In a recent judgment, which provides useful clarification to liquidators of companies, the High Court has held that section 631 of the Companies Act 2014 (the “Act”) does not confer a free-standing jurisdiction to order disclosure of information or documentation. Furthermore, the Court held that the inspection right conferred by section 684 of the Act cannot be used as a vehicle for carrying out a “fishing expedition” of a wide range of documents.

Background

This briefing was originally published on 27 July 2021 following the enactment of the Companies (Rescue Process for Small and Micro Companies) Act 2021. The Act was commenced on 8 December 2021.

Introduction

Examinership is a well-established corporate rescue mechanism for ailing corporates and groups. It combines flexibility with a high degree of commercial and procedural certainty for all involved. It is a process which has evolved with the different economic cycles in Ireland since its inception in 1990 and has responded to downturns in different sectors.

Now that the UK has left the EU and the transition period ended on 31 December 2020, this briefing considers the key points of the legal and regulatory landscape from the perspective of Ireland.

Deal or no-deal?

In effect, there is both. The December 2020 EU-UK Trade and Cooperation Agreement¹ (the “TCA”) includes a ‘deal’ so far as concerns EU-UK trade in many types of good. However, the TCA makes little provision for trade in services and so, broadly, it is ‘no-deal’ as regards most types of service.

Landlord and tenant relationships are likely to come under strain as tenants experience financial difficulties due to the COVID-19 pandemic. For tenant companies such financial difficulties may result in a tenant being placed in examinership, or ultimately in the appointment of a liquidator or receiver. An insolvency event generally constitutes an event of default in a commercial lease.

The High Court has recently struck out proceedings against a defaulting debtor where the bank made a unilateral commercial decision to delay to allow her co-debtor to recover financially so increasing its prospect of recovery.

Background

In Bank of Ireland v Wilson,¹ the bank commenced summary proceedings against the defaulting debtors in 2012. The debtors, who were jointly and severally liable on the debt, had been in a relationship but were now estranged.

When a business becomes insolvent, all of the creditors of the business are at risk, including its landlords. As COVID-19 continues to challenge businesses in Ireland and abroad, two recent decisions of Mr Justice McDonald in the High Court offer a timely reminder of the standards which tenants must meet when seeking to compromise their commercial lease obligations and the importance of procedural fairness for landlords affected by tenant insolvency.

The New Look case¹

The Irish Government is planning to take measures in the areas of settlement finality, insurance, and insurance distribution in the event of a 'no-deal Brexit'. The relevant measures are set out in Parts 7 and 8 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019 (the “Withdrawal Bill”), which was published on 22 February 2019. These measures are in addition to a number of measures already taken at EU level.

Settlement Finality

Certainty is a key element in any business planning. For corporate restructuring practitioners who are planning or working on cross border transactions, the uncertainty relating to Brexit and the departure of the United Kingdom from the European Union ("EU") may have long-term significant consequences and a "no-deal" Brexit (without a withdrawal agreement and the certainty of a transition period) will have immediate and significant consequences for any such cross-border transaction.

Certainty is a key element in any business planning. For corporate restructuring practitioners who are planning or working on cross border transactions, the uncertainty relating to Brexit and the departure of the United Kingdom from the European Union (“EU”) may have long-term significant consequences and a “no-deal” Brexit (without a withdrawal agreement and the certainty of a transition period) will have immediate and significant consequences for any such cross-border transaction.