Cayman Islands: The International Insolvency Review, 2nd Ed.: Ireland

INSOLVENCY LAW, POLICY AND PROCEDURE

i Statutory framework and substantive law

Ireland is a sovereign state in Europe and a member of the European Union since 1973. The legal system in Ireland is a combination of statute and common law in which a large emphasis is placed on precedent.

The principal statutes governing insolvency law in Ireland are as follows:

a the Companies Acts 1963–2013 (the Companies Acts) (the main point of reference for all Irish insolvency processes); the new Companies Bill, which is expected to be passed in late 2014 or early 2015, will consolidate and replace the previous Acts;

b Council Regulation (EC) No. 1346/2000 (referred to when a debtor has its centre of main interests (COMI) in an EU Member State) (the Insolvency Regulation);

c the National Asset Management Agency Act 2009 (relevant from the perspective of statutory receivers appointed by the National Asset Management Agency); and

d the Irish Bank Resolution Corporation Act 2013 (which introduced the concept of Special Liquidation) (the IBRC Act).

ii Policy

Remedies in the area of insolvency and bankruptcy have traditionally involved enforcement of security, realisation of a debtor's assets and the penalisation of resisting debtors. In recent years, however, there has been a subtle shift towards a 'rescue culture' in respect of certain companies. This has been motivated by a desire to achieve value for all stakeholders.

For those businesses that are in difficulty but can demonstrate that they have a reasonable prospect of survival2 examinership remains an attractive model for formal corporate restructuring and recovery. Examinership is a rehabilitative procedure that, broadly speaking, is a hybrid of Chapter 11 in the United States and administration in England and Wales.

Many businesses in Ireland borrowed significantly from 2000 to 2008 and much of that borrowing was used to fund property acquisitions. At present, there is a prevailing policy of enforcement by the lending institutions in respect of businesses and individuals who have breached covenants in their agreements. The lending institutions are taking enforcement steps in two ways: by the appointment of receivers to secured property or by issuing proceedings in the Irish courts to obtain judgments against defaulting debtors (or both).

iii Insolvency procedures

The formal insolvency and rescue procedures available in Ireland to wind up or rescue companies are:

a creditors' voluntary liquidation;

b compulsory or court liquidation;

c examinership; and

d statutory scheme of arrangement.

Receivership is a distinct enforcement remedy available to secured creditors only and does not involve the commencement of insolvency proceedings. The Companies Acts recognise and protect the rights of secured creditors to enforce their security in accordance with its terms, and secured creditors can, as a general rule, enforce or realise their security outside an Irish winding-up process.3

Creditors' voluntary liquidation

To commence a creditors' voluntary liquidation (CVL), the company, acting through its members (in general meeting), resolves that it cannot, because of its liabilities, continue in business and that it should be wound up voluntarily.4

The members' meeting at which the winding-up resolution is passed must be held on the same day or the day before a meeting of the company's creditors.5 The winding up commences once the members' resolution has been passed and, thereafter, the company must cease to carry on its business except insofar as is necessary to facilitate the liquidation.

The creditors almost entirely control the CVL process, although any interested party can apply to the Irish High Court (the High Court) for directions to determine any question arising during the course of the winding up.6

Once appointed, the function of the liquidator is to realise all of the assets of the company and to distribute the proceeds of sale of those assets to creditors in accordance with the priorities prescribed by the Companies Acts and the Rules of the Superior Courts.

The liquidator conducts the liquidation independently and reports on the conduct of the liquidation to meetings of the members and creditors at the end of each year. The liquidator is also obliged to submit a report to the Office of the Director of Corporate Enforcement following his investigation into the affairs of the company.7

Compulsory liquidation

A High Court or compulsory liquidation is commenced by the presentation of a petition for the winding up of a company, which can be presented by:

a the company itself;8

b a creditor of the company;9

c a member or contributory of the company;10

d the Director of Corporate Enforcement;11 or

e the Registrar of Companies.12

A court-appointed liquidator (the official liquidator) is subject to the supervision of the High Court and, for the most part, the official liquidator's powers are exercisable only with the sanction of the High Court. An official liquidator is an officer of the court and must conduct the liquidation in accordance with the provisions of the Rules of the Superior Courts and the Companies Acts.

Where the company in question is insolvent, it is typically a creditor who applies to have it wound up compulsorily on the grounds that the company is unable to pay its debts as they fall due for payment. It may, however, also be the company's directors or the company itself that presents a petition before the court.

The powers of the directors will cease once an order has been made to wind up the company, but the official liquidator may request their assistance and any necessary information from them. The shareholders retain their residual powers and have a proprietary interest in the liquidation of the company.

When the official liquidator has carried out all of his functions, he or she is required to apply to the High Court for final orders that will include an order discharging him or her as liquidator. Discharge occurs only once the liquidator has made all required payments pursuant to the final orders.

The High Court may, if satisfied that the urgency of the situation warrants it, appoint a provisional liquidator pending the hearing of the winding-up petition, for the purpose of continuing the company's business or preserving its assets or where an immediate investigation into the affairs of the company is necessary.13

Transaction avoidance in creditors' voluntary liquidations and compulsory liquidations

A transfer of property by an insolvent company to a creditor within six months of the commencement of the winding-up of that company, if made with a view to giving such creditor a preference over other creditors, may be deemed a 'fraudulent preference' and therefore invalid.14 The relevant provision is only applicable if, at the time of the transfer, the company was unable to pay its debts as they fell due. Essentially, for the transaction to amount to a fraudulent preference, the company must positively intend to improve the position of the beneficiary creditor in the event of the company's liquidation. Case law in this area indicates that it must have been the 'dominant intention' of the company to prefer the creditor in question.

Where the preferential transaction is made in favour of a 'connected person',15 the transaction will be invalidated where made within two years of the commencement of the winding up; a 'connected person' includes a related company. In addition, unless the contrary is shown, the preferential transaction in favour of a connected person is deemed to have been made with a view to giving such person a preference over other creditors, and to be a fraudulent preference. Consequently, the burden of proof is on the connected person to show that the transaction was not fraudulent.

Further, where property of a company has been fraudulently disposed of, the High Court may order the return of the property to the company on the application of a liquidator, creditor or contributory of the company.16 To apply for such an order, it must be shown to the satisfaction of the court that the effect of such disposal was to perpetrate a fraud on the company, its creditors or members. Unlike the fraudulent preference provision, there is no operative time limit for the making of the fraudulent disposition. There is also no requirement that, at the time of the disposition, the company was unable to pay its debts as they fell due – all that is required is a disposal of property where the effect of such disposal is to perpetrate a fraud on the company, its creditors or members.

A floating charge on the undertaking or property of a company created in the 12 months before the commencement of its winding up may be rendered invalid (except to the extent of monies actually advanced or paid, or the actual price or value of the goods or services sold or supplied to the company at the time of or subsequent to the creation of, and in consideration for, the charge) unless it is proved that the company was solvent immediately after the creation of the charge.17 Where the floating charge is created in favour of a 'connected person', the period of 12 months is extended to two years.

Where a company is being wound up by the High Court, any disposition of the property of the company (including things in action) and any transfer of shares or alteration in the status of the members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void.

In certain circumstances, a liquidator may be entitled to disclaim onerous covenants, unprofitable contracts or any other property that is unsaleable or not readily saleable.18 The liquidator must apply to the High Court within 12 months of the commencement of the winding up, seeking the court's leave to disclaim. Any person suffering loss or damage as a result of a disclaimer will be deemed a creditor of the company in the amount of such loss or damage and may prove for that amount as a debt in the winding up.

To view the full review click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Walkers
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Walkers
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions