The Finance Bill 2013 introduces a number of provisions that impact on the VAT treatment of transactions involving liquidators, receivers and mortgagees in possession (the “Insolvency Practitioners”). These provisions were largely expected following the consultation process on the tax implications of appointing a receiver which has been ongoing since July 2012.

Irish Bank Resolution Corporation Act and Appointment of Special Liquidators

In the early hours of 7 February 2013, the Irish Bank Resolution Corporation Act 2013 (the “IBRC Act”) was passed. The IBRC Act provides for the Minister for Finance to make a “Special Liquidation Order”  (“SLO”) winding up IBRC. As a result of the SLO:

The long awaited Personal Insolvency Act 2012 was enacted on 26 December 2012. It is expected to become operative in the third quarter of 2013. Once the Act is commenced there will be a State-run Insolvency Service to operate non-judicial debt settlement arrangements. The Act also reforms the existing bankruptcy procedure. The Act is of particular interest to financial institutions and trade creditors. Some debts ("Excluded Debts") cannot form part of insolvency arrangements e.g.

In a recent High Court case, a liquidator sought an order declaring that certain payments made by a company prior to its liquidation were a ‘fraudulent preference’ and invalid. The company had made payments to its overdrawn bank account which was personally guaranteed by one of its directors. It was alleged that the payments were made in order to reduce the company’s overdraft and therefore, the director’s own personal exposure under the guarantees.

An application by Quinn family members to have court-appointed receivers removed and their solicitors discharged on the basis of an alleged conflict of interest and partiality has been dismissed by the Commercial Court.

The Personal Insolvency Bill has completed its passage through the Dáil and the Seanad (the Irish Houses of Parliament) and will now be passed to the President for signing into law.

The new legislation has been described by the Minister for Justice as “the most radical and comprehensive reform of our insolvency and bankruptcy law and practice since the foundation of the State.”

It provides for:

This Briefing contains a general summary of developments and is not a complete or definitive statement of the law. It also updates the Briefing published in July 2012 on the Personal Insolvency Bill. Specific legal advice should be obtained where appropriate.

New legislation alters the law and procedures of personal insolvency in radical ways. The Personal Insolvency Act 2012 establishes an independent Insolvency Service of Ireland and introduces new insolvency procedures for addressing unsecured debts (of any value) and secured debts (up to €3 million in aggregate but without limit in the case of agreement). Current bankruptcy laws are amended, including a reduction of the bankruptcy term from 12 years to 3 and the carve-out of pension assets from the bankrupt’s estate.

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.

The Personal Insolvency Bill was signed into law by the President on 26 December 2012.

The Act provides for: