There have been a number of recent developments regarding the current system of examinership and the legislation governing repossession and other lender’s rights. Norman Fitzgerald, Partner and Head of Eversheds’ Insolvency Group, discusses the proposed amendments and their likely impact.

Circuit Court Provisions for Examinership

The Personal Insolvency Bill has now passed through the Dail and will commence in the Seanad. The Minister for Justice has commented that the intention is still to have the Bill enacted by Christmas.

Once a company has entered into a formal insolvency process, all its assets must be realised and distributed in accordance with the Companies Acts. An attempt to prefer a particular creditor up to two years prior to an insolvent liquidation can be declared void by the courts on the application of the liquidator of the insolvent company. To succeed on such an application, however, the liquidator must prove that the dominant intention of the insolvent company at the time it entered into the transaction was to prefer the creditor in question.

The usage of pre-pack insolvency sales is less developed in Ireland than in other jurisdictions, but there has been an increasing number of asset sales structured through pre-pack receiverships over the last year. The most recent successful example was the sale of the A-Wear retail chain by its receiver Jim Luby of McStay Luby. In July 2011 the Superquinn grocery chain was sold to Musgraves by its receivers Kieran Wallace and Eamonn Richardson of KPMG, in what was probably the largest ever pre-pack transaction in this market. 

The facts:

An application had been made by Bank of Scotland Plc and the Governor and Company of the Bank of Ireland (the Applicants) for a letter of request to be sent by the Royal Court of Jersey to the High Court of England and Wales in respect of four Jersey companies which were ultimate beneficial owners of English real estate.  

The proposed Personal Insolvency Bill, published on 25 January 2012, provides for significant changes to the personal insolvency regime in Ireland.

The term “pre-pack”, as it relates to insolvency sales, can have different meanings in different jurisdictions. In essence it refers to a sale of a distressed company or asset where the purchaser or investor has been identified and the terms of the sale have been fully negotiated before an insolvency process occurs. The advantage to the “pre-pack” structure is that the sale can be completed immediately upon or closely after the appointment of the insolvency office holder and, critically, without material interruption to the trading activity of the target company or asset.

The Central Bank of Ireland (the “Central Bank”) has declared its intention to strengthen the protection of client assets and has now published its “Review of the Regulatory Regime for the Safeguarding of Client Assets” (the “Review”).

The Review identifies three main objectives which should form the basis of a client asset protection regime:

The Personal Insolvency Bill published today represents a radical overhaul and modernisation of Ireland’s personal insolvency law. The Bill introduces a comprehensive and balanced regime to address personal insolvency as required by Ireland’s IMF country programme. It envisages the creation of an Insolvency Service of Ireland to oversee the legislative regime.

Introduction