Committee Reports::Report No. 01 - Irish Life Assurance plc::02 February, 1988::Appendix

Appendix 1

ARTICLES OF ASSOCIATION

The following Articles are of particular interest:


1.Article 116 provides as follows:-


“(a) The Directors shall, at quinquennial or such shorter intervals as they may decide, cause a valuation to be made of the Company’s life assurance business and industrial assurance business in accordance with the requirements of the Insurance Acts, and, after carrying to reserve or carrying forward such sum or sums (if any) as they consider proper, shall declare what surpluses (if any) are available for distribution in the life assurance business and industrial assurance business respectively.


(b)The surplus in the life assurance business in respect of periods after 31st day of December, 1971 shall be allocated as follows:


-To Shareholders:


(i)If such surplus exceeds £375,000 - two per cent of such surplus;


(ii)If such surplus exceeds £150,000 but does not exceed £375,000 - the sum of £7,500;


(iii)If such surplus is £150,000 or less - five per cent of such surplus.


-To the Policyholders in the life branch: The remainder of such surplus.


(c)The surplus in the industrial assurance business in respect of periods after 31st day of December, 1971 shall be allocated as follows:


-To Shareholders:


(i)If such surplus exceeds £1,250,000 - two per cent of such surplus;


(ii)If such surplus exceeds £500,000 but does not exceed £1,250,000 - the sum of £25,000;


(iii)If such surplus is £500,000 or less - five per cent of such surplus.


-To Policyholders in the industrial branch:-


The remainder of such surplus”.


2.Prior to the introduction of this provision into the Articles of Association in 1972 it was required that the surpluses be allocated as follows:-


(i)

Ordinary branch

-

10% to the shareholders

 

 

 

90% to the policyholders.

(ii)

Industrial branch

-

20% to the shareholders.

 

 

 

80% to the policyholders.

3.The text of Article 117 is as follows:-


“The portion of the respective surpluses allocated to the respective policyholders as aforesaid shall be allotted by the Directors to such respective policyholders by way of bonus upon such policies and at such times and in such manner as the Directors may from time to time determine (with power to the Directors to grant different participation to different policies or classes of policies)”.


4.Article 123 confirms that any such declaration by the Directors shall be conclusive. This means that the surplus which accrues to the policyholders in accordance with the above formula is not necessarily allocated to the policyholders and it is up to the Directors to allocate a suitable proportion of the surplus to them.


5.Articles 119 provides that the Company’s General Meeting may declare dividends but “no dividend shall exceed the amount recommended by the Directors or be payable except out of surplus or surpluses allocated to the Shareholders as aforesaid”. Furthermore, Article 121 provides that “no dividend shall be paid otherwise than out of the portion of the respective surpluses allocated to the shareholders as aforesaid”. This means that any surpluses which accrued to the policyholders but are not allocated to the policyholders cannot be distributed to the shareholders.


6.Under Article 122 the directors “may set aside out of the portion of the respective surpluses allocated to them (the members) as aforesaid, such sum as they think proper as a reserve or reserves, which shall, at the discretion of the Directors, be applicable, pending distribution by way of dividend amongst the members, for any purpose to which the profits of the Company may be properly applied ---------”


7.Article 146 provides for any surplus arising on a winding up to be distributed to the shareholders.