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The New Companies Act
Key Insolvency Changes
The Companies Act 2014 becomes operative on 1st June 2015. It brings major changes to several areas of company law and, in particular, corporate insolvency legislation.
Many of these changes are welcomed as they bring more clarity and options to companies which find themselves in difficulties. One key change is that the Act has revised the provisions around Schemes of Arrangement, making it much more accessible to struggling SMEs. This will give companies the opportunity to restructure their debts quickly and cheaply, without the shareholders or directors losing control.
Other significant changes relate to increased regulation of Insolvency Practitioners and the enhanced role given to creditors in insolvent liquidations.
Schemes of Arrangement
- Improved corporate insolvency option.
- Now possible to restructure liabilities with significantly reduced court involvement
- Faster and cheaper than Examinership
- No report to ODCE.
- Risk of ownership change removed, could be more appealing for business owners than Examinership.
- Creditor class selection is paramount for valid scheme.
- State Creditors (such as the Revenue) are now empowered to accept write down of debt, as per Examinership.
- Majority in number and 75% in value of creditors must agree to the scheme.
- ‘Stand Alone’ Schemes of Arrangement may need some time to settle in, as it is a ‘new’ procedure.
- Court may get involved where a stay on certain proceedings is necessary, however, it does not provide protection against the Appointment of Receivers or Creditors enforcing ‘Retention of Title’ claims.
- Examinership Schemes of Arrangement need less creditor agreement than ‘Stand Alone’ Schemes of arrangement and it benefits from Court oversight.
- Restructuring proposals can now provide for a reduction in the Company’s share capital, which overcomes an issue that has presented difficulties in the past.
Creditors Voluntary Liquidation
- Creditor involvement and influence is increased, both pre-appointment and during liquidation.
- Proposed Liquidator and Creditor identity revealed to all during notice period, giving enhanced ability for creditors to influence the appointment of the liquidator.
- The method by which liquidation fees are charged must be agreed with Creditors in writing and no fee can be paid unless it is specifically approved in advance by the Creditors.
- IAASA to regulate Liquidators (& Examiners), who are not members of a prescribed accountancy body or a member of the Law Society.
- Professional Indemnity now obligatory.
- The law surrounding directors’ loans has been tightened up.
- Minimum share capital for a Company with a Restricted Director is now €100,000 for a Private Limited Company and €500,000 euros for a plc.
Members Voluntary Liquidation
- Declaration of Solvency no longer needs to be sworn, Apostile process now redundant.
- The method by which liquidation fees are charged must be agreed with the Members in writing and no fee can be paid unless it is specifically approved in advance by the Members.
- Creditor involvement and influence is increased as Creditors/ Committee of Inspection replacing the role of the High Court Examiners’ Office.
- Fee approval will rest with the Creditors and Court involvement will only arise where creditors and liquidator cannot agree.