David Baxter and Brian O’Malley, A&L Goodbody

This is an extract from the first edition of GRR's The Art of the Pre-Pack. The whole publication is available here.

Introduction

Pre-packs in Ireland probably are not as common as they should be. In theory, a pre-pack is broadly available in each of our insolvency procedures: liquidation, examinership and receivership.

Some businesses may soon (and indeed already) be faced with sudden cash flow and liquidity issues as a result of the sudden economic disruption caused by the COVID-19 pandemic.

Some of these businesses may be well advised to first seek to renegotiate arrangements with creditors whilst others may require formal court protection from creditors to assist them while arrangements with creditors are being put in place.

The three main legal avenues which are available to businesses seeking to restructure their debt under Irish law are as follows:

Guidance for companies and company directors in Northern Ireland.

Overview

The adverse trading position caused by the COVID-19 situation is significantly impacting the majority of companies and is also bringing the duties of directors – particularly those relating to directors’ actions when a company is in difficulty or insolvent – into sharp relief.

Irish companies are facing challenges with the sudden changes imposed on their businesses as a result of the impact of COVID-19. Some may be experiencing cash flow difficulties; others may have had to temporarily cease trading altogether.

Directors are responsible for managing their company’s affairs. This requires them to identify and navigate risks, and to ensure that appropriate strategies and where necessary contingencies are in place to anticipate and deal with such risks.

The Revenue Commissioners have issued some recent welcome clarifications about certain provisions of the Government's temporary wage subsidy scheme.

Application for the Subsidy Scheme – An Admission of Insolvency?

The main provisions of the subsidy scheme are set out in Section 28 of the Emergency Measures in the Public Interest (Covid-19) Act 2020.

That section also contains the criteria for an employer's eligibility to avail of the subsidy scheme. One such criterion is that:

About a year ago, I completed the most exhausting marathon of my life serving as the chief lawyer during the cross-border restructuring and chapter 11 of Waypoint Leasing, an Ireland-based helicopter leasing company. I joined Waypoint Leasing shortly after it started operations in the newly formed helicopter leasing industry. After the first few years of meteoric growth, the collapse in oil & gas prices hit the helicopter industry hard. We soon found ourselves dealing with bankrupt customers and eventually reached the brink of financial distress ourselves.

Following our articles on:

A Members’ Voluntary Liquidation (“MVL”) is an efficient way to wind up a solvent company and release value to members. It is most often used where the directors wish to retire, the company has realised its potential or the company is dormant. By properly winding up the Company, the danger of the company being involuntarily struck off the Register of Companies and any resulting liability for the Directors is removed. A summary of the process is as follows:

COVID-19 is an unexpected shock for many businesses. Some businesses are being significantly affected, particularly those in the travel and hospitality sectors. We consider some of the options open to otherwise good businesses facing cash-flow and other financial issues as a result of COVID-19.

How are governments dealing with COVID-19

Executive Summary

COVID-19 poses high levels of financial distress for Ireland and Irish business. Ireland's examinership regime (Examinership) and schemes of arrangement under part 9 of the Companies Act 2014 (Schemes) are effective tools for corporate restructuring either immediately and/or once the more immediate threat of COVID-19 has passed.