New Bank Guarantee Scheme

The new scheme is described in this document.

68 replies on “New Bank Guarantee Scheme”

From previous thread

Government to convert Preference Shares to Ordinaries.

Looses Pref Divi.

Stated policy of, at least, Bank of Ireland is that no Ord Divis will be paid for some time.

Working out well for the two Brians then.

Current share price of Bank Of Ireland = €1.61
Shares in Issue = 1,004,216,989
Market Value = €1,616,789,352

Cost of Preference Shares NPRF = €3,500,000.

Any reason why this bank should not be nationalised?

Current share price of AIB = €1.57
Shares in Issue = 882,755,456
Market Value = €1,385,926,066

Cost of Preference Shares NPRF = €3,500,000.

Any reason why this bank should not be nationalised?

Apologies – already posted this is the sovereign debt topic but would really like an answer.

What do people think will happen from a competition perspective if all the Irish banks are nationalised, assuming the foreign banks continue to make a beeline for the exit?

Are there any non-Soviet era historic precedents for nationalisation of an entire banking system? (other than Iceland which is probably too recent to draw any conclusions from).

@ Concubhar O’Caolai

Very difficult to ensure competition.

Aer Lingus monopoly comes to mind. Though worse.

Negotiations must begin with the bondholders.

They should be cleaned up and sold on.

@Concubhar O’Caolai
It would only be an issue if the banks had to remain in state control long term.

But this shouldn’t be the case though. Since the subordinated debt is no longer covered by the guarantee the government could insist on a debt for equity swap straight away.

This would ensure that the banks retain a private stake at all times.

@ Dreaded_Estate

I’ve a feeling in my bones that it’s getting to late for debt for equity from the subs. I think the seniors are going to have to get engaged and the subs get wiped out.

Nine o’clock news on the radio & tv.

Not a “done deal” but mainstream news announcement.

The DoF cannot say they are “considering” such a move.

To “consider” is to do. You know that you work in the markets.

From the other thread:
@ Concubhar O’Caolai
“What do people think will happen from a competition perspective if all the Irish banks are nationalised, assuming the foreign banks continue to make a beeline for the exit?”

Appoint a board of huge experience and unimpeachable integrity and give them complete statutory independence. Let them appoint CEOs and management teams of same calibre. It was strange that many supporters of NAMA were so opposed to nationalisation. It will be the same government in both cases and full nationalisation would have been much easier to safeguard.

Soviet Union? No, this crony capitalism is much more like Yeltsin’s Russia.

When are we going to grow up in this country. Do we have to go totally broke first?
Sheikh Mohammed is taking no guff from his bankers and isn’t it about time we did the same?

Financial Times – Dubai rejects debt guarantee
November 30 2009 06:50

Dubai’s government will not guarantee the debts of Dubai World, the state-owned holding company struggling under the weight of $59bn in liabilities, arguing that lenders were mistaken to think that there was sovereign backing.

Abdulrahman al-Saleh, department of finance chief, said creditors were responsible for their own lending decisions.

Not sure if someone has already linked to this but Willem Buiter’s post-Dubai post on guarentees was interesting as ever:

“Given the severely-impaired fiscal-financial positions and prospects of so many countries, the notion of a sovereign of one of these countries assuming responsibility for any debt that is not sovereign or sovereign-guaranteed is ludicrous. Even banks and other financial institutions that would in the past (when fiscal pockets were deeper) have been considered too big and too systemically important to fail are now too big to save. Ireland’s government could not today afford to guarantee virtually all of the liabilities of its banking system, as it felt compelled to do at the beginning of this year.”

http://blogs.ft.com/maverecon/2009/11/polite-sugggestion-to-the-dubai-sovereign-that-creditors-of-dubai-world-not-be-bailed-out/

@ Bond. Eoin Bond

Watch the late news on RTE. Or tune in to your radio.

I’m sure the market will clarify the facts tomorrow.

Effectivley the Government has conceeded that the banks need more capital and can’t raise it on the open market.

Preference Shares will be converted to Ordinaries.

Exisiting shareholders will suffer severe dilution.

@ Bond. Eoin Bond

And no Bond. Eoin Bond, they haven’t said they are going to do it tomorrow.

But as I say, you work in the markets. You don’t fly kites like that. It’s as good as done but not a done deal.

@ Greg

there’s an important difference between an “announcement” and a fact as you lay it out, and “one of several options” that the DoF are admitting to. As i said, clarifying and seperating what has actually taken place and what might take place would be welcome.

@ E43Bn lost and no extra lending

“No, this crony capitalism is much more like Yeltsin’s Russia.”

Yeltsin and the Ruble crisis.

Opps. We don’t have a currency.

There’s something up. This is not in either the banks’ or the government’s plans. I smell another run…

@ yoganmahew

Good point. This is out of the blue.

BofI said what they said. The share price took a hit.

OK. So what.

You could be right. The “so what” is an electronic run on the banks.

Bond. Eoin Bond better be in the office by 6 am.

On the other hand maybe I’ve finally lost my mind. And the Government announcing a partial takeover of the banks is in my imagination.

@Greg
It’s clearly an attempt to avoid having to put cash into the banks. But it is a tacit admission that the two main banks will be zombies. It is an accounting fudge to keep their core capital levels above the regulatory minimum. As some of us have said all along, there is no way the banks could be kept out of majority government ownership.

AIB and BoI with their crony management have missed the window for private equity placement. Instead, they’ve spent their time jockeying to appoint insiders to the top slot. Whose turn is it to sit at the big table? Never mind the solvency, what about the perks? Seniority has entitlements, you know. Mr. Aynsley at Anglo is busy culling senior management; any outsider coming into the other two would be chopping dead wood and sure that suit nobody…. who is currently within the banks…

@Greg
That would be more than twice the market value of either of them as of COB today… I expect it will be three times by COB tomorrow. So somewhere between two-thirds and three quarters of the banks, without futher capital.

‘Course, I can’t remember what the strike price on the conversion options is?

@ yoganmahew

All true.

Try this.

The NPRF has 3,500,000,000 preference shares. So it would not be unreasonable to think that those shares, given that we paid €3.5bn for them would have a nominal value of €3.5 bn.

They don’t. They have a nominal value of 1c each.

They have anominal value of €35 million.

The rest went into the “Stock Premium Account”.

Now I’m talking off the top of my head here. But what is the dividend @ 8% on Preference Shares that have a nominal value of €35 million.

Stock Premium Accounts are not entitled to dividends.

yoganmahew

“The strike price was 0.52 for the first 117,213,784 and 0.20 for 157,523,364.”

However, if I’m right the strike price is irrelevant. It could only be relevant if the Warrants were exercised. If the Government chooses to convert the preference shares to ordinary shares the warrants disappear.

They were not convertible preference shares. They were preference shares with warrants attached.

@ Dreaded_Estate

No.

They would have to negotiate a price.

If I’m right we just put €7bn into AIB and BofI and it is now GONE.

Could be wrong.

🙁

@Greg
Well all the money we put into the banks is essentially gone. The only variable is amount of shares and assets we get in return.

The more shares and assets we get in return the less well off the state is.

IMO because we are putting in far more money than the banks are worth we should get everything but I expect we will get significantly less.

@ Dreaded_Estate

“Of most significance has been the Government supported recapitalisation of the Group. On 31 March 2009, the National Pensions Reserve Fund
Commission (NPRFC) completed the investment of €3.5 billion in new preference stock. This stock with a coupon of 8% is redeemable at par until the fifth anniversary of its issue and thereafter at 125% of par. The NPRFC also received warrants to subscribe for up to 25% of the enlarged ordinary stock of the Group.”

The stock is redeemable at par.

€3.5bn stock Vs €1.6bn market cap.

@ Dreaded_Estate

Bank of Ireland is carrying a “Stock Premium Account” of €4.1bn.

€3.3bn of that was provided by the Citizen/Taxpayer when they issued the Preference shares.

The truth is we have already paid for the banks.

!00% or nothing and for nothing.

These banks are bankrupt. We have already paid for them.

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A debtors’ revolt is not out of the question.

@ Dreaded_Estate

We’re crossing comments here.

If I’m right. We have paid. We don’t need to pay another cent.

Rember what a schock it was when Anglo Irish was nationaisled?

Everything was supposed to be ok and then BANG.

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

A debtors’ revolt is not out of the question.

@ Dreaded_Estate

And when the State ends up with (I’ll take your 70%) the State needs to grow a pair and start negotiations with the Senior Bond Holders….not their lackeys.

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

A debtors’ revolt is not out of the question.

@ yoganmahew & Dreaded_Estate

Let me put what I have said in my own plain language.

As soon as I heard that the State had “thrown in the towel” and decided to convert €7bn of hard cash into ordinary shares I knew it was an admission on the part of the State that the money was gone and that the banks were bankrupt.

The State can spin this as it sees fit but the fact remains that the State is about to give up a perpetual “guaranteed” income stream of €560,000,000 a year in exchange for non-dividend paying ordinary shares.

They wouldn’t do this if there were any options left.

Fianna Fail & the Green Party just wasted €7bn plus the €4bn they put into Anglo Irish.

They have destroyed Ireland.

Now we have to go back to where we should have been in the first place, but they have made it worse by a factor.

@Greg
Just wondering about S30 and S31:

I wonder about the logic of this if we are trying to get the bondholders to accept discounts. Is it a preemptive strike by the minister against another government coming in and revoking the guarantee?
The government will now have guarenteed this debt twice. Looks like it makes it really hard for his successors to revoke the guarantee. It also weakens the position of current or future governments negotiating discounts with bondholders. Am I correct?

@ yoganmahew

“It is an accounting fudge to keep their core capital levels above the regulatory minimum.”

The accounting fudge happened when they issued the Preference Shares.

99% of the money was put into the “Stock Premium Account”

To announce what they have announced means they are running out of road.

I don’t know, maybe you do. You take in “Capital” of €3.5bn, and then you decide it has a nominal value of €35m and you call the remainder a premium?

Why would you want to do that?

Maybe the “Premium” was going to be used to pay for the conversion of the preference into ordinary when the time was right.

It all happens on the liability side of the balance sheet. You convert a perpetual expense stream of €260,000,000 into thin air.

Bada bing.Bada boom.

http://www.youtube.com/watch?v=WiWVHBNKVbI

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

A debtors’ revolt is not out of the question.

What a mess, blow the money then convert to ordinary. Will this take the guestimating out of what NAMA assets are worth? When the floods recede many of them will pop up again!

11bn thrown away wait unto you guys realise that NAMA loses will come in at 31bn.

The ECB was willing to fund the government through the back door of government issued NAMA bonds. The ECB is legally constrained from lending to governments, it is going to start looking pretty blatant now. The government were depending on the banks remaining “private” so they could buy government paper! We have seen what Dubai did to our CDS this is a disaster.

@ E43Bn lost and no extra lending

It seems to me that Brian Lenihan is making sure that all of the subordinated debt that he has guaranteed to date will carry the guarantee of the State until it matures. I’m very possibly wrong on that.

These people are like Roman Catholic Bishops. The more I get to know of them the more they disgust me.

The truth is E43Bn, they intend doing what they want until they are stopped.

Don’t bend over any time soon.

@ Robert Browne

“11bn thrown away wait unto you guys realise that NAMA loses will come in at 31bn.”

The “wise guys” just stole €11bn.

@ Moderator,

That clip has violence. You may want to delete it. Women and children might see it. They might get the idea that the not all decision governments make are fluffy bunny.

However “The “wise guys” just stole €11bn.”

Found this press release this morning!!!

2009-12-01 07:22:05.343 GMT
Allied Irish Banks, p.l.c. Discretionary Coupon Payments
DUBLIN, IRELAND — (MARKET WIRE) — 12/01/09 —
Embargo 07:00 1st December 2009

Allied Irish Banks, p.l.c.
Discretionary Coupon Payments

Following the recent previously announced submission of
its restructuring plan, Allied Irish Banks, p.l.c. (“AIB”) [NYSE:AIB]
is in the preliminary stage of its engagement with the
European Commission (“EC”). The EC will consider over the coming
months the competitive effects of state aid on AIB’s business and
markets.

The EC has indicated that, in line with its policy and pending its
assessment of the AIB restructuring plan, AIB should not make coupon
payments on its Tier 1 and Tier 2 capital instruments unless under a
binding legal obligation to do so.

AIB has agreed to this request by the EC and announces that under the
terms of the Stg GBP 350,000,000 Fixed Rate/Floating Rate
Guaranteed Non-voting Non-cumulative Perpetual Preferred Securities of
AIB UK 3 LP which has the benefit of a subordinated guarantee of AIB
(“the LP3 Preferred Securities”) that the non-cumulative distribution
on these securities, which would otherwise have been payable on 14
December 2009 will not now be paid. The decision is entirely without
prejudice to all of AIB’s entitlements under the state aid rules
and the EU Treaties.

The effect of this decision by AIB will be to trigger the “Dividend
Stopper” provisions of the LP 3 Preferred Securities, so that AIB
will be precluded, for a period of one calendar year from and
including 14 December 2009, from declaring and paying any
distribution or dividend on its “Junior Share Capital”, an expression
which, at the moment, comprises AIB’s ordinary shares (“the Ordinary
Shares”) and the Irish Government EUR 3.5bn preference shares
(“the Preference Shares”) issued on 13th May 2009 to the National
Pensions Reserve Fund Commission of Ireland (“NPRFC”). AIB is
similarly precluded, for the same period of time, from declaring and
paying any distribution or dividend (or, where applicable, is bound
to procure that no distribution or dividend is declared or paid) on
any “Parity Security”, an expression which at the moment,
comprises AIB’s 7.5% Step-up Callable Perpetual Reserve Capital
Instruments (“the RCIs”) on which an annual Coupon Payment would
otherwise be due on 28 February 2010, the Fixed Rate/Floating
Rate Guaranteed Non-Voting Non-Cumulative Perpetual Preferred
Securities issued by AIB UK I LP (“the LP 1 Preferred Securities”)
on which an annual non-cumulative distribution would otherwise be
due on 17 December 2009 and the Fixed Rate/Floating Rate Guaranteed
Non-Voting Non-C
umulative Perpetual Preferred Securities issued by
AIB UK 2 LP (“the LP 2 Preferred Securities”) on which an
annual non-cumulative distribution would otherwise be due on 16
June 2010.

Were the Dividend Stopper to remain in force, AIB would be precluded
from paying the dividend due on the Preference Shares on 13 May 2010.
Under these circumstances, in accordance with the terms of the
Preference Shares, the NPRFC would become entitled to be issued, at a
date in the future, a number of Ordinary Shares related to the cash
amount of the dividend that would otherwise have been payable.

However, consistent with the stated objective of the Minister for
Finance of not taking majority stakes in the banks (including in AIB)
the preference of each of the Minister for Finance, and AIB is for
AIB to pay the dividends normally on the Preference Shares. In
furtherance of this objective, the Department of Finance and AIB are
in continuing discussions with the EC in respect of AIB’s
restructuring plan (which is required in compliance with state aid
rules), one element of which would allow AIB to resume declaration
and payment of dividends and distributions as normal, including the
retrospective payment of 14th December dividend on the LP3 Securities
to permit payment of the Preference Share dividends in cash.

If a restructuring plan is agreed with the EC on this basis, subject
to the terms of the instruments, AIB would intend to pay
retrospectively the distribution on the LP 3 Preferred Securities
which would have become payable on 14 December on the basis that the
Dividend Stopper would be released thereby enabling all other
dividend and distribution payments on Parity Securities, and the
dividend on the Preference Shares, to be paid in cash on 13th May
2010.

The EC has confirmed to AIB and the Department of Finance that,
without prejudice to the outcome of its review of the restructuring
plan, it is open, in arriving at its final decision to giving full
consideration to the approach outlined above.

-ENDS-

EU Competition Commissioner Nellie Kroes said last Friday “The new guarantee scheme will give credit institutions in Ireland access to medium-term state-guaranteed financing and provide Ireland with an effective means of restoring confidence in the financial markets, while at the same time limiting distortions of competition.”

Forcing the Irish people to accept liability for the debts of reckless bankers is never going to restore confidence in our financial markets. But prosecuting some of those same fraudulent bankers would begin to restore confidence, unfortunately Brian Cowen and Brian Lenihan, FOR SOME REASON, have shown a total unwillingness to do this.
Ongoing investigations you understand. Oh absolutely!

As for “limiting distortions of competitions,” this actually reinforces distortions in competition. The natural order in commercial life is that when executives of firms behave recklessly and run their companies into the ground they are put into bankruptcy and the various parts of their company are taken over by sound businessmen who did not behave in such a reckless fashion. That is how the free market has operated for hundreds of years. This is now changing and the consequences will be disasterous.

The European Commission said it now requires all banks in receipt of state aid to submit restructuring plans and has demanded that bailed-out European lenders sell-off a number of their businesses.
AIB has already stated to the Oireachtas Committee that it is not going to comply and wants to hold on to its Polish bank, is the minister for finance going to allow this?

AIB wants to dump it’s toxic loans, including some from its Polish bank, on to the Irish taxpayers and then begin to operate with a clean slate in the Polish and other east European emerging markets.
I for one don’t want to be saddled with AIB’s billions in gambling debts while they head off to pastures new.
If Nellie Kroes thinks this is how to limit “distortions of competition” then God help us all.
Of course AIB and BOI think this is fantastic, Brian Cowen and Brian Lenihan will no doubt blindly support the banks 100%, just as they have for the past year.

This is an attempt to solve the financial crisis by finding new sources of debt liquidity to paper over the continuing bank crisis. This is being done by converting private debt to public debt; this solution is illusory and doomed to fail on an even greater scale than before.
But of course when it does fail Nellie Kroes, Brian Cowen and Brian Lenihan will still be earning €6,000 A WEEK and have ‘gold plated’ pensions to retire on, there is no down side for these people when they get it wrong.
But ther is massive downside for the taxpayers who are funding the whole reckless scam, just talk to the half a million Irish people standing in the unemployment lines who are existing on €204 a week.
There are real casualties here and they are not the people who are making the mistakes.

Extending the guarantee on the bankers gambling debts is absolutely the wrong course of action and will end up crippling our economy and we won’t have to wait long for proof of this.

@ 0:12:16

“The government is considering converting state funding of €3.5bn given to each bank into ordinary shares to plug the gap in their finances.”

http://www.rte.ie/player/#v=1061319

AIB @ 1.50. BofI @ 1.59 …10:55am.

Gravity defying shares. Must get some. Or just wait for the details of the conversion to emerge and see what a good deal the taxpayer gets.

@ Greg

the pref shares are issued at 1 cent each to actually protect the government’s investment, i believe, as i think preference shares can only be redeemed from profits, from the share premium account, or from the issue of new ordinary shares. As the banks may not be making any/decent profits for quite some time, the share premium account is somewhat ringfenced from the ordinary shareholders via this method. This would obviously assume that there was capital left after the bondholders were paid out, but either way thats the reason why they were issued at 1 cent in my view, and its a fairly common situation.

Just like your suggestion about the Irish banks opening at 50 cents this morning, and your claim-as-fact about “an annoucement” from the DoF on the conversion of the prefs, your conspiracy theory on the preference share issue price is also pure fantasy.

@ Eoin

It seems that one reason for creating the stock premium was this,

“The exercise price per unit of ordinary stock issued pursuant to the Warrants will be €0.52 for 177,213,784 units of ordinary stock (“the core tranche warrants”) and €0.20 for 157,523,364 units of ordinary stock (“the secondary tranche warrants”). Any difference between the exercise price and the nominal value of the ordinary stock (being €0.64) shall be paid up from the Bank’s undistributable reserves (including the Stock Premium Account) or (subject to there being no contravention of the rights of other stockholders) from the Bank’s distributable reserves.”

50c….fantasy?

I can wait. It is fantasy that they are worth anything.

http://www.irishtimes.com/newspaper/breaking/2009/1201/breaking5.htm

“AIB said it had agreed to the request, which triggers a “dividend stopper” provision. This means AIB will not pay dividends on its junior share capital, which includes ordinary shares and the Government’s €3.5 billion stake in the bank issued to the the National Pensions Reserve Fund Commission (NPRFC).”

No dividend on the Preference shares then.

Shame they’re not cumulative. Oh well who needs €280m a year anyway.

@ Eoin

“and your claim-as-fact about “an annoucement” from the DoF on the conversion of the prefs”

You can take that up with RTE.

@ 0:12:16

“The government is considering converting state funding of €3.5bn given to each bank into ordinary shares to plug the gap in their finances.”

http://www.rte.ie/player/#v=1061319

If not today some time soon.

@ Greg

“The “so what” is an electronic run on the banks.”

“I’m sure the market will clarify the facts tomorrow”

“Share price of AIB & BofI tomorrow? 50c?”

“Why was the announcement made after close of business?”

Yes Greg, fantasy. I can only imagine the tizzy you had yourself in last night after the RTE news suggested something which was always an option, but remains only that. Boucher has previously admitted the State is gonna be a big shareholder, so why would this change things very much?

Try using the somewhat humble phrase “i think” before you claim opinions to be facts. Everyone else seems to be able to figure out this concept.

@ Eoin

“RTE news suggested something which was always an option, but remains only that”

I can wait.

Oh, by the way IF BofI follow AIB that will be €560m in lost dividends. Eh, per annum.

Nice.

@ Greg

The “dividend stopper” noise, is just that, noise at the moment. An unintended consequence of the EU state aid rules. Neither AIB nor the Govt want the pref divvy in dilutive equity. AIB want to sort this to pay the cash dividend in full, the Govt want to sort this to receive the cash dividend in full, the EU are open to sorting this so fear not the Master Fudge makers are hard at work so i’d stand down in the meantime and see what they delights they come up with.

@ Greg

the pref dividend is highly likely to be paid as expected. It’ll mean they have to pay the coupons on similar seniority securities as well (T1), but probably do it in arrears 6 months down the line. EU simply trying to make a point in all of this, that government support will come at a price to certain stakeholders.

@all
For me the key points about the revised guarantee are as follows:
Do S30 and S31 eliminate the possibility of getting the pre-guarantee bondholders to accept discounts?
If the state has guaranteed this debt twice will it not make it effectively impossible for a future government to revoke the guarantee?

@ DE

the EU likes a good fudge as much as the rest of us. Apparently they’re quite open (and they have confirmed as much) to the prefs being paid given that they are due to the government. As i said, its all about the optics of the EU being seen to clamp down on the back of government support.

@All
The blanket guarantee almost brought down the country but was sold as the world’s cheapest bailout. Grotesque. It was followed by the regulator resigning not over the state of the banks but over another issue. The regulator was given a hugely generous retirement deal even though the government blamed him for EVERYTHING they did wrong. Unbelievable. Why not suspend him on full pay or simply declare that the government had no confidence in him if he was completely at fault? The regulator then refused to give evidence before the Oireachtas and has not publicly spoken since. Why was his retirement package not made conditional on a full accounting for his stewardship? Bizarre. His boss, the head of the Central Bank, was allowed to retire in his own time. Meanwhile those at fault in the private sector have all retired with generous packages and have been replaced by insiders as chairmen and CEOs at the two major banks. The boards of the two major banks are almost intact. Unprecedented. The events of the last year have been many times more GUBU than anything under Haughey.

Lenihan says he has transformed the culture of Irish banking. All the evidence shows he is maintaining it.

@ Eoin

“the pref shares are issued at 1 cent each to actually protect the government’s investment, i believe, as i think preference shares can only be redeemed from profits, from the share premium account, or from the issue of new ordinary shares”

This is Section 62 of the Companies Act.

It seems that application of share premium is very restrictive.

I don’t see that the Preference Shares can be redeemed from the Share Premium Account. It can be used to provide “for the premium payable on redemption of any redeemable preference shares or of any debentures of the company”

If that is the case how is the government’s investment protected?

62.—(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called “the share premium account”, and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid up share capital of the company.

[GA] (2) The share premium account may, notwithstanding anything in subsection (1) be applied by the company in paying up unissued shares of the company (other than redeemable preference shares) to be issued to members of the company as fully paid bonus shares, in writing off

[GA] ( a ) the preliminary expenses of the company, or

[GA] ( b ) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

[GA] or in providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the company.

[GA] (3) Where a company has before the operative date issued any shares at a premium, this section shall apply as if the shares had been issued after the operative date, so however that any part of the premiums which has been so applied that it does not at the operative date form an identifiable part of the company’s reserves within the meaning of the Sixth Schedule shall be disregarded in determining the sum to be included in the share premium account.

http://www.irishstatutebook.ie/1963/en/act/pub/0033/index.html

Also posted on the Preference Share thread.

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