Insolvency Regulation in Ireland
Presentation to IAIR Insolvency Workshop
Prague, 7 October 2004
Paul Appleby
Director of Corporate Enforcement in Ireland
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Presentation Overview
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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
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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
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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
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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
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Relative Incidence of Insolvencies
Members Voluntary
Liquidations
Official Liquidations
Creditors Voluntary
Liquidations
Receiverships
Examinerships
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Corporate Insolvency Legislation
Companies Act 1963
Primary Liquidation & Receivership Provisions
Companies (Amendment) Act 1990
Examinerships - Corporate Restructuring/“Chapter 11”-Type
Companies Act 1990
Restriction/Disqualification of Company Directors
Unliquidated Insolvent Companies
Company Law Enforcement Act 2001
Functions of the ODCE
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General Principles
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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
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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
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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
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Official Liquidation
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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
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Members’ Voluntary Liquidation
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Company must be solvent – declaration to this effect
Initiated by members/shareholders of the company
Supervised by members
500 Members Voluntary Liquidations per year
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Creditors’ Voluntary Liquidation
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Primarily Insolvent Companies
Initiated by members
Liquidator appointed primarily by creditors
Supervised by members and creditors
500 Creditors’ Voluntary Liquidations per year
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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
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ODCE Role
• Investigation of Misconduct
– Require the production of documents from
• Companies, company directors, auditors
• Liquidators and receivers
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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
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ODCE Role
• Enforcement Options
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Prosecution of Directors, etc.
Seeking Court Orders to remedy defaults
Disqualification of Directors, etc.
Restriction of Directors
Other Options (e.g., asset freezing)
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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
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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
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Unliquidated Insolvent Companies
• ODCE and Creditors may seek:
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High Court Examination of Directors
High Court Order to return Company Assets
High Court Order to arrest absconding Contributories
High Court Asset-Freezing Order
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Receiverships
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Receiver, an Enforcer of Mortgage/Security
Appointed by the secured chargeholder
Terms of appointment in deed
Duties
– Collect & sell assets
– Benefit primarily to chargeholder
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Examinership
• Corporate Rescue
• Supervision by the High Court at all stages
• Only requires acceptance by one class of
creditor
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Personal Bankruptcy
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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
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Initial Impact of ODCE
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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
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Thank You
Further Information on
www.odce.ie
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