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Annual Report & Accounts 2016 - Notes
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104 Financial statements continued GVC Holdings PLC Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the year ended 31 December 2016 26. RELATED PARTIES 26.1 Identity of related parties The Group has a related party relationship with its subsidiaries and with its Directors and executive officers. 26.2 Transactions with Directors and key management personnel Karl Diacono is the Chief Executive Officer of Fenlex Corporate Services Limited, a corporate service provider incorporated in Malta. During the year ended 31 December 2016, Fenlex received €127,999 from the Group in relation to Company Secretarial and other matters arising in Malta (2015: €97,385). Peter Isola is a partner at Isolas, a law firm in Gibraltar which charged legal expenses of €209,858 to the Group relating to the acquisition of bwin.party. Richard Cooper received dividends during the year of €nil (2015: €934). The wife of Richard Cooper received dividends during the year of €nil (2015: €184,800) in respect of her interest in the ordinary share capital of the Group. Lee Feldman received dividends during the year of €nil (2015: €79,265) in respect of his beneficial interest in the ordinary share capital of the Group. Lee Feldman is the Managing Partner of Twin Lakes Capital, a private equity firm based in New York. During the year ended 31 December 2016, Twin Lakes Capital received €61,715 (2015: €68,715) in relation to office services. Kenneth Alexander received dividends during the year of €nil (2015: €69,264). The wife of Kenneth Alexander received dividends during the year of €nil (2015: €175,466) in respect of her interest in the ordinary share capital of the Group. On acquisition of bwin.party, Norbert Teufelberger became a Director of the Group and at this date, he had a loan balance due to the Group of €3.1m, including accrued interest. This liability was settled in full in the period. The Group purchased certain customer services of €2.5m from an associate, with amounts owed at 31 December 2016 of €0.2m. During 2016, the Group purchased certain rights to broadcast licensed media of €3.5m (2015: €nil) from Conspo, a previous joint venture company which was acquired with bwin.party. Conspo was disposed of on 6 July 2016 and ceased to be a related party at that point. 26.3 Transactions with Directors and key management personnel Details of the remuneration of key management are detailed below: 2016 €m 2015 €m Short-term employee benefits (Directors) 7.3 8.9 Short-term employee benefits (Key management) 2.6 2.1 Termination benefits - 0.8 Share-based payments 25.5 0.5 35.4 12.3 Details of Directors' remuneration is given in the Report of the Remuneration Committee on pages 51 to 63. 27. CONTINGENT LIABILITIES 27.1 East Pioneer Corporation Guarantee On 21 November 2011, the Group entered into a service agreement and guarantee relating to the acquisition by East Pioneer Corporation B.V. ("EPC") from Sportingbet PLC of Superbahis, a Turkish language website. The maximum contingent liability under this agreement at inception was €171m. The Directors consider this has a fair value of €nil (2015: €nil). The Group continues to provide back office and support services to EPC. Following the acquisition of Sportingbet PLC on 19 March 2013, the Group now receives all payments of amounts from EPC under the Business Purchase Agreement and other Transaction Documents and does not now offer any guarantee of payments to legal entities outside of the Group. 27.2 Indirect taxation Group companies may be subject to VAT on transactions which have been treated as exempt supplies of gambling, or on supplies which have been exported outside the scope of VAT where legislation provides that the services are received or used and enjoyed in the country where the service provider is located. Where group companies have treated supplies of gambling as exempt based on exemptions available to comparable supplies in the place where the customer is located, the right to exemption may be restricted if the supplies do not have similar characteristics or meet the same needs as other exempt gambling from the customer's point of view. Where group companies have determined the taxable amount for supplies of gambling to be the amount of stakes received less amounts that have to be returned to players, the right to a deduction for amounts returned to players may be restricted to the extent that the obligation to make a payment is not enforceable in the place where the customer is located. Revenues earned from customers located in any particular jurisdiction may give rise to further taxes in that jurisdiction. If such taxes are levied, either on the basis of current law or the current practice of any tax authority, or by reason of a change in the law or practice, then this may have a material adverse effect on the amount of tax payable by the Group or on its financial position. Where it is considered probable that a previously identified contingent liability will give rise to an actual outflow of funds, then a provision is made in respect of the relevant jurisdiction and period impacted. Where the likelihood of a liability arising is considered remote, or the possible contingency is not material to the financial position of the Group, the contingency is not recognised as a liability at the balance sheet date.