Irish company law provides that if a charge granted by a company is not registered in the Companies Registration Office (CRO) within 21 days of its creation, it is void against a liquidator and any creditor of the company. There is a duty imposed on a company which grants a charge to register the charge in the CRO but the creditor taking the charge can also do so.

Diamond Rock Developments Ltd (the Company) granted a mortgage over a property. That mortgage was registered in the Land Registry but was not registered in the CRO.

If you supply goods, the simplest step that you can take to reduce your exposure to a customer’s insolvency is to use effective retention of title (RoT).

However not all RoT clauses are effective and we see many RoT claims rejected in insolvency.

By default, once you sell goods on credit:

• the goods belong to the customer; and
• the customer owes you the purchase price.

This means that if an insolvency practitioner (IP) is appointed to the customer:

The Corporate Enforcement Authority (CEA) has recently issued an information note, which provides guidance to directors in respect of early warning tools, director's duties and restructuring processes for companies in financial difficulty.

The Irish courts have long recognised the principle that directors of companies that are insolvent must have regard to the interests of the creditors of the company as a matter of Common Law.

The European Union (Preventive Restructuring) Regulations 2022 (the "Regulations"), which were signed into law last year, have reinforced and refined this principle in certain respects.

Background

The Corporate Enforcement Authority (“CEA”) has issued its first information note of 2023 on the topic of the European Union (Preventative Restructuring) Regulations 2022 (the “Regulations”) which came into effect on 27 July 2022 (the “Information Note”).

DO YOUR DIRECTORS HAVE SUFFICIENT TOOLS AVAILABLE TO ALERT THEM TO CIRCUMSTANCES THAT COULD INDICATE FINANCIAL DIFFICULTIES IN A COMPANY AND ASSIST THEM IN ANY FUTURE RESTRUCTURING DECISIONS?

Good Financial tools will enhance Directors' understanding the company's financial position and alert them to any early signs of potential financial difficulties.

FINANCIAL DIFFICULTIES

Corporate Enforcement Authority Issues Helpful Guidance Note

The Preventative Restructuring Directive

In July 2022, the European Union (Preventive Restructuring) Regulations 2022 (the Regulations) transposed the requirements of EU Directive 2019/1023 (the Preventative Restructuring Directive) into Irish law.

Certain of the consequential amendments to the Companies Act 2014 (the Act) relate to the duties and responsibilities that directors of companies have in circumstances of financial difficulty and/or insolvency.

The Corporate Enforcement Authority recently published its guidance note on EU Directive 2019/1023 known as the "Preventive Restructuring Directive", which you will find here (Information Note).

The Government has announced the extension until 31 December 2023 of two significant temporary measures brought in by the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the "Covid Act").

Corporate insolvency numbers continued to appear artificially low in 2022. The expectation is that they will rise once businesses need to deal with the aftermath of Government pandemic supports and, in particular, start to pay warehoused taxes.