Grant Aid – Local & National

There are a range of financial and other supports available for qualifying businesses. The primary aim of the government support agencies is to provide assistance to new and existing businesses in the areas of niche manufacturing or internationally traded services, in order to allow the project to achieve its full potential. Local factors such as employment generation and impact on the local economy are also considered. In general, preference is given to manufacturing and service businesses with the potential for international trade. The relevant funding agency applicable to any qualifying business will depend on the following key factors:

-       Job creation potential

-       Domestic or export market

Whether you have a specific idea in mind, or are just curious as to the opportunities available, we have the expertise to assist you through the various funding measures, the rates of grant aid available per measure and the application process Who are the main grant providers? The main funding providers are as follows:

County Enterprise Boards

Primary Focus : Potential Employment: 1 to 10  employees

Every county in the country has a County Enterprise Board whose function it is to offer a range of financial support packages to qualifying small businesses. Eligible enterprises include those employing 10 or less full or part time employees and satisfy the criteria set out below.

Eligibility Criteria for Financial Supports

  • Projects in niche manufacturing or niche internationally traded services, which in time can graduate to the Enterprise Ireland Portfolio.
  • Participation by the Enterprise Board with other agencies (local authorities, state agencies, chambers of commerce and private sector interests) in the provision of industrial space for small enterprises or advanced technological facilities for small business.
  • Other worthwhile commercial ventures promoted by long term unemployed or those made redundant, which will contribute to national competitiveness and local development but will avoid job displacement.
  • Promising projects emerging from work in second or third level colleges.
  • Priority will be given to those projects who are engaging in manufacturing or internationally traded services, which over time can develop into strong export entities and graduate to the Enterprise Ireland Portfolio.
  • Capital Grant (Refundable Capital) – Capital Grants may be approved covering up to 50% of qualifying capital costs up to a maximum of €75,000.
  • Employment Grant – up to €7,500 per new employee up to a maximum of 10 employees. Employment grants may also apply to a person starting up his/her own business.
  • Feasibility Study Grant – for the purpose of assessing market demand for a proposed new product or service. Up to a maximum of €5,100 for eligible projects.

Synopsis of Financial Supports

LEADER – Rural Development Programme

Leader programmes are generally speaking more locally focused. The LEADER Programme has been a driving force in grassroots local development within counties since 1995, investing in literally thousands of projects across the country through grant aid, technical specialist supports and training initiatives. The new Leader programme will be available to private promoters and community organisations with financial and technical support on offer under the following measures:

  • Diversification into non-agricultural activities
  • Business creation and development
  • Encouragement of tourism activities
  • Basic services for the economy and rural population
  • Village renewal and development

Funding

Taking the mystery out of local development

To keep things simple, we set out below a guide to the most relevant information across the range of initiatives Leader programmes apply to.
Business

  • Tourism
  • Craft
  • Enterprise
  • Food
  • Alternative agriculture
  • Environmental
  • Specialist Support
  • Training
  • Analysis & Development

Community / Voluntary

  • Village enhancement
  • Heritage and history
  • Culture / music
  • Conservation / promotion of nature
  • Youth Supports
  • Social Inclusion
  • Training
  • Analysis & Development

table

Figures/rates are correct at time of print but may be subject to department changes

* In exceptional circumstances, and subject to prior written approval by the Department, grant aid up to €200,000 may be awarded.

** In exceptional circumstances, and subject to prior written approval by the Department, grant aid up to €200,000 and €500,000 may be awarded to private and non-commercial community projects respectively. (A & D = Analysis & Development)

Enterprise Ireland

Primary Focus: Export Orientated.

Employement Prospects: Potential employees > 10

Enterprise Ireland is the government agency responsible for the development and promotion of the indigenous business sector. Their mission is to accelerate the development of world-class Irish companies to achieve strong positions in global markets resulting in increased national and regional prosperity.

Through their extensive network of Irish and international offices, their function is to assist and help grow Irish companies in international markets.

Enterprise Itreland’s key focus, for Irish companies is covered under the following five areas of activity:

  • Achieving export sales
  • Investing in research and innovation
  • Competing through productivity
  • Starting up & scaling up
  • Driving regional enterprise

They also provide assistance for international companies who are searching for world-class Irish suppliers and we can help international companies who want to set up food and drink manufacturing operations in Ireland. Contact us for more details.

Enterprise Ireland provide advisory and financial support to High Potential Start-Up (HPSU) businesses and encourage all forms of entrepreneurship from people living in Ireland and from Irish people living abroad.

As a HPSU, the support you can get from Enterprise Ireland depends on where you are in the three stages of our start-up development process.

1) Starting a Business

2) Challenging and Validating the Business Idea

3) Seeking Advice and Funding to Develop an Investor-ready Business Plan

High potential start-ups (HPSU) eventually need to attract investors. At this start-up development stage it is essential that HPSUs develop a commercially sound business plan that can draw solid investment.  We offer various supports to help you achieve this.

Advice for developing investor-ready business plans

The advisory support available includes:

  • A development programme that helps you build an investor-ready business plan.
  • Access advice, guidance, training and business mentoring tailored towards helping you to develop a commercially aware business plan.
  • Help and guidance on raising finance.If you are preparing for an investment phase you will assigned a Development Advisor who will guide and work with you to develop your business plan and help you to present it to potential investors.  We offer assistance in the preparation of all levels of business planning. Contact us for more details.

Funding for investor-ready business plans

When you have developed a strong, investor-ready business plan Enterprise Ireland can consider co-investing in it. Our co-investment takes the form of an equity stake (preference or ordinary shares) following a commercial due diligence process

IDA Ireland

Ireland’s inward investment promotion agency, IDA Ireland partners with foreign investors, helping them to set up and develop their business in Ireland.

IDA Ireland provides ongoing assistance to companies that locate here.

For further assistance on Grant Aid for your business please contact tony@mcgrory.ie or contact our Drogheda office or our Clondalkin office or call (041) 9836707

Sole Trader vs Limited Liability Company: Pros and Cons.

Starting up in business? Already in business and thinking of changing to a Limited Liability Company and don’t know if you should? Bernadette McGrory Farrell of W.O.McGrory & Co has set out below the pros and cons to help you decide. What is a sole trader? A sole trader is a business owned and controlled by one person, generally trading under his/her own name or using a registered business name. If the business owner decides not to trade under his/her own name it is necessary to register the business name with the Registrar of Business Names. There is a small fee attached to this registration but otherwise it is a very simple process.

Advantages of trading as a sole trader:

1. It is much less onerous in terms of structure and formalities to set up.
2. There is no requirement to file annual accounts other than when required as proof of income for income tax purposes.
3. Closure of the business is equally easier to effect.

Disadvantages of trading as a sole trader:

1. The owner is personally liable for all the debts of the business.
2. Because ownership rests with one person, raising capital can be more difficult. Many businesses find it necessary to become Limited Companies as they grow to facilitate further growth and development.
3. The profits of the business are considered personal income and used in the calculation of income tax liability which is taxed at higher rates than Corporation Tax for Limited Companies. What is a Limited Liability Company? A Limited Company is a separate legal entity from the people who operate and control it. The owners are shareholders in this legal entity. The Company has Directors who make decisions on behalf of the Company. The Company itself has sole responsibility for all the debts of the Company, which are restricted to the paid-up share capital of the Company, hence the term Limited Liability.

Advantages of trading as a Limited Liability Company:

1. The shareholders are only liable to lose the share capital they have invested in the company.
2. Raising Capital to fund growth and development can be easier.
3. There may be many owners of the company, and it continues to exist despite the death, retirement or resignation of the Directors.
4. The Company can make pension contributions as an expense.

Disadvantages of trading in a Limited Liability Company:

1. In practice, lenders generally seek to have personal guarantees against loans given, which reduces the benefit of limited liability.
2. Setting up a company is more expensive than trading as a sole trader.
3. Legislative requirements in making annual returns to the Companies Registration Office are more onerous. Annual Accounts must be filed with the Companies Registration Office also.
4. Company Directors are subject to extensive legal responsibilities, including being made personally liable for all the debts of the Company if they are proven to have traded recklessly.

For further advice or information contact our Drogheda office or our Clondalkin office or call (041) 9836707 and we will chat through your options with you.

The Role of Company Directors

Paul Farrell, Partner at W.O.McGrory & Co, CPA Registered Auditors & Accountants, Drogheda, confirms that there is considerable uncertainty among Directors of small companies as to what their roles and responsibilities are as Directors. This is such a critical concern, particularly in these troubled times for small enterprises, that he sets out below the duties and responsibilities for easy reference. Paul also recommends that small business owners seek advice from their accountants on this issue to avoid costly errors.

What are the duties of the board of directors and of individual directors?

The main function of the board of directors is to supervise the management of the company and to set its policy and direction. The failure of the board to maintain control over the affairs of the company can contribute to company failure.

There is no prescribed agenda or timing of board meetings. However, a board should meet regularly to review the company’s state of affairs.

Mention has already been made earlier of a number of the statutory obligations which apply to all directors. Apart from these, a director has a number of general duties including:

- to use their skills and a reasonable level of care in the performance of their duties;

- to attend meetings regularly (but not necessarily every time);

- to act in good faith in the company’s best interest;

to exercise powers for a proper purpose, namely for the benefit of the members or the purposes for which the company was set up; and

to avoid either actual or potential conflicts of interest between their personal interests and those of the company.

Common law duties of directors (the duties created by the courts)

The common law duties require that:

• directors must act in good faith and in the company’s interest and not use their powers for personal gain or for the benefit of others at the company’s expense – for example directors should pay the market value for company assets;

• directors must not profit from being a director and must account for any profit secretly obtained – for example a director who is also a director of a second business cannot use any confidential information they receive as a director of the first company to benefit that second business; and

• directors must act with due care, skill and diligence – for example, directors need to meet regularly to review the company’s finances and take action to correct any problems.

What personal entitlement do directors have to company property?

One of the most important principles which a company director must learn is that a company’s assets are not their property (even though they may be the sole or primary shareholder). This is because there will often be many other parties with a financial interest in the business, including in particular the company’s employees and its creditors.

Therefore, company directors should not treat company assets as belonging to them unless the property has been properly assigned to them.

The most appropriate methods by which a director can obtain value from the company are as follows:

• Dividend

A dividend is the money which shareholders receive as earnings from their investment in the company. A dividend can only be declared at the AGM and must only be paid out of the profits which have been accumulated by the company. All eligible shareholders must receive the dividend.

• Contract of Employment

A director can be an employee of the company and may take a salary in line with that contract. However, this salary must be disclosed in the annual accounts of the company.

• Directors’ Loans

There is general prohibition on directors drawing down funds from the company for personal purposes. However, it is permitted in certain defined circumstances, and where it occurs, the funds will often be treated as a company loan to the director. One of the permitted circumstances is where the aggregate value of loans to directors does not exceed 10% of the company’s ‘relevant assets’.

Further information on this term and on the other exceptions is available from the ODCE at www.odce.ie. A breach of the permitted circumstances may constitute an offence by the company’s directors.

What happens if the company is in financial trouble?

If a company cannot pay its debts as they fall due, then the company is deemed to be insolvent. If the company continues to operate while in this situation and in disregard of the interests of its creditors and other stakeholders, the directors may be held personally liable for the consequences, including any debts which the company may incur while trading in an insolvent manner.

The director will also be at the risk of prosecution, restriction or disqualification if they fail to act within the law and discharge their duties in a responsible manner. Some 300 company directors have been restricted to date. A summary of the main scenarios for companies who find themselves in financial trouble are explained below.

Trading difficulties

If a company finds it difficult to pay its debts, the directors must favour the interests of the people to whom the company owes money (creditors).

Reckless trading

If directors help to create a company debt knowing that the company will not be able to pay the creditor, they may have to pay some or all of the company’s debts themselves if this is ordered by a court.

Insolvent liquidation

If a company does not have enough money to pay creditors and the company is later wound up, the directors must prepare a statement of its assets and liabilities and co-operate with the liquidator.

Struck off insolvent companies

If directors fail to arrange for the liquidation of a company that owes a large debt to one or more creditors, the High Court may disqualify them from acting as directors if the company is later struck off the Companies Register for failing to file its annual returns

Conclusion

A more detailed information book on directors is available under

Decision Notice D/2002/1 from www.odce.ie.

Accountants Outline Top 7 Sanctions Against Directors of Insolvent Companies

Tony Mallon of W.O.McGrory & Co, CPA Registered Accountants, Drogheda, outlines the top 7 legal remedies which are available to the courts in pursuing directors of insolvent companies. While personal responsibility of directors remains the exception when considering how and where directors’ duties are owed to creditors of a company it is useful in today’s economic climate to recall those situations in which personal liability may be imposed.

Fraudulent trading

If in the course of a winding up of a company, or where a company has been shown to be insolvent but is not being wound up, or in the course of an examinership; any person found knowingly a party to the carrying on of the business of a company with intent to defraud its creditors or for any fraudulent purpose, may be guilty of fraudulent trading under the 1963 Companies Act. .

Section 297 C.A. 1963 provides for a maximum penalty of imprisonment for a term not exceeding 7 years or a fine not exceeding €63,487 or both.  In addition, any such person may be personally responsible for all or any of the debts of the company as the Court may direct.  Diverting monies payable to the company to a director or shareholder, incurring credit at a time when to the knowledge of the director there is no prospect of that credit being repayable, non-payment of monies to employees or to pension funds would all constitute fraudulent trading.

In Re Hunting Lodge Limited , there was a secret arrangement to divert half of the proceeds of the sale of the only remaining company asset to a building society account with fictitious names. The company was insolvent at the time. This single transaction was enough to constitute fraudulent trading by the directors.

Reckless trading

Reckless trading was introduced into Irish company law as a lesser offence to fraudulent trading to capture situations where there was no actual intent to defraud.  If in the course of the winding up of a company or in the course of examinership proceedings or where an insolvent company is not being wound up, it is found that any officer of the company was knowingly a party to the carrying on of the business in a reckless manner, then pursuant to Section 297A C.A. 1963, such person may be personally liable for all or any part of the debts or other liabilities of the company.

An officer of a company is knowingly a party to the carrying on of any business of the company in a reckless manner if:

-    having regard to the general knowledge, skill and experience that might reasonably be expected of a person in that position he ought to have known that his actions or those of the company would cause loss to any creditor of the company, or
-    he was a party to the contracting of new company debt and did not honestly believe on reasonable grounds that the company would be able to pay that/other debts when falling due.

The defendant director must have knowledge or imputed knowledge that his actions would cause loss to creditors; it is not sufficient that there was a concern or uncertainty about the ability to pay all creditors.  It is a defence to show that a director has acted in an honest and responsible manner. However, failure to actively take part in the affairs of the company may not provide relief from liability since the failure to exercise proper control may amount to recklessness.

Failure to keep proper books of account

Where a company is being wound up and is insolvent and it has failed to keep proper books of accounts in accordance with Section 202 C.A. 1990, the Court may declare that any officer or former officer of the company who is in default of this obligation to keep proper books is personally liable for all or such part of the debts of the company as may be specified by the Court where the failure to keep books contributed to the insolvency. Case law shows that the Court will impose liability for such amount of the company’s debts as are directly attributable to the failure to keep proper books.  The Court may also find every officer of the company who is responsible for the failure guilty of an offence and a fine of up to €12,700 or imprisonment for a term not exceeding five years or both imprisonment and fine can be imposed.

Fraudulent preference

Fraudulent preference is the wrongful favouring of one creditor over others by a company which is unable to pay its debts.  Any such payment is invalid. Demonstrating preference is crucial and this can be difficult for a liquidator looking to challenge the payment; for example, the payment of a creditor who has simply been very diligent about pursuing a debt will not amount to fraudulent preference.

Where a company is put into liquidation, any preference of a creditor in the prior six months may potentially be set aside as a fraudulent preference. Where the creditor is a director of the company or a person connected with a director, the liquidator can consider any payments made in the previous two years. Any repayments of debts owed to directors or shareholders by an insolvent company are likely to be scrutinised most closely by a liquidator.

A Voluntary Winding Up

On a voluntary solvent winding up of a company, the directors of a company must make a statutory declaration to the effect that the company will be able to pay its debts in full within twelve months from the commencement of the winding up. Where it is subsequently proved that the company is unable to pay its debts, the Court may, declare that any director who made the declaration of solvency is personally responsible for all or any of the company’s debts.

Other sanctions

Aside from personal liability, the following sanctions may also be imposed on directors of insolvent companies:

Restriction order

If an insolvent company is wound up then, unless the Director of Corporate Enforcement (DCE) relieves the liquidator from doing so, the liquidator must apply to the High Court for an order restricting each of the directors of the company from acting as a director or secretary of company for five years (a “Section 150 Order”). The Court will make the order unless the director can satisfy the Court that he has acted honestly and responsibly in relation to the company and that there is no other reason making it just and equitable to make such an order against him.  Although the Supreme Court has recently described this regime as “draconian”; and in the relevant case, lifted a restriction order that had been granted by the High Court; the statutory provisions remain unchanged.

Section 150 C.A. 1990 applies to any person who was a director of the insolvent company in question either at the date of or within 12 months prior to the commencement of its winding up. The section also applies to shadow directors.  Shadow directors are persons in accordance with whose directions or instructions the directors of a company are accustomed to act. Case law indicates that one single act or omission can result in a restriction order being imposed.

A restricted director cannot be a director of a company in the future unless that company is capitalized to just under €63,500 if a private company and to just under €317,500 if a plc..


Disqualification order

Section 160(1) C.A. 1990 provides for automatic disqualification for a period of five years or such other period as the Court may order, from acting as an auditor, director, other officer, receiver, liquidator or examiner, where a person, (i.e., not necessarily a director) is convicted on indictment of any indictable offence in relation to a company or involving fraud or dishonesty. Unlike a restriction order, the onus is on the liquidator or other applicant to show that the director’s conduct justifies a disqualification order.

In addition to the various provisions discussed above, which relate directly to insolvent companies, there are provisions where personal liability may arise under other statutory provisions if the relevant actions contributed to the insolvency of a company or were carried out when the company was not solvent. Loans to directors and financial assistance (”Section 60″) should all be approached with even more caution during the current economic difficulties.

Extension of Tax Exemption for New Start-Up Companies

McGrory & Co set out the recent Revenue Extension of Relief from Corporation Tax for New Companies.

Relief from corporation tax is available in their first 3 years of operation for new companies:

  • that are incorporated on or after 14 October 2008,
  • which commence a qualifying trade in 2009, and
  • whose corporation tax liabilities do not exceed specified levels.

The recent changes extend the relief to such companies commencing to trade in 2010.

A qualifying trade does not include

  • a trade which was previously carried on by another person or formed part of another person’s trade,
  • a trade of dealing in or developing land or exploration and extraction of natural resources, or
  • a trade consisting of “service company” activities such as the carrying on of a profession

Where a company claiming relief takes over the activities of another trade, those activities will be treated as a separate trade (which will not be a qualifying trade, having been previously carried on by another person). Relief will continue to be available with regard to corporation tax attributable to the qualifying trade within 3 years of commencement, subject to certain limits.

Relief under this section will cease where part of the qualifying trade is transferred to a connected person.

 If you think you might be eligible for this relief, or are thinking of starting up in business and want some advice,contact our Drogheda office or our Clondalkin office or call (041) 9836707 and come in for a free first consultation.