor.

This type of order would cover

  • wages due to the debtor
  • a credit balance in the debtor’s bank account
  • other debts due to the debtor.

Appointment of a receiver

The Circuit or High Court has the power to appoint a receiver over the property of a debtor, selling it and paying the proceeds to the creditor. This method is entirely at the discretion of the Court as it is an equitable remedy.

Charging shares and stocks

This involves getting a charge on government securities or shares registered in the debtor’s name and ordering a transfer of those shares to the creditor.

Order for possession

This order applies where the creditor seeks to recover property other than money or land, for example goods and chattels. This too is an order at the discretion of the Court with no automatic right to the creditor.

Sequestration

This is an order against a person or company who has not complied with an injunction but can also be used to enforce a judgment.

Charging a partner’s interest

This comes about where the debtor is in a partnership and this gives the creditor priority over other creditors of the partnership.

Bankruptcy

Another, and last resort procedure, in your debt collection may involve issuing bankruptcy proceedings.

If you are intending to issuing bankruptcy proceedings against a creditor you should bear in mind the following

  • You gain no priority in relation to your debt
  • Preferential claims will still be paid first ie employees, Revenue Commissioners etc.
  • Bankruptcy summons will only be granted by the High Court where all other avenues have been exhausted

The Bankruptcy Act 1988 provides 2 methods by which a debtor can make a formal arrangement with his creditors

A private arrangement under the control of the court which is very similar to an examinership process for companies.

This involves the debtor setting out the reasons why he is unable to pay his debts and requesting protection from proceedings including Bankruptcy.

When the protection order has been granted the debtor will meet with his creditors and make an offer to them.

If three fifths of the creditors in number and value accept the offer, it is deemed to be accepted

Private arrangement outside the court. This is a matter of contract between the debtor and his creditors and needs the support of all creditors.

Execution Order

The execution order occurs in the latter phase of debt collection. And this is after you have obtained a court order for the debt due to you.

In this scenario you apply to the relevant court for an execution order which, if granted, is sent to the Sheriff for execution. The sheriff then writes to the debtor and has a duty to execute the execution order within a reasonable time.

He has the power to seize all the debtors’ moveable goods and has a right of entry into premises but he must not use violence and must have reasonable grounds for believing that there are defaulter’s goods on the premises.

You will then be in a position to hand over that decree to the sheriff for the area and he must attempt to execute it on your behalf.

An execution order is valid for 12 months but often if the debtor has no goods to seize then the sheriff will return the execution order to the creditor marked ‘nulla bona’ which essentially means ‘no goods’.

However nowadays this procedure can be ineffective in practice as a lot of goods will be leased or supplied to the debtor with retention of title clauses in the contract or on a sale or return basis.

However the existence of bankruptcy proceedings, receivership or liquidation complicates things and the Official Assignee in bankruptcy, the receiver or liquidator all have priority.

So whilst some debt collection procedures are relatively straightforward, some will need the assistance of a solicitor.

Companies

Where you are owed money by a company and you know the company is insolvent then you can petition the High Court to wind up the company (section 213 procedure). This can be an effective debt collection procedure, although the courts do not like to see it used until all other debt collection avenues have been explored first.

To do this you serve a 21 day demand letter on the company; if the debt is not paid within this period the debtor is free to petition for the winding up. Again the petitioner’s debt ranks behind preferential creditors such as employees and the Revenue Commissioners.

Pursuing debt collection against a company

  1. Obtain a judgement against the company by way of “summons for liquidated debt”, the amount of debt determines in what Court the summons is issued
  2. Have the judgement executed by the sheriff or the county registrar
  3. Have the judgement registered in the High Court which will result in publication in Stubb’s Gazette, potentially affecting debtor’s credit rating
  4. Lodge an affidavit with the Property Registration Authority registering the judgement against the debtor’s property.
  5. Obtain a Court Order that the company has wilfully defaulted on the payment of its debt.

The Courts have broad powers including the seizure of the company’s assets, the director’s personal assets and even the imprisonment of the debtor.

This option can be expensive and difficult to prove, and the Courts may take the less stringent approach of for example a stay to allow the debtor pay.

You can also apply to the High Court, where the company is unable to pay its debts but is not in liquidation, for a wide range of reliefs, including arrest, seizure of assets, imposition of personal liability and assessment for damages, and to have the company put into liquidation.

Need Professional Help With Debt Collection?

Sometimes, a solicitor’s letter will do the trick and have the desired outcome. If not, I can take stronger action on your behalf and commence legal proceedings.

Contact me here.
By Terry Gorry
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Categories
Data Protection

Data Protection Law and Your Business-An Overview

data protection law ireland

Data protection laws can cause significant headaches for business owners and employers.

As a business owner and/or employer you can easily fall foul of the law.

This piece aims to give you an overview of the most important obligations on business and employers in relation to data protection.

Everyone has strong rights when it comes to the data that is held on them thanks to the Data Protection (Amendment) Act 2003 and Data protection act of 1988.

And it is up to the data protection commissioner to uphold those rights.

The role of the data protection commissioner in protecting your privacy rights when it comes to data being held about you is critical.

Data Controllers and Data Subjects

Firstly though, it is important to understand what a data controller and what a data subject is as defined under the legislation. Many data controllers do not understand the vital responsibility that they have when it comes to retaining data on employees, customers, clients, etc.

data controller” means a person who, either alone or with others, controls the contents and use of personal data;

data subject” means an individual who is the subject of personal data;

People who control and use data about others are called ‘data controllers’ and are recognised in the acts above as having certain obligations imposed on them by law.

Individuals should know when they provide personal information to any organisation

  1. Who is gathering the data
  2. What use this data will be put
  3. Who the data will be disclosed to.

If a data controller has the data for a specific purpose but in the future decides to use it for a new purpose he must ask the person whose information he has whether they are agreeable to that new use or not as the data shall only be held for specified purposes.

Data Protection for Employers

All businesses should be concerned about data protection and the Data Protection Acts 1988 and 2003. These 2 acts attempt to balance the rights of individuals in relation to personal data that is stored by various organisations about them.

Learn more about data protection and employers at EmploymentRightsIreland.com.

As an employer you should be concerned with other aspects of your role as a data controller such as the usefulness of online backup services which can provide online backups of your valuable data or offsite backup if that is more convenient for you.

The Data Protection Acts 1988 and 2003 also impose stringent requirements on the data kept by employers about employees and in particular in respect of sensitive personal data. Employers are of course data controllers and processors within the legislation.

The Data Protection Commissioner can impose fines of up to €100,000 and employees can succeed in claims in relation to breaches of data protection law.

The principle obligations on the employer in respect of sensitive personal data is to collect and process it fairly, is accurate and up to date, and is kept no longer than necessary. For this reason employers should ensure that they have a data protection policy in the workplace.

Employee as Data Subject

The employee, as a data subject, has a general right to know what personal data is held about him/her, to whom it is disclosed, and to have it deleted or amended if incorrect. A written data request from an employee should be responded to within 40 days.

The Data Protection Acts, section 8 in particular, set out the circumstances where the employer may disclose the employee’s data to a third party.

Whether the 3rd party is a member of the EEA (European Economic Area) or not will determine whether the request can be complied with or not by the employer. If the data is being disclosed to a 3rd party within the EEA then a written contract is required.

If not, the transfer of data is prohibited (subject to exceptional safeguards).

Registration with the Data Protection Commissioner

Data controllers fall into 3 categories for the purpose of registration

  1. Categories of persons who are always obliged to register-this includes Banks and financial institutions, insurance companies, internet service providers, phone companies
  2. Categories of persons who may be required to register –this includes data controllers who process personal data relating to mental and physical health
  3. Categories who are excluded- not for profit organisations, elected representatives, data processed for the normal course of personnel administration, solicitors and barristers, data for journalistic, literary or artistic material

Please note that these are not exhaustive lists and you may need to consult the legislation or a solicitor who has an expertise in this area if you are in doubt.

Personal data should not be excessive in relation to the purpose for which it is held and should not be kept for longer than is necessary for that purpose.

Non compliance with data protection law

Non-compliance with data protection law may lead to a complaint to the Data Protection Commissioner and the Data Controller can be held liable under normal common law principles (eg the law of contract, confidential information etc.)

It should be noted that Irish data protection legislation only applies to data controllers who are established here.

Data Protection Law and Direct Marketing

Many direct marketers are blissfully unaware of the significant conditions in the Data Protection Acts 1988 and 2003 concerning the use of personal data for direct marketing purposes.

For example the Data Protection Act 1988 provides that the data controller/direct marketer has forty days to agree to a request from the recipient to stop using his data for direct marketing.

There is also a positive obligation on the data controller/direct marketer to let the recipients (data subjects) know that they can object in writing and free of charge to the data controller using their data for direct marketing purposes.

The significance of this is that there is a real obligation on the marketer to let the “target” know that they are being targeted for direct marketing purposes.

The basic rule is this:

The basic rule that applies to direct marketing is that you need the consent of the individual to use their personal data for direct marketing purposes.

The Electronic Communications Regulations 2003 (SI 535 of 2003)

These regulations (subsequently revoked-see below) provide further protection to the consumer/recipient of direct marketing messages and cover, amongst other things

  • Email marketing
  • SMS messaging
  • Processing of location data.

These regulations aim to protect recipients from unwanted and unsolicited SMS messages and email.

In summary the Electronic Communications Regulations provide that

  1. The use of email, fax, automatic dialling machines, and SMS messaging for direct marketing purposes to individuals without the advance consent of the recipient is prohibited
  2. The use of these methods of direct marketing to businesses is prohibited if the business (or non-natural person) had recorded their objection in the National Directory Database or has told the sender that they do not consent
  3. The use of telephone marketing is also prohibited if the phone subscriber has recorded their objection in the National Directory Database or advised the caller that they do not consent
  4. Unsolicited telephone callers must provide their name and, if requested, their address and phone number
  5. The same situation applies in relation to sending SMS messages or emails for direct marketing purposes
  6. If a customer gives their contact details in the course of a transaction or purchase then their details can be used for direct marketing purposes only if it is made clear to the recipient that they are provided with an easy and free way of objecting. And this direct marketing is only permissible in respect of similar goods or services to the original purchase.

Breach of all of the activities 1-6 above is actually a criminal offence, unlike much of Data Protection Law breaches.

It is worth noting also for example that the Data Protection Commissioner has found that unsolicited political soliciting of support has been found to be unlawful direct marketing.

For further useful information and frequently asked questions in this potentially dangerous area for direct marketers take a look at http://www.dataprivacy.ie which is the website of the Data Protection Commissioner.

UPDATE

The above statutory instrument and SI 526 of 2008 were revoked by statutory instrument, 336/2011, European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011.

SI 336/2011-European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011

Different rules apply to phone, fax, text message and e-mail marketing.

Direct Marketing by Post

The Data Protection Acts determine how you can market by direct mail through the postal service.

For the protection of the Data Protection Acts to apply, the letter must be addressed to a named individual.

Unaddressed mail or post addressed to the ‘householder’ or ‘homeowner’ for example is not covered as this type of mail is deemed not to use ‘personal data’.

In addition, post addressed to corporate entities and/or named office holders in those entities is not covered by data protection legislation.

In order to use personal data for direct postal marketing, you must firstly tell the person that you intend using their personal data for this purpose and give them the opportunity to ‘opt out’.

A person can withdraw their consent at any time.

Electronic Marketing

The rules surrounding marketing by email, text, phone, fax are more stringent than those applying to direct marketing by post.

And certain more restrictive rules apply to marketing to corporate entities than applies re marketing by post.

You cannot make a marketing call to a person or business if they have indicated their preference to not receive such calls in the National Directory Database. The same rule applies to a person or business that has made it known to you that they do not consent to such calls.

You cannot make a call to a mobile phone unless the person has consented to such calls or the person has indicated his/her willingness generally to receive such calls on the National Directory database.

Electronic Mail

Electronic mail includes email, phone text, MMS messages, voice messages, image messages, and sound messages.

Individual and business customers : Consent is again required; in addition the offer you are making must be of a kind similar to that which you sold the person to begin with, you must have given them the opportunity to object to such marketing in an easy manner, every time you send a marketing message you must give the person the opportunity to opt out again, and the original sale must have occurred in the last 12 months.

Individuals who are not customers: consent is required to send marketing messages.

Business contacts: you cannot send marketing messages where the business has advised you that they do not consent to such messages.

Direct Marketing by Fax

You cannot send a fax with a marketing message to a person if they have not previously consented. However, the fax line must be used for personal/domestic purposes and any use in relation to a business will see that line being treated as part of the business and not a residential line.

You may not send a marketing fax to a business which has indicated its unwillingness to receive such messages on the National Directory Database. Nor can you send one if the business has told you they do not wish to receive them.

Generally

The onus is on you, if you are prosecuted, to prove that you had consent for the sending of marketing messages. Any consent that you have should be retained for 2 years.

The penalties for breaches of data protection legislation and electronic communications regulations are very stiff.

And each breach attracts a new penalty.

Processing of personal data

In order to process personal data the most important pre-condition to be satisfied is that the data may only be processed where the subject has given his consent.

However there is considerable debate as to what ‘consent’ in this context means-is it the opt-in procedure (where the subject must expressly consent to his data being processed)?

Or is it the opt-out procedure (where the subject is asked if they object to their data being processed)

There are additional preconditions relating to the processing of sensitive personal data such as racial or ethnic origin, political opinion, religious belief etc.

In these circumstances the data subject must expressly consent and the ‘opt out’ procedure would not be sufficient in these situations.

Rights of Data Subjects

These rights derive from the Data Protection acts and include

  • The right to be informed of data being kept on them
  • The right to access to the data (there are a number of exceptions to this right)
  • It is worth noting that the Data Protection Commissioner appears to be of the opinion that CCTV footage of a person is data within the meaning of the acts.
  • Right to prevent processing where it may cause damage or distress

The transfer of data outside the state is restricted to countries outside of the European Economic Area.

It may not occur unless that country provides an adequate level of protection and this causes problems re transfer of such data to USA as there are varying standards of protection in the USA.

Their Safe Harbour scheme is a voluntary scheme which provides similar standards of data protection to Europe but not all companies sign up.

Data Protection and Schools

Data protection legislation applies to schools even though the Freedom of Information Act does not.

The Data Protection Commissioner has stated that

CCTV may be used legitimately for security related purposes at the perimeter of a school. Any use beyond this would need to be fully justifiable and evidence-based with a very high threshold for such evidence. This is particularly the case in a school environment as most of the personal data processed will relate to minors.

Data requests can be made by parents on behalf of children or any member of staff.

Learn more about how the law applies in schools in Ireland at education law Ireland.
By Terry Gorry
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Categories
Bankruptcy

The New Bankruptcy Law in Ireland-How to Declare Bankruptcy

If you are thinking about going bankrupt in Ireland in 2014 this piece will give you the essential information you will need.

bankruptcy-ireland

This piece aims to give you the meat and potatoes of what’s involved in you choosing to go bankrupt and the procedure involved.

Debtor’s Bankruptcy

I am assuming you are the one who is choosing to go bankrupt.

This is a “debtor’s bankruptcy”. (A creditor’s bankruptcy is where a creditor of yours chooses to apply to have you made bankrupt-that procedure is covered elsewhere on the site).

Firstly, before applying for bankruptcy you need to explore the alternative solutions available to you courtesy of the Personal Insolvency Act, 2012:

  • A debt settlement arrangement or
  • A personal insolvency arrangement.

To apply for bankruptcy you don’t need a solicitor. But you would be well advised to engage one because

  1. It is a High Court application by way of a Petition verified by an Affidavit and Statement of Affairs and
  2. You need legal advice to confirm that bankruptcy is the right option for you.

There are 2 key offices you need to know about:

  1. The Office of the Examiner of the High Court. Your application for a bankruptcy order is filed in this office in the first instance.

This office is an office of the High Court.

2. The Official Assignee’s office. After your bankruptcy order is granted you will deal with the Official Assignee’s office.

The official assignee is an independent statutory officer of Court who administers your estate once you have been declared bankrupt.

Consequences of Bankruptcy

The main consequences of bankruptcy are:

  1. Your debts are wiped out
  2. All your property transfers to the Official Assignee (The only assets that do not transfer to the Official Assignee are essential assets up to a value of € 6,000 (including vehicles), or more, if the High Court allows.
  3. You are discharged from bankruptcy after 3 years
  4. You must contribute from your surplus income towards your debts for up to 5 years
  5. The Official Assignee receives and deals with the claims of your creditors-they can no longer contact you
  6. The Official Assignee administers your estate.

Eligibility for Bankruptcy

To be eligible for bankruptcy you must fulfil the following conditions:

I.            You must be insolvent

II.            You must lodge €650 with the Insolvency Service of Ireland

III.            You must swear an affidavit that you have made reasonable efforts to use the alternative debt settlement arrangements open to you-the debt settlement arrangement and the personal insolvency arrangement

IV.           Your debts must exceed your assets by more than €20,000 and you must present a Statement of Affairs setting our your financial position

V.            You must prepare a petition for bankruptcy.

Bankruptcy Fees

The fees for bankruptcy are

  • €650 for the Insolvency Service of Ireland
  • Stamp duty on the petition and affidavit of €102.50.

As I write this you would also have an advertising fee for a national newspaper of approximately €500 to advertise your petition for bankruptcy.

However this is almost certain to change as the Companies (Miscellaneous Provisions) Bill 2013, if passed into law, will do away with the requirement for advertising.

Your Duties re Your Bankruptcy

You will have to attend the High Court on the day your application for bankruptcy is listed; you will have to attend again on the Statutory Court Sitting date.

You also have to cooperate fully with the Official Assignee; attend the bankruptcy division of the Personal Insolvency of Ireland on the day you are made bankrupt.

You will also have to attend for interview with the Official Assignee’s office.

Post Bankruptcy

The Official Assignee will look for a contribution from your surplus income, if any, after deduction of reasonable living expenses.

Your pension is not transferred to the Official Assignee.

The Family Home in Bankruptcy?

Your share of the family home will transfer to the Official Assignee. You may be able to agree a schedule of mortgage repayments with your bank, provided the Official Assignee agrees that these payments are within reasonable living expenses and not for some exorbitant pile with eye watering mortgage payments.

The Official Assignee cannot sell the family home without first obtaining the consent of the High Court. The High Court will consider each case on its merits and look at your creditors, your spouse’s/civil partner’s situation, and your dependents.

If there is equity in the family home the Official Assignee will seek to sell his share to your spouse/civil partner.

If there is no equity the Oficial Assignee will consider the sale of his share to your spouse/civil partner.

Discharge from Bankruptcy

You should be discharged after 3 years.

This period could be extended if you don’t cooperate with the Official Assignee or you fail to disclose all of your property.
By Terry Gorry
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Categories
Intellectual Property

Copyright Law in Ireland-A Quick and Easy Guide to Copyright Law

copyright-law-ireland-2

What is copyright? Can you register copyright? What steps can you take if your copyright has been infringed?

Copyright is the legal term, which describes the rights given to authors/creators of certain categories of work.

Copyright protection extends to the following works:

  1. Original literary, dramatic, musical or artistic works sound recordings, films, broadcasts, cable programmes
  2. the typographical arrangement of published editions, computer programmes,
  3. original databases.

The owner of copyright is the author and within the Copyright and Related Rights Act, 2000 the author has a very specific definition

21.—In this Act, “author” means the person who creates a work and includes:
(a) in the case of a sound recording, the producer;
(b) in the case of a film, the producer and the principal director;
(c) in the case of a broadcast, the person making the broadcast or in the case of a broadcast which relays another broadcast by reception and immediate retransmission, without alteration, the person making that other broadcast;
(d) in the case of a cable programme, the person providing the cable programme service in which the programme is included;
(e) in the case of a typographical arrangement of a published edition, the publisher;
(f) in the case of a work which is computer-generated, the person by whom the arrangements necessary for the creation of the work are undertaken;
(g) in the case of an original database, the individual or group of individuals who made the database; and
(h) in the case of a photograph, the photographer

 

For example a photographer is the owner in the case of a photograph.

However, as copyright is a form of property, the right may be transferred to someone else, for example, to a publisher. Where an employee in the course of employment creates the work, the employer is the owner of the copyright in the work, unless an agreement to the contrary exists.

Copyright is a property right and the owner of the work can control the use of the work, subject to certain exceptions.

The owner has the exclusive right to prohibit or authorise others to undertake the following:

  1. copy the work
  2. perform the work
  3. make the work available to the public through broadcasting or recordings
  4. make an adaptation of the work.

Copyright takes effect as soon as the work is put on paper, film, or other fixed medium such as CD-ROM, DVD, Internet, etc.

No protection is provided for ideas while the ideas are in a persons mind; copyright law protects the form of expression of ideas, not the ideas themselves.

Rights related to Copyright

Rights are not restricted just to the creators of the works themselves but certain other rights may apply.

For example, the record company has certain rights in a sound recording of the performance of a song, in addition the author(s) of the lyrics and the music will also have certain copyrights. Similarly performing artists have certain rights in their performances. The legislation also provides for moral rights, such as the right to be acknowledged as the author of a particular work and also the right to object to derogatory treatment of that work.

The primary legislation governing copyright in Ireland is the Copyright and Related Rights Act, 2000 (No. 28 of 2000).

Copyright Protection

In Ireland, there is no registration procedure for owners of a copyright work.

Basically the act of creating a work also creates the copyright, which then subsists in the physical expression of the work.

Copyrights are protected by law and illegal use of these rights can be contested in the Courts, the technical term for this misuse is infringement.

The legislation provides for criminal offences and consequently infringers could face both civil liability and criminal convictions.

Professional advice should be sought by copyright owners with regard to the options and the remedies available where infringement of their work occurs.

It is most important that the originator of a work can show subsequently when the work and the consequential copyright were created as it may be necessary to commence or defend infringement proceedings, at some later stage.

One way of doing this is to deposit a copy of the work with an acknowledged representative who may be a bank or solicitor in such a way as to allow the date and time of the deposit to be recorded or notarised.

Alternatively, one may send a copy of the work to oneself by registered post (ensuring a clear date stamp on the envelope), retaining the original receipt of posting and leaving the envelope containing the copyright work unopened thus establishing that the work existed at that date and time.

The Copyright Notice and Symbol ©

It is important to show that copyright is claimed in a work. Works should be clearly marked to show who the copyright owner is and the date from which copyright is claimed.

The internationally recognised symbol © is normally used to indicate that a work is protected by copyright.

Example:

© Copyright Terry Gorry 2013.

Examples of more detailed copyright notices may be found in published versions of literary works. The inclusion of a copyright notice does not legally constitute proof of ownership, but does indicate a claim to copyright, which may prove useful if it is necessary to defend that claim or to deter possible infringement.

It is usually necessary to obtain permission to use copyright material. Persons with a copy of a work can look for an indication on the work regarding copyright. This can assist making contact with the author/ original creator of the work in order to obtain their permission to use the work for any act, which is prohibited by copyright legislation.

Length of Copyright Protection

The duration of copyright protection varies according to the format of the work. In respect of the following works the term of protection is:

Literary, dramatic, musical and artistic works

Copyright protection expires 70 years after the death of the author/creator.

Films

Copyright protection expires 70 years after the last of the following dies, the director, the author of the screenplay, the author of the dialogue of the film, or the author of the music composed for use in the film.

Sound recordings

Copyright protection expires 50 years after the sound recording is made or if it is made available to the public then 50 years from the date it was made available to the public.

Broadcasts

Copyright protection expires 50 years after the broadcast is first transmitted.

The typographical arrangement of a published edition

Copyright protection expires 50 years after the date it is first made available to the public.

Computer-generated works

Copyright protection expires 70 years after the date it is first made available to the public.

Chapter 3 of the Copyright and Related Rights Act, 2000 (No. 28 of 2000) deals in greater detail with the duration of copyright in Ireland.

Benefits of Copyright Protection

Copyright protection provides a vital incentive for the creation of many intellectual works.

Without copyright protection, it would be easy for others to exploit these works without paying any royalties or remuneration to the owner of the work. Copyright therefore encourages enterprise and creates a favourable climate to stimulate economic activity.

Copyright protection provides benefits in the form of economic rights which entitle the creators to control use of their literary and artistic material in a number of ways such as making copies, performing in public, broadcasting, use on-line, etc. and to obtain an appropriate economic reward.

Creators can therefore be rewarded for their creativity and investment.

Copyright also gives moral rights to be identified as the creator or author of certain kinds of material (known as the paternity right), and object to the distortion and mutilation of it.

An author’s right to object to the modification or derogatory action in relation to his or her work is known as an integrity right.

Chapter 7 of the Copyright and Related Rights Act, 2000 (No. 28 of 2000) deals in greater detail with moral rights applicable in Ireland.

Commissioned Work and Copyright

Prior to the Copyright and Related Works Act, 2000 the commissioner of certain types of work would own the copyright to that work.

That is no longer the case.

If you commission artistic work and wish to have the copyright transferred to you, it will be necessary to have a written agreement to do so.

In Irish law, the assignment of copyright in a work must be effected in writing and signed by the person assigning the copyright (section 120, Copyright and Related Rights Act, 2000).

(3) An assignment of the copyright in a work, whether in whole or in part, is not effective unless it is in writing and signed by or on behalf of the assignor.

However, if an employee creates a work in the course of his/her employment, the owner of the copyright in that work will be the employer.
By Terry Gorry
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Categories
Company Formation Starting a Business

How To Set Up a Limited Company (And the Advantages and Disadvantages of Limited Company Status)

Thinking about setting up a limited company?

set-up-limited-company
Advantages and disadvantages of limited liability

Fancy the thought of becoming a company director? And majority shareholder?

But you’re not sure whether it is a good idea or whether you need to?

This piece will take a look at how to register a limited company in Ireland, the different types of limited company and, most importantly of all, the advantages and disadvantages of setting up a limited company.

Update 2015

The law in this area is due to change on 1st June, 2015 when the Companies act, 2014 comes into force.

To form a company, also known as setting up a company or incorporating a company, you will need to submit the following documents, along with the registration fee, to the companies registration office:

  1. Memorandum of association
  2. Articles of association
  3. Form A1

To carry out your company set up you can download the forms above from the companies registration office website at CRO.ie.

Rather than do it yourself though you can engage the services of a solicitor who will probably have formed many companies on behalf of clients. Your solicitor will also probably use a reputable company formation service which will make formation easier and less likely to cause any delays.

Memorandum of association

Your company set up will involve what’s called a memorandum of association.

This memorandum of association sets out the conditions upon which the company is granted incorporation. It must contain provisions dealing with certain matters e.g. the name and objects of the company and, if it is a company with limited liability, that fact must also be stated.

The memorandum of association must be in accordance with, or as near as circumstances permit, to the appropriate table in the First Schedule to the Companies Act 1963. It must be printed and divided into paragraphs and numbered consecutively.

Types of company

To set up a company in Ireland you must decide first which is the most appropriate type of company for your enterprise-

  1. Private company limited by shares Table B
  2. Company limited by guarantee and not having a share capital Table C
  3. Company limited by guarantee and having a share capital Table D
  4. Unlimited company Table E
  5. Public limited company Second Schedule of Companies (Amendment) Act 1983

Articles of association

Your company set up will also require the use of articles of association. The articles of association is a document which sets out the rules under which the company proposes to regulate its affairs.

Articles of association are required to be registered by a company limited by guarantee and having a share capital or an unlimited company. Articles of association must be printed and divided into paragraphs and numbered consecutively.

A company limited by shares or a guarantee company not having a share capital may register articles of association with the CRO. Model form articles of association are set out in the First Schedule to the Companies Act 1963.

Samples of memorandums and articles may be obtained from legal stationers, accountants, solicitors or company formation agent.

Form A1

Form A1 requires you to give details of the company name, its registered office, details of secretary and directors, their consent to acting as such, the subscribers and details of their shares. It incorporates a statutory declaration that the requirements of the Companies Acts have been complied with, and as to the activity which the company is being formed to engage in.

Applications for company set up can be submitted under any one of three schemes, each of which has a different customer service standard:

Ordinary: while there is no guaranteed service level, in practice it takes 15 working days.

Fé Phrainn: ten working days

Companies Registration Office Disk: five working days

Documents are processed in chronological order and are subject to checks.

Documents returned for correction are processed according to their date of re-submission to the companies registration office.

Statutory declarations sworn abroad will often require further legalisation.

The Advantages and Disadvantages of a Setting Up a Limited Company

If you are thinking of starting a business in Ireland you may be considering registering a limited company rather than trading as a sole trader or partnership.

 What are the advantages of setting up a limited company?

There are three broad advantages of registering a company with the Companies Registration Office (www.cro.ie).

Advantages of a limited company

Firstly a company has a separate and distinct legal identity from its member or shareholders. This allows it to enter into contracts, sue and be sued, and so on in its own right.

Secondly a company can live forever provided it is not liquidated or struck off the companies’ register-this is called perpetual succession.

Thirdly its potential liability is limited to its paid up share capital unless it is an unlimited company but the vast majority of companies in Ireland are private limited companies.

In theory this means that you as shareholder or member are protected from creditors and banks should the company cease.

In practice however you will find that many banks and suppliers will insist on personal guarantees from directors or shareholders.

Disadvantages of a limited company

The main disadvantage of setting up your own company are

  1. Cost, although this is minimal as you can incorporate a company for between €200 and €300;
  2. Filing financial statements every year with the Companies Registration Office with those details being open to public scrutiny.

On balance, despite the limitations on the concept of limited liability and protection from creditors, setting up a company is a smart move.

The alternatives of trading as a sole trader or partner in a partnership offer no protection from creditors and can leave you open to losing everything you own and bankruptcy.

Conclusion
Company set up in Ireland is a relatively straight forward process. The companies registration office are helpful and they have quite a lot of information on their website.

Sooner or later when forming your small business or even if you choose to work from home, you will have to carry out a company set up.

This need not be a complex task but one that should not be taken for granted.

You might also be interested in the 7 critical elements of a shareholders agreement.
By Terry Gorry
Google+