On the 12 December, the European Commission announced the proposal to update Council Regulation 1346/2000 on insolvency proceedings. They also announce a separate initiative whereby it will be highlighting the differences between national laws that have the greatest potential to hamper an efficient insolvency legal framework across the EU.

This Q&A focuses on the need to modernise the EU Insolvency Regulation to facilitate the restructuring of businesses in financial difficulty.

Questions include: why do the current rules need updating, what is the impact of the insolvency rules on the economy, how many businesses are affected and what are the next steps?

On 26 December last, the Personal Insolvency Act 2012 was signed into law by the President.

The various provisions of the Act will come into force through commencement orders which will be made by the Minister for Justice. It is expected that certain sections of the Act relating to its Establishment Day and related provisions, will be commenced shortly.

The remaining provisions will then come into operation on a phased basis under Section 1(2) of the Act, as designated by orders to be made by the Minister.

Last week, the Bankruptcy Court for the Northern District of Texas granted involuntary bankruptcy petitions against ten US subsidiaries of Mexican glassmaker Vitro S.A.B. de C.V. (the “New Debtor Subsidiaries” and “Vitro”, respectively). The ruling is a win in the multi-paned litigation involving certain petitioning noteholders (the “Noteholders”) in their fight against Vitro’s efforts to effect a non-consensual restructuring of their debt through a Mexican insolvency proceeding.

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.

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.

A third court confirms that settlement payments are still settlement payments and early redemptions of notes prior to maturity are exempted from preference actions.

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.

Yesterday (September 12, 2012) the Bankruptcy Court for the Southern District of Texas provided an excellent lesson on the need to know what sauce is going into the stew that governs privileged communications in bankruptcy proceedings.[1]