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Recent Supreme Court Ruling re Repossession Proceedings relating to Residential Property

Lender cannot repossess where breach of the moratorium required by the code of conduct on mortgage arrears, supreme court says


The Supreme Court has said failure to comply with the moratorium provisions of the Central Banks Code of Conduct on Mortgage Arrears by a lender can prevent a home being repossessed in a recent decision of Irish Life and Permanent Plc, Gemma and Kevin Dunne and Dylan Dunphy [2015] IESC 46.

The Supreme Court heard appeals of two cases against Irish life and Permanent Plc which were referred by the High Court Judge. The Dunnes had defaulted on repayments due to Irish Life and Permanent Plc and it appeared that Irish Life and Permanent Plc were entitled to recover possession of the property. As the Dunne were not legally represented and did not enter an appearance to the proceedings, there would be no enquiry that the lender had complied with the Code of Conduct on Mortgage Arrears. Judge Hogan referred these 2 cases on appeal due to various different views taken by High Court Judges on the question of legal status and consequence of compliance by lenders with the Code of Conduct on Mortgage Arrears in relation to repossession.

The Supreme Court was asked to consider:-

  1. As there is no sanction for failure by a lender to comply with the Code of Conduct on Mortgage Arrears does non-compliance with the Code affect a lenders entitlement to obtain repossession of a property
  2. If a lender has not complied with the Code of Conduct on Mortgage Arrears, depending on the type of breach can the Court refuse to make an Order for repossession and can any breach be rectified by a period adjourning or postponing the proceedings.

The Supreme Court said that regulated financial institutions must obey the Code of Conduct on Mortgage Arrears which forms part of the law pursuant to Section 117 (1) of the Central Bank Act 1989. When a lender is applying for a Court order for repossession of a private residence of a homeowner the Court may have to consider a situation where a lender is in breach of the Code. The Court said if an application for repossession brought by a lender is in clear breach of the moratorium that a Court could not aid the lender in these actions which are clearly in unlawful and in breach of the Code of Conduct on Mortgage Arrears and could not make an order for repossession in those circumstances. However the Court clarified that it will not have a role in deciding whether particular proposals should be accepted by the lender or in formulating a lenders policy in relation to mortgage arrears and in applying these or assessing as to whether these are reasonable as this is not its role. All proceedings for repossession should now contain a statement that the proceedings were commenced outside of the moratorium period. If the moratorium does not apply then this should be explained and a Court can consider what evidence it needs to be satisfied that there was no breach of the moratorium by a lender.


This is a summary of a recent decision and does not constitute legal advice. If you require any further information in relation to this matter please contact Davnet@amoryssolicitors.com.


The Importance of “the Right to be Forgotten”

At the moment, the Data Protection Acts 1988-2003 provide that employees have the right to request their employer (who are “data controllers”) to rectify, erase, or block personal data accessible by them if it is incomplete, inaccurate or not up to date.

Personal data includes an employee’s HR file, reference checks, medical information, details of accidents or other claims, information in investigation and disciplinary processes, redundancy or dismissal of the employee.  There are restrictions preventing access by employees to certain data, for example information relating to investigating or detecting offences, and legally privileged information.

The European Court of Justice ruling in Google Spain, Google Inc. –V- AEPD and Gonzalez (C – 131/12) in 2014, said that Mr. Gonzalez could require the Google search engine to remove information linked to his name about the repossession of his home, some 16 years earlier. The Court said that individuals have the right to ask search engines or “data controllers” to remove links to personal information which is inaccurate, inadequate, irrelevant or excessive. This right of removal is subject to the right of freedom of expression and of the media.

This ruling has stirred up debate about what should be removed and whether individuals should be able to whitewash their reputations through the “right to be forgotten” and their right to do so where time has passed. Similar concerns arise for organisations when requests are made by employees to rectify, delete or block their personal data, where it relates to their HR file.

Employees “right to be forgotten” is strengthened in the new General Data Regulation which will be in force in 2 years’ time, and this provides:

  • An employer is obliged to erase an employee’s personal data where requested without undue delay
  • Employees will be able to supplement incomplete information held by an employer with a statement
  • If the information to be removed under the “right to be forgotten” has been made public, an employer shall take reasonable steps (taking account of technology and cost) to require that links and copies are erased


Employees “right to be forgotten” is not unlimited and will be subject to:

  • the right to freedom of expression
  • processing required by law, or in the public interest, or for public health
  • archiving in the public interest or for historical, statistical and scientific reasons
  • the establishment, exercise or defence of legal claims


An employee will have the right to restrict an employer from processing personal data, where its accuracy is being verified, or when it’s not necessary but is required for legal reasons, or if it is pending verification as to whether the grounds of the employer override the rights of the employee to rectify, erase or block the data.

The General Data Regulation allows fines of up to 4% of the annual worldwide turnover of a company who does not comply with the rights of employees “right to be forgotten”.



  • The organisation should review its Data Protection Policy to ensure compliance with “the right to be forgotten”.
  • When a request to rectify, erase and block data is received by an employer, the request should be assessed on a case by case basis, as an employee’s right to rectify, erase and block data is limited.
  • Relevant factors to be considered by an employer are the time that has passed, the reason for retention of the information, its relevance, whether this is required for legal proceedings or other processes which are ongoing.
  • The “right to be forgotten” request should be complied with within 40 days.



Update on Claims under Payment Protection Policies

Consumer misled in purchasing insurance policy where commission and connection with insurer not disclosed, Davnet O’Driscoll advises

Mr. Untoy who is a consumer took out 3 loans from GE Money who offered him a payment protection policy for the loans. GE Money acted as an intermediary for the underwriter Lighthouse which offered the insurance. Lighthouse was also owned by the parent company of GE Money.

Mr. Untoy was a public sector employee at the time he took out the 3 loans from GE Money. He was not aware at the time that commission was paid to GE Money on the purchase of each policy for his 3 loans. Neither was he aware that GE Money and Lighthouse were related companies. He subsequently discovered the policy sold to him was not suitable for public sector employees as he was not eligible to obtain any benefit under the policy. He then sued GE Money for negligence, misleading him, failing to disclose the relationship with the underwriter and that it was earning commission on the payment protection policies.

In the District Court, GE accepted that they had a duty to act honestly, in good faith in their dealings. Mr. Untoy said he did not realise that the Insurer and GE were the same entity. He was surprised to learn that GE earned a commission on the sale of the payment protection insurance as this was never disclosed to him. He said had he known that he was paying extra for this he might have gone to the insurer directly or looked for other options.

There is no express obligation for GE Money to disclose its commission or the amount of any commission on the sale of an insurance policy. However there is an obligation on an insurance intermediary to disclose any connection between the provider of a loan and the provider of insurance cover for a loan, under regulation 19(1)(d) of the Insurance Mediation Regulations 2005 (SI 13/2005).


The findings of the District Court were appealed by way of case stated to the High Court.

The Irish Court considered the regulatory regime in the UK which is different to the Irish regime. In the UK there are a number of rulings considering the fairness of a debtor creditor relationship and situations where commissions payable are not disclosed. The UK Supreme Court has found in one case that the non-disclosure of a 71.8% commission made a contractual relationship unfair for a consumer under a statute.  A reasonable person given that information would be bound to question if the insurance represented value for money.

GE Money admitted that they had not complied with the requirement to inform a customer in advance of entering into an insurance contract of the connection between the lender and insurance provider.  In Mr. Untoys case, the Judge found that where companies are related and one is paying commission to the other, this information should be disclosed to the consumer, since the consumer may not realise that he is in effect paying on the double to related companies. It is at that point the size of the commission being paid becomes relevant. The Judge found that the conduct of GE Money amounts to a misleading commercial practice and Mr Untoy is entitled to compensation for this as a result.

The amount of damages to be awarded to Mr. Untoy have not yet been measured, and we will update you when this has been decided. Following this ruling insurance intermediaries should review their procedures for selling insurance policies and practices. Further training may be necessary for staff.


If you have any comments on this article, or would like any further information on the responsibilities of insurance intermediaries, please contact Davnet O’ Driscoll http://www.amoryssolicitors.com/index.php?page=davnet-o-driscoll at Davnet@amoryssolicitors.com.

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Changes to the Employment and Investment Incentive Scheme in Budget 2016

Changes have been introduced to the Employment and Investment Incentive Scheme (“EIIS”) in section 16 of the Finance Bill 2015 which will no doubt be welcomed by investors and businesses alike.  The relevant changes apply to shares issued in an EIIS qualifying company to an investor on or after 13th October 2015.

The EIIS provides for income tax relief for investors of up to 41% of their investment to a limit of €150,000 each year up to 2020 in qualifying companies once certain conditions are met by both parties.

The relief is given by way of a deduction from the total income of the investor.  This means that the qualifying amount of the investment is taken out of the tax computation entirely (save for the universal social charge computation).  The qualifying amount of investment will either be 30/41 or 11/41 of the investment (see below) or an amount of unused relief carried forward from previous years.  Most investors are taxed at the higher rate of tax, currently being 41%. Accordingly the tax or monetary saving to an investor purchasing shares from an EIIS qualifying company rather than a non-EIIS qualifying company can be as much as 41% of the amount invested.

There is no tax advantage to qualifying companies but securing EIIS status may enhance their ability to attract external funding.

The relief is granted to investors in two tranches: the first tranche is a guaranteed relief of 30/41 of the amount invested and may be claimed by the investor in the first two years after investment is made however the second tranche being 11/41 of the amount invested is conditional and may be only claimed once certain targets have been achieved by the qualifying company. For instance prior to the Finance Bill 2015 the targets were the following:-

  1. That the number of employees had increased and the average wage of employees had not been reduced; or
  2. The qualifying company had increased its expenditure on research and development.

Target no.1. above has been tweaked by the Finance Bill 2015 to be an increase in staff numbers, by a minimum of one member of staff, and an increase in total wages by a minimum of the wages of one member of staff.

The EIIS has now been extended to include companies engaged in nursing home and international financial services trades.  In addition medium sized[i] enterprises already engaged in a trade and having a registered office in “non-assisted areas” will be eligible for the relief.

In brief, the following amendments were introduced to the EIIS by Finance Bill 2015:-

  1. Micro[ii], Small[iii] and Medium Enterprises at any stage of development in any part of the State may now qualify for EIIS.
  2. The limits on the amounts that can be raised by companies have increased from.
    • €2,500,000 to €5,000,000 in any 12 month period and
    • €10,000,000 to €15,000,000 in the lifetime of the company.
  3. The minimum period for the holding of shares in an EIIS company, and for the company to remain a qualifying company for EIIS, has been increased from 3 to 4 years
  4. A qualifying company must qualify for a Tax Clearance Certificate at the time of applying to Revenue for EIIS status.
  5. Internationally traded financial services are now considered to be a qualifying trade under EIIS subject to certification by Enterprise Ireland.
  6. Nursing homes and nursing homes which incorporate residential care units are now considered to be a qualifying trade under EIIS. Furthermore monies raised under EIIS can be used to expand the capacity of the Nursing Homes or Residential Care Units.
  7. Qualification criteria for the second tranche of relief (i.e. the further 11/41 of the investment) has been changed from an increase in staff numbers and average wages, to an increase in staff numbers, by a minimum of one member of staff, and an increase in total wages by a minimum of the wages of one member of staff.
  8. The EIIS now operates under the conditions set out in the EU Commission’s General Block Exemption Regulations on State Aid (2014).  This is a set of 43 exemptions from the requirement of prior notification and commission approval for State Aid purposes.

Further details of these changes can been viewed in section 16 of the Finance Bill 2015 (http://www.finance.gov.ie/sites/default/files/Finance%20Bill%202015%20As%20Initiated.pdf)


(c) October 2015, Deirdre Farrell, solicitor and AITI Chartered Tax Adviser, Amorys Solicitors, Suite 10, The Mall, Sandyford, Dublin 18

[i] A medium sized company is defined in the relevant legislation as a company with less than 250 employees and annual turnover not exceeding €50m or an annual balance sheet not exceeding €43 million

[ii] A Micro sized company is a company with less than 10 employees and an annual turnover not exceeding €2 million

[iii] A small sized company is defined in the relevant legislation as having less than 10 employees and a turnover not exceeding €10 million.


Consumer Protection (Regulation of Credit Servicing Firms) Act 2015

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the Act”) came into force on 8th July 2015 and has the effect of ensuring that relevant borrowers whose loans are sold by a regulated entity to a third party maintain the same regulatory protections they had prior to the sale.

In particular, the Act ensures that the rights available under the Consumer Protection Code, the Central Bank’s Code of Conduct on Mortgage Arrears and the Code of Conduct for Business Lending to Small and Medium Enterprises (“the Codes”) are available to ‘relevant borrowers’ after their loan has been transferred to a third party, where, prior to the commencement of the Act, same would not have been available.

In brief, a ‘relevant borrower’ is a natural person within Ireland or a small or medium sized enterprise (“SME”) being an enterprise which employs fewer than 250 persons and which has an annual turnover not exceeding €50m and/or an annual balance sheet total not exceeding €43m.

Frequently when a loan or a portfolio of loans is sold by a bank/ lending institution, it is sold to an investment company that is not in the business of administering or managing loans.  Usually, investment companies outsource the administrative duties attached with servicing loans acquired (such as notifying a borrower of a change of interest rates, sending statements, dealing with complaints, managing or recovering the loan, etc) to another company or organisation.  The Act defines that other company as the ‘credit servicing firm’ (“the CSF”) and requires that entity to have an authorisation from the Central Bank of Ireland (“the CBI”) or other relevant bank.  If the investment company administers and services the loan itself, the investment company is treated as the CSF under the Act.  An authorisation from the CBI requires high service level standards to be met when interfacing with the relevant borrower and robust governance arrangements to be in place. Further details of the high service level standards and arrangements may be viewed here.

The Act goes some way towards protecting consumers, SMEs and individuals borrowing in their private capacity and is no doubt a welcome introduction for those whose loans have been transferred from established financial institution in Ireland to a relatively new non-resident investment company.
If you have any queries about the application of the above legislation to your business contact Deirdre Farrell, solicitor and AITI Chartered Tax Adviser, deirdre@amoryssolicitors.com, tel 01 213 59 40.

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Employees in Clerys Liquidation

When a provisional liquidator was appointed to Clerys, that evening employees were informed that the store was being closed. As the business is being liquidated where does this leave the employees?

When a business is being liquidated, the employees are automatically dismissed when a Court order is made to wind up the company. The employees become preferential creditors under Section 621 of the 2014 Companies Act. This means the employees rank behind any secured charge holders (normally banks) who have a first charge over the property and assets of the company. Where there are sufficient funds to pay the secured charge holders fully, there may be funds left to pay the preferential creditors who will then receive some or all of the monies owed. The Companies Act provides for payment of arrears of wages or salary for employees for a period of 4 months before the date of appointment of a liquidator, provides for payment of holiday pay, payments to an employee who is ill and the payment of the company’s and employee pension contributions which cannot exceed more than €10,000 in a case of any one claim. Payments to preferential creditors will be reduced pro-rata where there are insufficient funds left to pay all of the preferential creditors.

If there are funds left for the preferential creditors, Clerys staff can seek to recover the payments set out above.

However, if there are no funds or limited funds for preferential creditors the Protection of Employees (Employer’s Insolvency) Acts 1984-2004 apply to protect employees (who are insurable under the Social Welfare Acts) in the event of an employer’s insolvency. The Insolvency Payments Scheme provides for limited payments for qualifying employees from the Social Insurance Fund, and it covers payments due to employees in liquidations, receiverships, bankruptcies and employees in Ireland working for employers who become insolvent within the EU. There is a loophole in the legislation in that it does not cover companies which cease trading and are insolvent but are never formally wound up.


The Social Insurance Fund will pay:

  • Up to 8 weeks arrears of salary limited to €600 per week.
  • Maximum 8 weeks statutory notice pay
  • Maximum 8 weeks holiday pay
  • Statutory redundancy pay for employees with over 2 years continuous service
  • Payments in respect of employment rights, claims for unfair dismissal, discrimination, and other claims relating to a period of 18 months prior to insolvency. The remuneration recovered is however limited.


TUPE or the EC Protection of Employees (Transfer of Undertakings) Regulations 2003  

Media reports indicate that there were a number of bidders for Clearys at the time of its sale and that some of these planned to keep the store open and trading for a further 12 months, with scaled down retail activity within the store. If another option had been taken up, the employees may have benefited from TUPE.

TUPE applies if a business or part of a business is sold and transferred to a new owner and retains its identity. In such circumstances all employees of the business automatically transfer with the business to the new entity and are protected against dismissal. Furthermore the terms and conditions of their employment are preserved on the transfer except for their pension rights. The new owner may make redundancies among staff after the transfer due to economic, technical and organisational reasons under the regulations, however, this exception will be carefully scrutinised by the tribunals. If a new employer is making staff that transferred redundant under this exception, the new employer is bound to pay the employees being made redundant their statutory redundancy, salary/wages for the contractual notice period and any ex-gratia redundancy payment which may become payable through a collective agreement or custom and practice. Usually on a sale of a business the parties provide for arrangements between the transferor and transferee to apportion liability for payment of staff redundancy and notice.

Cleary’s staff may be paid their legal entitlements by the company or by the Minister for Social Welfare under the Redundancy Payment Scheme. TUPE does not apply in an insolvency or bankruptcy situation unless the sole or main reason for bankruptcy or insolvency of the Transferor is the evasion of employers’ legal obligations to staff under TUPE.


This is a summary of recent developments and specific legal advice should be obtained. If you would like to discuss any aspect of this further, please contact Davnet@amoryssolicitors.com.

Conversion of existing companies to an LTD or a DAC under the Companies Act 2014

Directors of all private limited companies in Ireland have probably received written notification from the Companies Registration Office to the effect that the Companies Act 2014 (“the Act”) came into force on 1stJune 2015.  But what does it mean for a director of a small private company limited by shares incorporated under the ‘old’ legislation?

The Act introduces a significant number of reforms to Irish company law which are designed to make it easier for companies incorporated in Ireland to do business.

More specifically, private limited companies incorporated under the ‘old’ legislation are being phased out and replaced with a new form of company (referred to in this article as “an LTD”) or a “Designated Activity Company” (“a DAC”) or some other form of private company under the Act.   Existing companies cannot continue in their current form and will be treated as DACs from now until conversion.

There is a transition period of 18 months from the date of commencement of the Act (i.e. until 31stDecember 2016) within which an existing private limited company may alter its existing form to one of the other forms provided for under the Act.  If no action is taken at all, an existing private limited company will automatically convert to an LTD. However failing to take any action may result in a breach of directors’ duties and a corporate form which might not serve that company’s requirements.  It is therefore advisable for directors to make the decision as soon as possible.  Once the answer is known, the process of conversion is relatively straight forward.  In addition, there are no fees payable in the companies registration office for re-registering as a ‘new’ company.

For the majority of directors of existing private limited companies the decision will be whether to convert to an LTD or a DAC.  Below is a brief outline of the principal features of an LTD and a DAC provided for under the Act and a list of queries to which if answered ‘yes’ will most likely mean that your company should re-register as a Designated Activity Company, rather than an LTD.

Main Features of an LTD

An LTD is a more simplified version of the existing private company limited by shares. Whereas the existing private company limited by shares cannot act outside its stated objects clause in its memorandum of association, an LTD has full and unlimited capacity to carry on and undertake any business or activity of the company and is not restricted by an objects clause.  Whereas the ‘old’ private company is governed by its Memorandum and Articles of Association, an LTD’s constitutional documentation will consist of one single document called a “Constitution” and will not have an objects clause.  An LTD may also dispense with the holding of a physical AGM.  A company whose principal activity is that of a charity, an insurance undertaking or financial services is however prohibited from incorporating as an LTD.

Main Features of a DAC

A designated activity company or a DAC closely resembles an LTD but has a number of notable differences.  Firstly as its name suggests, it will be more suitable to those companies who wish to confine their activities to those designated in their constitution or not permitted to an LTD such as joint ventures, financial services and charities.  Secondly it must hold a physical AGM and its constitutional documentation includes a memorandum and articles of association.  In this regard the DAC closely resembles the existing private company limited by shares.


Differences between an LTD and a DAC in Table format

Below is a table of the differences between an LTD and a DAC

New LTD Company Model Designated Activity Company
It may have just one director (but it must have a separate secretary if it has only one director). It must have a least two directors.
It can have between 1 and 149 members. It can have between 1 and 149 members.
It does not need to hold an AGM. It does need to hold an AGM where it has 2 or more members
It has a one-document constitution which replaces the need for a memorandum and articles of association. It has a constitution document which includes a memorandum and articles of association.
It will not have an objects clause because it has full unlimited capacity to carry on any legal business, subject to any restrictions in other legislation. It has a memorandum in its constitution which states the objects for which the company is incorporated.
It can claim eligibility for audit exemption (and dormant company audit exemption). It can claim eligibility for audit exemption and dormant company audit exemption.
It has limited liability and has a share capital. It has limited liability and has a share capital or is a private company limited by guarantee with a share capital
It can pass majority written resolutions (special and ordinary). It can pass majority written resolutions unless constitution states otherwise.
Name must end in “Limited” or “Teoranta” Name must end in “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe” unless qualified for an exemption.


How to choose between an LTD or a DAC

For the majority of existing private companies, directors will need to decide whether to convert to an LTD or a DAC.  Below is a list of queries to which if answered ‘yes’ will mean that you should convert your company to a DAC.

1.         Does the existing private limited company perform a designated activity

(i.e. is it a  management company or a special purpose vehicle?)

2.         Is the existing private limited company governed by a shareholders


3.         Does the existing private limited company have banking covenants

restricting its activities?

4.         have members holding more than 25% of the ordinary share capital

served notice on the company requiring conversion to a DAC?

5.         Is the existing private limited company in a joint venture arrangement?

6.         Is there a requirement for an objects clause?

7.         Does the existing private Limited company have listed debt, securities or


8.         Is the company a licensed bank, a charity or an insurance undertaking?



For more information on the Companies Act 2014 and how it affects your company contact Deirdre Farrell,Solicitor and AITI Chartered Tax Consultant (CTA)


Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18 © January 2014


The Companies Act 2014 Enacted

he Companies Bill 2012 was signed by the President on 23rd December 2014.  It has been enacted as the companies Act 2014 (Act No. 38 of 2014) and is expected to be commenced by Statutory Instrument with effect from 1st June 2015.

Amorys’s last news update in relation to the Companies Bill is being reviewed with references to the Act.

Examinership Explained

At present all applications for examinership must be made to the High Court.  With a view to reducing costs and providing greater accessibility for small private companies to the examinership process section 2 of the Companies (Miscellaneous Provisions) Act 2013 was enacted on 24thDecember 2013 and provides that a small to medium sized company may apply to the Circuit Court to instigate the examinership process. Section 2 is however subject to a ministerial commencement order which has not yet been passed.


Small companies are those that satisfy two out of the following three conditions:

1.         Balance sheet not exceeding €4.4million;

2.         Turnover not exceeding €8.8million; and

3.         Number of employees not exceeding 50;


What is examinership?

Examinership is a court supervised rescue process which is designed to help companies recover from insolvency. The principal rationale behind examinership is to allow a company that is experiencing financial difficulties a period of protection from creditor action during which a third party (the Examiner) has an opportunity to examine the affairs of the company and, if there is a reasonable prospect of the survival of the company and all or part of its undertaking as a going concern, to formulate proposals for a scheme of arrangement to facilitate such survival and save the jobs of its employees.


When will a court appoint an examiner to a company?

Briefly put, if satisfied that an insolvent company and the whole or any part of its undertaking has a reasonable prospect of survival as a going concern a court may appoint an examiner. The company must prove it is unable to pay its debts at the time of the application to appoint an Examiner.  The company does not however need to be insolvent to fulfil the necessary criteria, a court may take account of a future event which is likely to have an adverse effect on the company’s ability to discharge its debts.

An Examiner will not be appointed where a receiver stands appointed for a continuous period of three days or more.  Furthermore the existence of a winding up petition does not in itself prevent the appointment of an Examiner.


How does a company go about applying to the Court to appoint an examiner?

An Examiner is appointed to a company on foot of a petition brought before the High Court*. The petition must be supported by an affidavit (a written document sworn by the applicant on oath) and must be accompanied by an independent accountant’s report.  The independent accountant’s report must put basic information before the court to show whether or not proposals for a scheme of arrangement would offer a reasonable prospect of the survival of the company and all or part of its undertaking as a going concern.

* There is provision in the Companies (Miscellaneous Provisions) Act 2013 to permit a company to apply to the Circuit Court in the circuit of the company’s registered office but at the date of writing the relevant commencement order has not been signed by the Minister for Innovation, Trade and Employment.


Practically speaking what does “court protection” mean for the Company?

The practical effect of “court protection” for a company is that the company is effectively immune from creditor action. This means the following:-

No proceedings may be taken or resolution may be made to wind up the company during the period of protection;

  1. No receiver can be appointed over secured assets of the company;
  2. No steps may be taken to pursue a guarantor of that company’s debts during the protection period; and
  3. No steps can be taken to repossess goods of the company or to enforce a judgment of a court during that timeframe.


What is a Scheme of Arrangement?

As stated an Examiner’s main function is to arrange a formal scheme of arrangement between the company and its creditors and members which will facilitate the survival of the company and the whole or part of its undertaking as a going concern.

An Examiner is obliged to prepare a report outlining proposals for a scheme of arrangement and to convene a meeting of each class (see below) of creditors and shareholders to consider same.  The Examiner is obliged to convene the said meetings within 35 days of his or her appointment however typically this timeline is extended.

A scheme of arrangement frequently involves a new investor acquiring all or substantially all of the shareholding in the company together with a write down of the company’s debt across a range of classes of creditors. In certain circumstances, third party investment is not required.

In his report, the Examiner must divide the company’s creditors and members into various classes (e.g. unsecured creditors, leasing creditors, retention of title creditors, floating chargeholders, fixed chargeholders, Revenue Commissioners, contingent creditors, etc., preferential shareholders and ordinary shareholders) and treat each class equally.

I am a creditor of a company in examinership, will I be compelled to accept a Scheme of Arrangement ?

Provided that at least one class of creditor and member (see above) votes in favour of accepting the Examiner’s proposals, the Examiner may proceed to seek court approval sanctioning his scheme of arrangement thereby making it binding on dissenting creditors and members. The voting by creditors at their meetings is by a majority in number representing a majority in value of the claims represented at that meeting. (e.g. a secured creditor of €100,000 could have 100 votes and a secured creditor of €1000 could have 1 vote)


What does the board of directors need to consider before applying for examinership?

The overarching principal of examinership is to give an insolvent company some time during which it is uninhibited by creditor action to come to a scheme of arrangement which is agreed to by a majority of creditors (voting in number and value) which would be more beneficial to them then in a winding up or liquidation situation.  If the directors doe not believe that any scheme would be accepted by a majority of a class of creditors and members (see above) the directors should not proceed to examinership as to do so would significantly reduce the funds available to creditors.

If a scheme of arrangement is not agreed to by a class of  creditors or members or approved by the Court it is important to note that the company will most likely go into liquidation.  In this scenario the costs of examinership are paid in priority to all other debts of the company, thus minimising the amount available for the creditors.  Usually costs of the examinership process are significant and this could lead to there being no funds left to pay the creditors.


What happens if the Scheme of Arrangement is approved?

The company proceeds with business as per the scheme of arrangement.


When does Court Protection end?

The date on which the scheme of arrangement is approved or disapproved, as the case may be.  If at any stage the Examiner believes that there is no prospect for the survival of the company and all or part of its undertaking as a going concern, he or she must apply to be discharged and to have court protection terminated.


What happens if the examinership process fails?

If the examinership process fails the company will most likely be placed into liquidation or the company’s secured creditors will appoint receivers to the secured assets.

For more information on the above please contact Deirdre Farrell, solicitor and AITI Chartered Tax Advisor (CTA), Amorys solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18 Tel. No. 01-213 59 40


© February 2014

The Companies Bill 2012

A New Dawn for Companies in Ireland

The Companies Bill 2012 which was published by the Minister for Jobs, Enterprise and Innovation, Richard Bruton on 21 December 2012 will revolutionise company law as it is known today.  Currently drafted the bill contains 1,439 sections and is the largest piece of legislation in the history of the State.  The bill is largely based on the recommendations of the Company Law Review Group which is a statutory body set up by the government for ensuring that “Ireland should have an efficient world-class company law infrastructure”. It is anticipated that this bill will become law during the final quarter of 2013 but that it will not become operative until a later date subsequent to its enactment.  There will be a transitional period provided for companies that have been established under present company law.

When the bill becomes law, it will affect every company now in existence in Ireland.  All companies will be required to convert to a company recognised by the proposed new legislation.  Nine out of ten companies in Ireland are private companies limited by shares and will therefore need to convert to the new model of the private company limited by shares (commonly referred to as a “CLS”).  It is proposed that all companies established under the current regime would be obliged to convert to a company recognised by the bill within 18 months of the commencement date of the new legislation.




I am a director of a private company limited by shares with two members, how do I convert to a company limited by shares that is recognised by the bill?

It is suggested that there would be a simplified process of “opting in” to the new model private company whereby directors of a company would simply deliver a prescribed statement to the Companies Registration Office which would then issue a new “constitution” based on the existing memorandum and articles of association of the previous company.  Generally speaking the new constitution would incorporate the existing memorandum and articles of association of the company save for the objects clause.


What are the major changes to the existing private company limited by shares?

The new model private company provided for in the draft legislation includes the following features :_

1.   The CLS will be limited by shares only.

2.   The CLS will have a one-document constitution and the memorandum and articles of association of existing private limited companies will be replaced by this document.

3.   The CLS will have the same contractual capacity as a natural person. This will avoid the problems that arise where an activity carried on by a company is deemed to be illegal or ultra vires because it is not listed in the company’s Memorandum and Articles of Association.  It will also simplify the procedures surrounding commercial borrowing as banks will no longer need to require a company to establish that it is legally empowered to borrow money for a proposed venture or activity.   A company may retain its objects clause however such a company would be classified as a designated activity company and would be treated differently under the proposed legislation.

4.   It is possible for a CLS to have only one director.  The reduction in the statutory minimum number of directors from two to one is designed to increase accountability of those who govern a private company because there will be no need for a passive nominee director to make up the second director.

5.   A CLS meeting certain criteria will now be entitled to apply to the Circuit Court for examinership.

6.   The CLS will not be permitted to list any securities or to sell its shares or debt to the public.  This is to ensure that the model private company would be kept simple.  Other companies such as designated activity companies (DACs) and public limited companies will of course be entitled to list securities.

7.   The CLS will no longer be required to hold an Annual General Meeting each year.  This will be replaced by a written procedure to be completed by the directors.

8.   A new “summary approval procedure” would dispense with the requirement for companies to obtain High Court approval for certain transactions, including transactions with directors, financial assistance, capital reduction and solvent windings up.

9.   Offences created by the Bill have been categorised on a scale of 1 to 4 (where 1 is the most serious: punishable with a fine of up to €500,000.00 and/ or a term of 10 years imprisonment) and the punishment for those found guilty of each category is clearly specified.

10. The audit exemption will now be available for group companies and to certain dormant companies which were previously ineligible.

11. Private companies will be permitted to engage in domestic mergers and divisions.

12. Directors of certain companies will be obliged to ensure that the person appointed company secretary has certain necessary skills.  This is commonly referred to as the secretarial “qualification test”.

The publication of the bill is a welcome development although it will be interesting to see if all its proposals remain in place by the time it finally becomes law.  The scrapping of the requirement for companies to have at least two directors, and the abolition of the need to have an “objects clause” will have a major impact on how one transacts with companies in Ireland especially a banks which at present need to undertake comprehensive research into a company’s capacity to borrow.

Company directors will need to familiarise themselves with the relevant provisions of the proposed new legislation which imposes significant duties and obligations on such individuals.  Ignorance however innocent of the proposed law will be of no defence.  Watch this space!


Deirdre Farrell, Solicitor and AITI Chartered Tax Adviser (CTA), Amorys Solicitors, Suite 10, the Mall, Beacon Court, Sandyford, Dublin 18. Tel: 01 213 59 40