IRISH LIFE & Permanent (ILP) may face legal claims and “substantial fines and penalties” over the controversial €7.45 billion deposits into Anglo Irish Bank last year, the company has said in a prospectus to shareholders.

The prospectus has been circulated ahead of an extraordinary general meeting on December 17th to approve the creation of a new holding company that will pave the way for a division of the group and the possible offloading of IL&P’s bank, Permanent TSB.

The Anglo deposits were listed among 29 risks facing the group.

The deposits flattered Anglo’s balance sheet over the bank’s year-end in September 2008 and led to the resignations of three senior IL&P managers, including chief executive Denis Casey, when they were disclosed last February.

IL&P says in the prospectus that it is “exposed to litigation and regulatory litigation risks including risks arising from transactions with Anglo Irish Bank”.

Shares in IL&P remained largely unchanged at €3.40.

The Anglo deposits are being investigated by the Financial Regulator, the Garda and the Office of the Director of Corporate Enforcement. “These investigations could give rise to claims against the group and, depending on the outcome of any investigations, enforcement authorities may seek to impose substantial fines and penalties,” IL&P says in the prospectus.

A spokesman for the company said it was prudent to include “all risk factors, hypothetical or not”, within the prospectus.

The group also outlines plans to create a new holding company called Irish Life & Permanent Group Holdings, which will sit above Permanent TSB, the Irish Life insurance division, and Irish Life Investment Managers, IL&P’s fund manager. The creation of the new company, whose shares will be listed in mid-January, will allow IL&P to restructure the group “in a prompt and flexible manner” in response to any changes in the wider Irish banking sector. There is “no certainty” about what those changes would be, the group says.

The restructuring would enable IL&P to dispose of Permanent TSB, with industry expectation pointing to a possible tie-up with the State’s two building societies, EBS and Irish Nationwide, which are engaged in merger discussions.

IL&P also lists the impact of the National Asset Management Agency (Nama) among the risks facing the group. “Nama’s acquisition of bank assets may have the effect of distorting the market for investment property in Ireland,” it says, adding that Nama may also cause “competitive distortions in the banking system”.

The IL&P prospectus states that chief executive Kevin Murphy and finance director David McCarthy are being paid salaries of €500,000 for 2009, the Government cap for bankers, compared with their 2008 salaries of €525,000 and €334,000 respectively. Neither will be paid bonuses for 2008 or 2009.

IL&P estimates the cost of restructuring at €5.9 million.