William Day and Emily Hogan of Arthur Cox assess the bankruptcy and insolvency regime in Ireland

Section 1: processes and procedures

1.1 What reorganisation and bankruptcy processes are available for financially troubled debtors?

There are a number of principal corporate insolvency and reorganisation proceedings available under Irish law.


Liquidation or winding-up is the formal procedure for the dissolution of companies under Irish law and is available in both cases of solvency and insolvency. It involves the appointment of a liquidator whose function is to take control of all the property vested in the company, to realise the assets and if possible to pay the creditors. In fulfilling these obligations the liquidator is subject to a varying degree of supervision by the court, creditors, shareholders and the director of corporate enforcement depending on the type of liquidation. At the end of the liquidation process, the company is dissolved.

There are three different types of liquidation under Irish law: compulsory liquidation by the court, which is typically commenced by a creditor of an insolvent company by way of a petition to the High Court; creditors' voluntary liquidation, which is started by shareholders' resolution where the directors of the company have decided that the company cannot, by reason of its liabilities, continue to trade; and members' voluntary liquidation, which is a winding up by a liquidator initiated by the members of a company where the directors believe the company to be solvent. If the liquidator forms the view that the company is in fact insolvent during a members' voluntary liquidiation process, the process will convert into a creditors' voluntary liquidation.


Examinership is a court protection procedure available to companies with their centre of main interests (Comi) in Ireland that are insolvent or likely to become insolvent on a cash-flow or balance sheet basis. It is considered to be a highly effective restructuring process for trading companies that have accumulated excessive liabilities and where the restructuring of those liabilities would allow a viable business to survive. It involves the appointment of an independent accountant as examiner of the company for the purpose of formulating proposals for a compromise or scheme of arrangement between the company and its members or creditors. The examiner has no executive role and the company's directors and management will remain in control of the company and of its day to day operations during the protection period. The process is overseen by a judge of the High Court and is designed to ensure that all key stakeholders are treated fairly and in accordance with their respective rights under Irish law.

A petition for the appointment of an examiner can be brought by the insolvent company itself, by its directors, by any creditor or by certain shareholders where no members' resolution subsists, or order has been made, for the winding-up of the company or where a receiver has not been appointed over the assets of the company for more than three days.


Receivership is a method of enforcing security. In general terms a receiver is appointed pursuant to a debenture/charge under which the secured creditor is entitled to appoint its own receiver for the purposes of realising the assets secured by the debenture where the company has defaulted in the repayments of the loan secured. A receiver can be appointed only over assets which have been charged. The appointment of the receiver does not change the status of the company and although the directors cease to control the charged assets, their normal powers and duties continue in respect of the other assets and liabilities of the company. The receiver's principal task is to realise the secured assets to discharge the debt owed to the secured creditor.

Schemes of arrangement

Schemes of arrangement under chapter one, part nine of the Companies Act, 2014 allow a company to formulate proposals to compromise the rights of either members or creditors or any class of them including for the purposes of the reconstruction of any company or the amalgamation of any two or more companies and to petition the High Court for an order approving any such scheme of arrangement. Under the legislation the directors of the company may convene the meeting of creditors or shareholders to approve the proposed scheme. If the directors fail to convene a meeting where a scheme is proposed, then the High Court may do so on application of the company, or a creditor or member, or a liquidator. The High Court may and sanction a scheme where a majority representing 75% in value of each class of creditors approve of the scheme. Such a scheme would be binding even on dissenting, absent or untraceable creditors. Schemes of arrangement are rarely used in insolvency scenarios because the threshold that must be met for the scheme to be binding on dissenting creditors is higher than what is required in an examination.

1.2 Is a stay on creditor enforcement action available?


From the date of presentation of the petition, the company is effectively protected from specified actions which may be taken by its creditors including the commencement of winding-up proceedings, the appointment of a receiver, the attachment of assets, the repossession of goods under hire purchase or retention of title arrangements and generally any action to realise security except where the consent of the examiner is obtained. No proceedings may be instituted against the company without leave of the court. The examiner may also apply to court for an order staying any existing proceedings.

The moratorium is ineffective in relation to rights in rem by way of security in assets outside of Ireland. Creditors are able to exercise set-off rights during the moratorium period. This has an effect on a company's proposed funding during the protection period as its ability to use cash in its bank accounts is effectively removed where there is a net debit balance after the exercise of set-off.

The initial period of court protection is 35 days, which can be extended by the court for further periods of 35 days and 30 days - up to day 100. That enables the examiner to formulate his proposals for a scheme of arrangement and present them to the court. The examiner must present a report to the court, with a scheme of arrangement that has been approved by one class of impaired creditors, by the end of day 100, otherwise the period of court protection will expire. However, the court may extend the period of court protection beyond day 100 if it considers it necessary to enable it to make a decision on the examiner's proposals. If the examiner cannot find new investment or otherwise bring forward proposals for a scheme of arrangement, he is under a duty to apply to court to have the court's protection lifted and the company will then either go into receivership or liquidation.

Scheme of arrangement

There is no automatic moratorium where a scheme is being convened under chapter one, part nine of the Companies Act, 2014. However, the court is empowered to stay all proceedings and restrain further proceedings against a company for such period as it sees fit. The application for a stay on proceedings can be made by the company itself, the directors of the company, any creditor or member of the company and in the case of a company being wound up, the liquidator.

1.3 What are the key features of a reorganisation plan and how is it approved?

In an examinership, the scheme of arrangement is formulated following discussions with potential investors and will normally include new investment, a write-down of creditors' claims or a transfer of the entire issued share capital to the new investor. Once the scheme is prepared, the examiner convenes meetings of shareholders and each different class of creditors. The examiner will generally class creditors by reference to their priority for payment in a winding-up. The proposals are deemed to be accepted by a class of creditors if passed by a simple majority in value and number of that class of creditors.

1.4 Can a creditor or class of creditor be "crammed down"?


The court can cram down or render the scheme binding on the company, its members and creditors if at least one class of creditors whose rights are adversely affected has voted in favour of the scheme. Any creditor or shareholder whose rights would be affected by the scheme may make representations at the confirmation or approval hearing. The Court cannot confirm a scheme of arrangement unless it is satisfied that it not unfairly prejudicial to any interested party. While there is no statutory definition of unfairly prejudicial, it is generally regarded as meaning that the interested party would receive less from the scheme that he would on a liquidation or enforcement of security.

In the case of a secured creditor it is open to the examiner to place a value on the secured asset and for the scheme of arrangement to cram down the debt due to the secured creditor to just above the value of the secured asset. In such circumstances as the secured creditor is to receive more than it would on a receivership or liquidation, it is unlikely that a court would take the view that the secured creditor was being unfairly prejudiced.

The examiner can apply to court to seek approval for the sale of assets that are subject to a fixed charge. Where granting such an order, the court must be satisfied that such disposal is likely to facilitate the survival of the whole or any part of the company as a going concern. In the event of any such disposal, the company must apply the net proceeds of sale to discharge the debt to the chargeholder. The court can determine the open market value of the assets sold and oblige the company to make good any difference between the proceeds and that value. Again the examiner's fees, costs and expenses would be payable in priority to any sum due in respect of the charged assets sold.

Scheme of arrangement

In a traditional scheme of arrangement, if a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting at the meeting, vote in favour of a resolution agreeing to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors or the class of creditors, or on the members or class of members. It will also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

1.5 Is there a process for facilitating the sale of a distressed debtor's assets or business?

There is no specific process matching this description but loan-to-own strategies are increasingly appearing in the Irish market. This involves an investor acquiring a company's secured distressed debt with a view to converting that debt into an equity stake, which can often involve taking control of the borrower. The conversion into equity can take place by corporate restructuring or through an insolvency procedure such as receivership, pre-pack receivership or even examinership.

When there is a pre-pack sale to a company's secured creditor, a SPV ultimately owned by the company's existing secured creditors is used to acquire the company's business. A receiver is first appointed by the secured creditor who then sells the business to the SPV. Often these are cashless transactions where the SPV agrees to assume certain of the company's liabilities in return for the transfer of the business. This is then distributed to the lender facilitate a conversion of part of the assumed debt into equity. The balance of the transferred debt that is not converted is rescheduled and reconfigured.

1.6 What are the duties of directors of a company in financial difficulty?

The guiding principle for the directors of a company which is or is likely to become insolvent, is that to avoid the potential of being made personally liable for the debts of the company or be subject to criminal sanction, they should ensure that no further credit is incurred by the company except in circumstances where the directors have an honest belief based on reasonable grounds that the credit to be incurred together with the credit already extended to the company will be repaid. It is permissible for the directors of a company to incur further credit if they honestly believe that by doing so the company will be in receipt of further monies and will allow time for negotiations with counter-parties to be successfully concluded (and assuming that this is a reasonable belief in the light of all of the circumstances).

The duty owed in circumstances where the company is insolvent is principally to have due regard to the interests of the creditors. From the moment of insolvency the directors hold the assets of the company in trust for the benefit of the creditors.

Seeking professional advice, retaining good records of decisions taken and keeping proper books of account are all demonstrable evidence of the directors seeking to act responsibly and should mitigate against the risk of personal liability on the directors should the company subsequently be wound up.

1.7 What priority claims are there and is protection available for post-petition credit?

Funds are distributed in the following order upon a company's insolvency:

(a) Fees, costs and expenses of an examiner;
(b) Mortgage or fixed charge holders (paid up to the amount realised from the assets covered by the security);
(c) Amounts certified by an examiner under section 529 of the Companies Acts 2014;
(d) Costs and expenses of the winding-up which are subject to their own rules in relation to priority;
(e) Certain social insurance deductions;
(f) Preferential debts (rates, taxes, wages and salaries);
(g) Floating charge holders;
(h) Unsecured debts ranking equally with each other;
(i) Return of capital to shareholders.

1.8 Is there a different regime for banks and other financial institutions?

There is a legislative framework which empowers the Central Bank of Ireland to use a variety of mechanisms to address and resolve financial institutions that find themselves in distress. Where certain pre-conditions are met, this triggers the Central Bank's resolution powers.

The central bank is able to propose an order for the transfer of all or any specified part of the assets or liabilities of an authorised credit institution or propose an order for the appointment of a special manager to an authorised credit institution. It can also establish bridge banks to hold assets or liabilities transferred pursuant to a transfer order or present a petition to the High Court for the winding up of a credit institution, and direct that an authorised credit institution prepare and implement a recovery plan, and empowers the central bank to prepare a resolution plan for the institution.

The governing legislation also establishes a Credit Institutions Resolution Fund to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution.

The Single Resolution Mechanism, which is due to take effect from January 1 2016, will apply to the large credit institutions.

Insurance undertakings can also be placed in administration under the Insurance No. 2 Act 1983. this is similar to the liquidation process discussed above.

Section 2: international / cross border issues

2.1 Can bankruptcy or reorganisation proceedings be opened in respect of a foreign debtor?

European Commission Regulation 1346/2000 on insolvency proceedings (Insolvency Regulation) forms part of Irish law. Insolvency proceedings can only be commenced in the member state in which the company has its centre of main interests. Non-EU companies can be liquidated in Ireland if there is sufficient connection to Ireland, e.g. it carries on trade within the jurisdiction.

2.2 Can recognition and assistance be given to foreign bankruptcy or reorganisation proceedings?

If a judgment specific to insolvency proceedings, such as the opening of insolvency proceedings, is obtained in an EU member state other than Demark, Ireland must recognise and give effect to that judgment with no further formalities. A foreign judgment is recognised in Ireland with no further formalities if two conditions are met. First the judgment must have been handed down by a court whose judgment relating to the opening of insolvency proceedings is recognised under the Insolvency Regulation and it must concern the course or closure of insolvency proceedings and compositions approved by that court.

For other foreign proceedings recognition is possible on the basis of principles of judicial comity.

Section 3: other material considerations

3.1 What other major stakeholders (such as governmental or regulatory institutions) could have a material impact on the outcome of the reorganisation? Are there special protections for employees?

Where a company's assets are unable to satisfy certain basic redundancy and other entitlements owing to employees, it is normally possible in Ireland for a claim to paid by the Irish State from the Social Insurance Fund or the Insolvency Payments Scheme. The scheme then subrogates to the employees position as creditor.

Section 4: current trends

4.1 Outline any bankruptcy and reorganisation trends specific to your jurisdiction.

The sale of Irish pillar bank loan books of distressed debt to private equity houses is a growing trend which has resulted in high levels of activity for Irish corporate insolvency and restructuring. Loan book sales have resulted in markedly high levels of subsequent enforcement and also consensual restructuring. It has also meant that mechanisms such as pre-pack receiverships and loan-to-own structures, heretofore relatively novel on the Irish market, are being employed with increasing frequency.


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William Day
Arthur Cox

About the author

William Day is a partner and head of corporate recovery at Arthur Cox, in Ireland.

Emily Hogan is an associate solicitor at Arthur Cox in Ireland specialising in insolvency and corporate recovery.

They have advised insolvency practitioners, accountancy practices and banks. The practice also focuses on shareholder disputes, duties and potential liabilities. Arthur Cox has been involved in the vast majority of the significant restructuring and insolvency cases involving Irish companies over the past 25years.


Emily Hogan
Arthur Cox

About the author

William Day is a partner and head of corporate recovery at Arthur Cox, in Ireland.

Emily Hogan is an associate solicitor at Arthur Cox in Ireland specialising in insolvency and corporate recovery.

They have advised insolvency practitioners, accountancy practices and banks. The practice also focuses on shareholder disputes, duties and potential liabilities. Arthur Cox has been involved in the vast majority of the significant restructuring and insolvency cases involving Irish companies over the past 25years.