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Insolvency Regulation in Ireland Presentation to IAIR Insolvency Workshop Prague, 7 October 2004

Insolvency Regulation in Ireland Presentation to IAIR Insolvency Workshop Prague, 7 October 2004 Paul Appleby Director of Corporate Enforcement in Ireland. Presentation Overview. Office of the Director of Corporate Enforcement (ODCE) Corporate Liquidation in Ireland

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Insolvency Regulation in Ireland Presentation to IAIR Insolvency Workshop Prague, 7 October 2004

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  1. Insolvency Regulation in Ireland Presentation to IAIR Insolvency Workshop Prague, 7 October 2004 Paul Appleby Director of Corporate Enforcement in Ireland

  2. Presentation Overview • Office of the Director of Corporate Enforcement (ODCE) • Corporate Liquidation in Ireland • Liquidation-Related Functions of the ODCE • Enforcement Options • Examinership/Receivership/Bankruptcy • Initial Impact of the ODCE

  3. What is the ODCE? • Statutorily independent • Multi-disciplinary body of accountants, lawyers, police and administrative staff • ODCE is responsible for: • encouraging compliance with the Companies Acts and • bringing to account those who disregard the law

  4. Encouraging Compliance • ODCE Educational Materials include: • Information Books on Duties and Powers of: • Company Directors • Creditors • Liquidators, Receivers and Examiners • Liquidation-Related Functions of the ODCE • Unliquidated Insolvent Companies • Available on the ODCE website – www.odce.ie

  5. Forms of Corporate Insolvency • Official Liquidations (under High Court supervision) • Voluntary Liquidations • Members’ Voluntary Liquidations (Solvent Companies) • Creditors’ Voluntary Liquidations (Insolvent Companies) • Unliquidated Insolvent Companies • Receiverships • Examinerships

  6. Relative Incidence of Insolvencies

  7. Corporate Insolvency Legislation Companies Act 1963 Primary Liquidation & Receivership Provisions Companies (Amendment) Act 1990 Examinerships - Corporate Restructuring/“Chapter 11”-Type Companies Act 1990 Restriction/Disqualificationof Company Directors Unliquidated Insolvent Companies Company Law Enforcement Act 2001 Functions of the ODCE

  8. General Principles • Market decides timing of corporate liquidations • Companies are liquidated by private practitioners • No ‘State Insolvency Service’ in Ireland • No State Licensing System for Liquidators (yet) • But the High Court and ODCE have distinct roles

  9. General Principles • Balance • Company versus the rights of Creditors • Limited liability versus public interest • High Court is currently the arbiter of the correct balance in individual cases • Liquidators will assume more powers and will be supervised by Creditors in the future

  10. Primary Duties of Liquidators • Collect Assets • Not required to sell by public auction • May administer with consent of Court/Creditors/Members • Ascertain Creditors • Distribute Assets • Priority of Creditors defined in Law • Investigate Circumstances of Insolvency

  11. Official Liquidation • Usually Insolvent Company • Liquidation proceeds under High Court control • Commenced by Creditors’ Petition to the Court • Multiple Grounds • Primarily an inability to pay debts as they fall due • Unexecuted judgements • 21 day letter; or • Court Assessment of inability to pay

  12. Members’ Voluntary Liquidation • Company must be solvent – declaration to this effect • Initiated by members/shareholders of the company • Supervised by members • 500 Members Voluntary Liquidations per year

  13. Creditors’ Voluntary Liquidation • Primarily Insolvent Companies • Initiated by members • Liquidator appointed primarily by creditors • Supervised by members and creditors • 500 Creditors’ Voluntary Liquidations per year

  14. ODCE Role • Mandatory Reporting to the ODCE by • Liquidators of Insolvent Companies in relation to • Conduct of Directors of Insolvent Companies • Liquidators are obliged to apply to the High Court to ‘restrict’ all of the directors unless relieved by the ODCE • Reporting to the ODCE by Professional Bodies of indictable offences committed by their members while acting as liquidator/receiver

  15. ODCE Role • Investigation of Misconduct • Require the production of documents from • Companies, company directors, auditors • Liquidators and receivers • Search and seize documents • Examine company directors and other officers • Information-sharing with State Authorities • Powers of arrest, etc. retained by police in the ODCE

  16. ODCE Role • Enforcement Options • Prosecution of Directors, etc. • Seeking Court Orders to remedy defaults • Disqualification of Directors, etc. • Restriction of Directors • Other Options (e.g., asset freezing)

  17. Disqualification • Disqualification is automatic upon conviction on indictment for fraud/dishonesty • ODCE can apply to the High Court for a person’s disqualification on certain grounds including: • Lack of suitability to be a director • Conviction of multiple offences • Director of a dissolved company • Effect is that a disqualified person cannot act in management, formation or promotion of company or act as an officer

  18. Restriction • Directors of insolvent companies are eligible • ODCE and Liquidators may apply to the High Court • Reverse burden of proof • Director must be able to show that he/she acted “honestly and responsibly” • Effect is that a restricted person cannot act as a director, unless the company is adequately capitalised in cash: • €63,000 for a private company • €317,000 for a public company

  19. Unliquidated Insolvent Companies • ODCE and Creditors may seek: • High Court Examination of Directors • High Court Order to return Company Assets • High Court Order to arrest absconding Contributories • High Court Asset-Freezing Order

  20. Receiverships • Receiver, an Enforcer of Mortgage/Security • Appointed by the secured chargeholder • Terms of appointment in deed • Duties • Collect & sell assets • Benefit primarily to chargeholder

  21. Examinership • Corporate Rescue • Supervision by the High Court at all stages • Only requires acceptance by one class of creditor

  22. Personal Bankruptcy • Not an ODCE Function • Bankruptcy Act 1988 • Individual Insolvencies under the High Court • Limited numbers of applicants • 7 persons adjudicated bankrupt last year • Procedure takes 3-5 years to discharge

  23. Initial Impact of ODCE • Over 1,000 Reports from Liquidators • 14 High Court Remedial Orders against Liquidators • Over 100 Convictions against Companies/Directors, etc. • Over 200 Liquidators restricted via Liquidator Actions • One Disqualification • Books of a number of Liquidators examined • Seizure of Company Assets by the ODCE in one case

  24. Thank You Further Information on www.odce.ie

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