Summary

The Personal Insolvency Bill 2012 has passed Committee Stage in the Dáil. The Select Committee on Justice, Defence and Equality made a number of changes to the Bill, many of these being technical changes to clarify provisions or to correct inconsistencies.

Key changes

Some of the key changes made by the Select Committee were as follows:

The Irish telecommunications company eircom recently successfully concluded its restructuring through the Irish examinership process. This examinership is both the largest in terms of the overall quantum of debt that was restructured and also the largest successful restructuring through examinership in Ireland to date. The speed with which the restructuring of this strategically important company was concluded was due in large part to the degree of pre-negotiation between the company and its lenders before the process commenced.

On 4 July 2012, the Minister for Finance, Mr Michael Noonan, launched a public consultation on the tax implications of appointing a receiver. The consultation paper was jointly issued by the Department of Finance and the Revenue Commissioners and invited input by 4 September 2012 from interested parties in relation to technical and practical tax implications concerning the appointment of receivers.

In Re: Michael McLoughlin Pharmacy Ltd. The examiner sought the High Court’s approval for a scheme of arrangement which limited his liability for negligence. The secured creditor objected as a matter of principle because such limitations of liability had become commonplace in schemes. The secured creditor made it clear that there was no suggestion of any negligence by the examiner in the particular case.

The court considered:

In an insolvent winding up, preferential creditors are entitled to be paid first from assets subject to a charge which at the time of creation was floating, regardless of whether the floating charge has crystallised at the commencement of the winding up.

InDellway and Ors. v National Asset Management Agency & Ors., a number of companies and Paddy McKillen appealed a decision of the High Court in relation to the purported acquisition of €2∙1 billion in loans to the appellant companies by NAMA.

The appeal was brought on five grounds:

In January 2011, the High Court refused to approve an examiner’s rescue plan (“Scheme of Arrangement”) for construction company McInerney Homes Limited (“McInerney”), on the basis that the Scheme of Arrangement was unfairly prejudicial to the secured creditors consisting of a Banking Syndicate of Anglo Irish Bank Corporation Limited, Bank of Ireland plc and KBC Bank plc (the “Banks”).

TheCentral Bank and Credit Institutions (Resolution) Bill 2011 seeks to establish a more permanent and a wider framework for dealing with insolvent banks and banks in financial difficulty. It is intended that the legislation would replace and extend the provisions contained in the Credit Institutions (Stabilisation) Act 2010.

The new Bill was published to meet the end of February deadline set under the terms of the EU-IMF Financial Support Agreement.

Introduction

Prior to 25 March 2011, there was no judicial decision in Ireland on whether the holder of a floating charge could validly improve its position in the order of priority of payments, vis-à-vis preferential creditors, in circumstances where its floating charge crystallises (i.e. converts into a fixed charge) prior to commencement of the winding up of a company.