Insolvency & Restructuring

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Insolvency & Restructuring

  1. 1. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. In Association with:- Online CPD for Accountants & Professional Advisors Insolvency and Restructuring – Achieving the Best Outcomes for your Client moving into 2012 Presenter: Tom Murray – Friel Stafford CPDStore.com Unit 3, South Court, Block D, Iveagh Court, Wexford Road Business Park, 5 – 8 Harcourt Road, Carlow. Dublin 2. 059 9183888 01 4110000 www.OmniPro.ie www.CPDStore.com
  2. 2. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. Insolvency & Restructuring: Achieving the Best Outcomes for your Client, moving into 2012 EDUCATING SUPPORTING Omnipro December 2011 REPRESENTING
  3. 3. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. INDUSTRY PROFILE – APPOINTMENTS BY TYPE • Creditors Voluntary Liquidations 1,147 (2010 - 1,191) • High Court Liquidations 80 (93) • Receiverships 250 (225) • Examinerships 15 (16) INDUSTRY PROFILE - SECTORS • Construction 379 • Services 221 • Retail 204 • Hospitality 190 • Manufacturing 96 • Motor 53 • IT 40 • Transport 54 • Wholesale 64 • Other 194
  4. 4. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. CRYSTAL BALL 2012 • Continued increase in appointment of Receivers (both trading and property) • Change in Bankruptcy legislation including the introduction of Debt Settlement Arrangements (DSA’s) • Significant numbers entering into DSA’s (Consumer and Trading) • Inexperienced Liquidators ISSUES FOR CLIENTS • Lack of Cash Flow • Hardening attitudes of Creditors (Banks, Revenue, Key Suppliers) • Bank possibly require IBR • Bank may appoint Receiver • Liquidation only option • The Erosion of Limited Liability • Bankruptcy as an option
  5. 5. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. LIQUIDATIONS • Continuing to rise in number • A lot of inexperienced liquidators! • CAI and possibly CPA monitoring its members who take insolvency appointments • All sorts of issues coming to light LIQUIDATIONS – SOME AREAS WHERE ERRORS MADE BY IP • Resolution not sent into CRO – Company struck off • Not holding shareholders meeting and creditors meeting within 24 hours of each other • Placing company into an MVL when it was insolvent • No understanding of grounds upon which ODCE will grant relief – submitting reports looking for relief where no will or can be granted • Lack of investigation
  6. 6. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS • Increasing in numbers – both fixed asset receiverships and trading receiverships • Auctioneers being appointed directly to fixed asset receiverships • More banks like to appoint • Leisure Industry / H t l etc… a t bl d sector in this regard L i I d t Hotels t troubled t i thi d RECEIVERSHIPS Section 315 of the 1963 Companies Acts contains similar provisions in relation to those qualified to act as Receivers. • Body Corporate • Undisclosed bankrupt • Officer last 12 months • Parent, Spouse, close relative • Employee E l
  7. 7. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS • Different approaches to appointing a receiver are being adopted by different banks (e.g. BOI versus ACC) • Most banks operating in the Irish market have a centralized credit department or recoveries department for dealing with companies in financial difficulties. RECEIVERSHIPS – RELATIONSHIP ZONE BANK •“Workout Zone” – Facing reality Mutual wish for solution Open honest communication p Realism •“Mushroom Zone” - Feeding banks with manure (e.g. misleading accounts) and keeping them in the dark. This leads to Lender anger. •“Knockout Zone” - Lender re-acts with extreme prejudice.
  8. 8. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – EARLY WARNING SIGNS • Obvious specific sectors: E.g. Construction, hospitality, retail • Decline in sales (widespread!) = Reduced lodgements • Impact of Foreign Exchange movements • Cheque kiting • Cash flow: - No headroom on overdraft - Returned cheques - Requests for bank drafts - No payments to Revenue - Cancellation of direct debit arrangements • Revenue attachment action R tt h t ti • Judgements being registered • Directors asking to see a copy of their personal guarantees! • Delays in receiving Audited/Management accounts RECEIVERSHIPS – WHEN WILL BANK APPOINT? • Directors not co-operating • Directors’ dishonesty • Boardroom/shareholder dispute (Request to change bank mandate) • Sheriff seizing assets • Revenue attaching bank accounts/debtors • Insurance cover not in place • Trading losses eroding floating charge
  9. 9. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – WHEN WILL BANK APPOINT? • Revenue debt eroding floating charge • Winding up petition advertised and risk of assets being dissipated • Do you need to crystallise quantum of personal guarantees, particularly where guarantors are being pursued by other creditors? • The Bank want to take charge! APPOINTING A RECEIVER • Breach or Default • Charge Documents • Written demand • Deed of Appointment
  10. 10. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. APPOINTING RECEIVERSHIPS - FIXED OR FLOATING CHARGE • Floating charge receiverships can be expensive. Dealing with employees, creditors, landlords etc. • If valuable floating charge assets (after Retention of Title etc.) then appoint under floating charge, as Receivers fees should be covered. • To preserve value of property e.g. A pub, then floating charge appointment must also be made. FIXED CHARGE RECEIVERSHIPS The appointment of a fixed charge receiver has, in the Irish context been a relatively rare occurrence to date. However, it is fair to say in the current challenging economic times, it is at best, something that most financial g g g institutions with an exposure to the investment property market will at least be required to consider in respect of certain properties on their portfolio. At the outset it is most important to note the difference between a fixed charge receiver and floating charge receiver. A floating charge receiver takes charge of all of the assets (generally belonging to a company) whilst a fixed charge is held over specific ascertainable assets and ‘attaches’ immediately on creation specific, attaches creation, meaning that the individual (or company) is no longer free to deal with the assets without the charge-holder’s authority.
  11. 11. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. FIXED CHARGE RECEIVERSHIPS Appointment: There are three ways in which a fixed charge receiver may be appointed: 1. Under the “default rules” as outlined in conveyancing legislation 2. By application to the Courts 3. Under the terms of mortgage deed FIXED CHARGE RECEIVERSHIPS Appointment: The Conveyancing act of 1634 sets out what a lender can do to recover a loan which is in default. One such power is the appointment of a receiver. These rights were restated in 2009 Law Reforms. A receiver may be appointed when: • Notice requiring payment of the mortgage has been served on the mortgagee and there are three months default in payment; • Interest is outstanding and in arrears for at least two months; • There is a breach of other general conditions of the mortgage
  12. 12. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. FIXED CHARGE RECEIVERSHIPS If it is not possible to appoint a Receiver under the rules above, an application can be made to Court to have a Receiver appointed. A key difference is that the Receiver has a duty to and a reporting obligation to the Court. y p g g Generally speaking, though the vast majority of Receivers are appointed under the terms of provisions contained in Mortgage Deeds. Mortgage property deeds are drafted with the specific power to appoint a receiver without the requirement of the factors required for a statutory default. Furthermore, these deeds will set out in detail what a Receiver can and cannot do in relation to the property. If dealing with a company’s property-a mortgage holder must write to the Companies Registration Office seven days in advance giving notice of the intention to appoint a Receiver over a company. The Receiver will generally be appointed by way of deed or a similar written confirmation. Likewise it is possible to terminate their appointment in writing. FIXED CHARGE RECEIVERSHIPS Indemnity Upon his appointment – a Receiver may require an indemnity from the financial institution who is appointing him. However, more and more receivers are dispensing with the requirement for an indemnity from the mortgagee. Powers and duties of a fixed Charge Receiver The receiver has a duty to act in the best interests of the lender who has appointed him. This is his primary duty and he has little obligation above the duty of acting in good faith to the property owner and/or any secondary charge holders on the property. p p y A fixed charge receiver has broad powers including • Collecting rents.
  13. 13. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. FIXED CHARGE RECEIVERSHIPS Powers and duties of a fixed Charge Receiver • Arranging to have property let or sold depending on the strategy for repaying the debt. • Maintaining property – including securing it, repairing it and insuring it. • Obtaining possession. This generally speaking is needed when a property is illegally occupied or when a tenant has defaulted on its rent. With regard to adopting a strategy for either letting or selling the property, the Receiver will probably take into account • The strategy adopted by the financial institution to its property portfolio • Professional advice in relation to the current and anticipated market trends. FIXED CHARGE RECEIVERSHIPS What Lenders Want It is fair to say that in these scenarios, the Lender will rely heavily on the Receivers expertise to achieve maximum recovery. The mortgagee will expect the Receiver to look at a range of options to realise the assets and indeed minimise any potential losses. These options will generally centre around either a holding strategy- where a tenant is either kept or sourced and the property generates rental income or the property is marked for sale (perhaps with a tenant in place). If the Receiver is going to rent the p p y – he may commence legal g g property y g proceedings if the tenants are in breach of their lease in order to enforce the collection of rent. If a sale is the strategy to be adopted, the Receiver must be active in the marketing of the property. If issues arise, and invariably they will, the mortgagee must be made aware of them and the options available to them with immediate effect.
  14. 14. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. FIXED CHARGE RECEIVERSHIPS What Lenders Want It should be noted that if a Receiver is appointed on back of a default by a mortgage holder – the Receiver does not have a power of sale under the “default” rules. However this is generally provided for in mortgage deeds. Whilst this is, right may be given to the Receiver under the deed of his appointment – he is not obliged to sell the property. Naturally enough if he does decide to sell the property he has an obligation to realise the maximum amount. FIXED CHARGE RECEIVERSHIPS Cash Flow Controls It is important also that the Receiver controls outgoings in relation to the property. The 2009 Law Reform Act notes that a Receiver must apply monies • In discharge of tax on rental income, rates and outgoings effecting the property • Keeping down annual sums, payments, interest and principal sums having priority to the mortgage under which the Receiver was appointed •In payment of the Receivers commission premiums and insurances • C t on executing necessary or proper repair as di t d b th mortgagee Costs ti i directed by the t • In payment of interest accruing due in respect of principal money under the mortgage • The payment of any surplus to the mortgagor
  15. 15. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. BEFORE APPOINTING A RECEIVER • The credit department / recoveries department will review the company’s turnaround plan and in particular consider the extent of their exposure to the company and the security which they hold. (A factor of a lot of the large scale insolvencies in Ireland in 2009 have been the cross guarantees between group companies). • The Bank will of course consider the ‘greater’ relationships which the bank have with the company and its promoters. • A fundamental issue for the bank will be the management of the company and the approach the management have taken with them in dealing with the difficulties to date. It is important that there is ‘trust’ between the parties which will facilitate meaningful discussions. BEFORE APPOINTING A RECEIVER • The Bank will review the company’s plan. (It would not be unusual for a bank to consider appointing external advisors to assist or advise on the review) • The Bank officials will be mindful of any suggestions they would have made to the company and will want to see in the plan evidence that the plan is well thought out and takes into account banks proposals (even if ultimately suggesting an alternative route) etc. • As noted above it is important to consider reconciling different creditor’s priorities and the Bank will want to see that the plan identifies the priorities and status of the bank.
  16. 16. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. INDEPENDENT BUSINESS REVIEW • Banks requiring them for troubled customers • Specialist firms being engaged by banks • Client generally pays for IBR – negotiate fee! • Important to work with accounting firm – can hold the key to bank support • Ask to see draft report before being submitted to bank - insist on draft being presented as part of engagement letter • Important to have up to date management accounts and projections available. • Need to be able to demonstrate management capability and understanding of what is required to turnaround business. Must demonstrate willingness to take tough decisions • Need to show that you recognize banks situation BUSINESS PLAN A business plan should be able to influence decisions about the business. It should • Enables objective assessment • Lay’s down strategy and timescale • Fundamental in approach to banks or investors
  17. 17. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. BUSINESS PLAN • A turnaround business plan includes: Company background Current position Short term goals Long term goals Product / Service description Market and Competitors Management and Staffing BUSINESS PLAN • A turnaround business plan includes: Financial Requirements Forecasts
  18. 18. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – WHEN ARE BANK LESS LIKELY TO APPOINT • Agricultural land (Development land which has great potential as agricultural land!!) • Significant ongoing trading losses will be incurred • Poor PR for bank (employment black hole etc.) • Brown field site issues and costs RECEIVERSHIPS – SECURITY ISSUES • Company may be dissolved! • Documentation not properly executed. p p y • “Missing” debentures on key group companies. • Original conveyancing incomplete: - “Ransom” strips not captured - Rights of way not captured - W l Wayleaves/Easements not captured /E t t t d - Building agreement not captured
  19. 19. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – SECURITY ISSUES • Goodwill issues • Power to appoint a Receiver may not extend to all assets due to poor drafting • No assignment of Rent • Fire Certs RECEIVERSHIPS • Possession • Operate business • Sell / Realise Assets • Duty to realise best price • Insure Assets • Notify stakeholders • Correspondence “in Receivership in Receivership” • File E9 Abstract every 6 months
  20. 20. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS • Responsible to charge holder • Has legal responsibilities Closing down • Endgame • Deed of Discharge • Filings RECEIVERSHIPS – PRE PACKS • The Receiver sells the "business and assets" (not the actual company) to the new owners. This gets rid of debts, unwanted or onerous contracts and employees (in certain circumstances there could TUPE issues that are q p y ( quite difficult) and there needs be no interruption to the business which in itself can destroy value. • Another big advantage is that the cost of the process is lower as the Receiver does not need to find funding to trade the business. The process, once the preliminary marketing, valuation work and discussions with creditors can be very quick and done in a couple of days if necessary.
  21. 21. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – NAMA Statutory Receiver has more powers and could over any deficiencies in the original debenture • Can Sell, • Rent, • Trade • apply for planning permission • rescind, repudiate or cancel contracts • Redeem prior security Key factor is a Statutory Receiver cannot be displaced by an examiner RECEIVERSHIPS – LEASES In principle, the appointment of a receiver over a company’s assets does not affect the rights and obligations of a landlord • It does not prevent the lessor for suing for unpaid rent or for breach of other covenants • Similarly, the Company through the receiver retains its rights under the lease, including the statutory right to the renewal of the business lease • It is common for leases to stipulate that they may be forfeited on a receiver being appointed over the property • However Receiver may cause the Company to apply for relief from forfeiture on ‘equitable grounds’ and at the same time apply to have the lease assigned to a suitable purchaser • Receiver is not liable for rent falling due before his appointment.
  22. 22. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. RECEIVERSHIPS – LEASES • Agent: By merely managing the company’s assets, including either premises or goods held on lease, and paying the ongoing’s is quite consistent with the Company remaining in legal possession p y g g p • Options for landlord include to ‘distrain for unpaid rent’ or if rent not paid usual procedures for termination of lease THE EROSION OF LIMITED LIABILITY • Directors are discovering that they may have given multiple guarantees to a significant proportion of a company’s creditors including landlords, leasing companies and essential suppliers at a time when they thought that the p pp y g prospect of them ever been called in was slim. Bankruptcy • We are seeing instances where Directors are facing the threat of bankruptcy proceedings where creditors are getting judgement against directors on the back of their failure to deal with these personal guarantees and are then using the judgement as a basis for a petition to make the individual bankrupt • As the cost of making someone bankrupt has decreased dramatically – with a starting cost as low as €3,000 this is a very real threat on behalf of creditors who wish to enforce personal guarantees and indeed give a warning shot to other individuals that the personal guarantee has an implication.
  23. 23. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. THE EROSION OF LIMITED LIABILITY • Directors are discovering that they may have given multiple guarantees to a significant proportion of a company’s creditors including landlords, leasing companies and essential suppliers at a time when they thought that the p pp y g prospect of them ever been called in was slim. Bankruptcy • We are seeing instances where Directors are facing the threat of bankruptcy proceedings where creditors are getting judgement against directors on the back of their failure to deal with these personal guarantees and are then using the judgement as a basis for a petition to make the individual bankrupt • As the cost of making someone bankrupt has decreased dramatically – with a starting cost as low as €3,000 this is a very real threat on behalf of creditors who wish to enforce personal guarantees and indeed give a warning shot to other individuals that the personal guarantee has an implication. THE EROSION OF LIMITED LIABILITY Section 13 of the Finance Act 2005 • Limited Liability has been further eroded by Section 13 of the Finance Act 2005. • Section 13 inserted a new Section, Section 997A to Chapter 4 of Part 42 Taxes Consolidation Act, 1997, which gives the Revenue Commissioners the powers for the tax year 2005 on to assess and collect from “controlling” directors any PAYE which was deducted from their salaries but not actually p paid over by the company at the time. y p y
  24. 24. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. THE EROSION OF LIMITED LIABILITY Section 13 of the Finance Act 2005 • It should be noted that “controlling” directors refers to a person who either themselves, or through connected persons, are the beneficial owner of, or is able, directly or indirectly, to control more than 15% of the issued share capital of the company. • This brings the prospect that a relatively small shareholder who have a relatively minor position in the company but is connected to the majority shareholder – e.g. the spouse or the children may fall under this provision and be assessed directly by the revenue for this tax. • Furthermore – where the company has deducted PAYE from salaries but not enough to cover the whole liability of the company – that PAYE is allocated first to employees who are NOT covered by this section with any surplus allocated on a pro rata basis in proportion to salary earned PERSONAL GUARANTEES • PG’s serve 2 purposes: - Additional collateral - Encourage co-operation • Best PG is a collateralised PG • First Mover Advantage = call in guarantees before other banks (or before borrower “shifts” assets) • You do not have to wait for Receiver to complete sale. • Once default has occurred you should be able to call in PG seek legal advice on each case
  25. 25. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. DECEASED GUARANTORS • Sections 8 & 9 of Civil Liability Act 1961 applies • The Bank has the lesser of six years from the date of demand or two years from the date of death to issue proceedings, otherwise claim is statute barred • Demand can only be made if default occurs • If no default during the individual’s life, then the normal statute of limitations apply (i.e. Six years) WHY MAKE SOMEONE BANKRUPT? • To maximise debt recovery by: - Overturning “voidable” dispositions within previous 2/5 years (e.g. Transfers to spouses) - To challenge fraudulent preferential payments made within previous 6 months. - To effectively set aside Judgment Mortgages obtained by competing creditors in previous 6 months - To realise “awkward” assets such as shares in private limited companies - To fast track sale of debtor’s interest in family home, particularly if you are only/largest creditor - Possibly encourage their spouses to “bail them out” so that they may continue earning a living e.g. solicitors, pharmacists etc.
  26. 26. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. THE BANKRUPTCY PROCESS • Liability in excess of €2,000 • Two types of Petition - Creditor’s Petition – Section 14 - Debtor’s Petition – Section 15 CREDITOR PETITION • Must have committed an act of bankruptcy • Acts of Bankruptcy p y - Conveys or assigns all property to a trustee for benefit of creditors. - Files a declaration of insolvency in Court - Execution against debtor by seizure of goods (nulla bona) - Fraudulent conveyance of property or part - Creditor petition following service of summons on a debtor and the debtor has failed to discharge the amount claimed or otherwise compounded the claim - Seeks to enter into an arrangement with creditors
  27. 27. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. CREDITOR PETITION • Bankruptcy Summons - Prescribed form – personal service required p q - Debtor has 14 days to pay or secure to creditors satisfaction or apply for dismissal - Committed act of bankruptcy if unable to resolve within 14 days • Setting Aside Summons - Application must be within 14 days of service - Rationale that debt disputed, secured or obtained protection order - Court can dismiss summons or allow creditor to present a bankruptcy petition CREDITOR PETITION • Petition - Debtor to be domiciled or ordinarily resident in the state, or carry on y , y business in the state or own residential property in the state at any time within previous year - Debt must be liquidated - Ensure personal service on debtor-affidavit of service to be lodged - Must be served within 3 months of the date of the act of bankruptcy • Hearing - Petitioning P i i i creditor, d b and supporting creditor may appear di debtor d i di - Petitioner must prove 7 days elapsed since service by affidavit - Court has discretion
  28. 28. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. CREDITOR PETITION • Order - Requires bankrupt to attend a statutory sitting - Court shall cause an advertisement to appear once the period for appeal has passed - Advertisement of adjudication of bankruptcy placed in one daily paper and in Iris Oifigiuil DEBTOR PETITION •Must prove cannot discharge liabilities • Must demonstrate estate has a minimum level of realisable assets • Petition - Name and place of residence, occupation - Business names, sole trader or other - Nature of trade and business address - Statement of inability to pay debts – but must demonstrate minimum asset level - Debtor must also give certain undertakings • Order - Grounds for order must be included - Notice of time re appeal
  29. 29. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. BANKRUPTCY • Property of Bankrupt automatically vests in Official Assignee • Petitioning creditor can seek appointment of Receiver and g pp Manager g • May dispose of assets by public auction or private treaty • Restrictions on dealing with property by Bankrupt • Restrictions on legal proceedings without Court permission • Secured creditors may enforce their security • Official Assignee will convene statutory sitting of creditors BANKRUPTCY RESTRICTIONS •Restrictions - Cannot act as TD or Senator - Cannot act as auctioneer and multiple restrictions on various offices - Practising certificate as solicitor automatically terminated - Cannot act as Director of a Company - Partnership terminated - Cannot engage in business in name other than that in which adjudicated unless discloses the previous name
  30. 30. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. BANKRUPTS OBLIGATIONS •Obligations - Deliver up all books and records on request - Disclose name of any person controlling relevant books and records - Give inventory and further information - Deliver possession of property - Provide Statement of Affairs at least 2 clear days prior to statutory sitting - Provide books of account - Attend at statutory sitting - Give reasonable assistance - Notify after acquired property - Notify change of address and name BANKRUPTS OFFENCES • Offences - Non disclosure of property - Concealment of property - Failure to deliver up property and books & records - Failure to deliver statement of affairs - Leaving jurisdiction with property - Obtaining credit - Limited company involvement – Director - Corrupt inducement - Non-disclosure of after acquired property • Defence to the above is proof of no intent to defraud or conceal • P lt iis fine, iimprisonmentt or b th Penalty fi i both • Rights - To challenge any application for an income payments order decision - Can apply to court if dissatisfied with any proceedings
  31. 31. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. TRUSTEES ROLE AND POWERS • Statutory position – has all the powers of Official Assignee under Act (2 exceptions) • Get, realise and distribute estate; identify debts and liabilities • Powers all powers provided under the Act or the Court Rules - Sell by public auction/private treaty - Production of Documents - Redirection of Mail - Of arrest – of Court rather than Trustee - Of seizure - Disclaimer of onerous obligations - Realise R li secured assets ( bj t to consent) d t (subject t t) - Appoint Receiver & Manager - Transfer Shares - Institute or defend legal proceedings - Dispose of property to associates - Any other necessary or expedient in the exercise of the above powers - Control the functions of the bankruptcy inspector MATRIMONIAL HOME •KEY POINT – No disposal without Court approval Section 60 • Home in joint names j - Bankruptcy splits joint tenancy - Trustee will frequently attempt to have spouse/3rd party purchase equity - Where no agreement then order for partition and order for sale will be required • Home in sole name - Spouse may be able to claim interest through resulting or constructive trust - Love and affection L d ff ti - Courts may have made matrimonial settlements
  32. 32. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. DISCHARGE Five Methods 1. Application for discharge on payment in full of all expenses and claims including i t i l di interest. t 2. Application for discharge where unsecured creditors have received at least 50% 3. Bankruptcy over after 12 years 4. Composition by bankrupt 5. 5 Application to High Court (provided expenses and Prefs paid) DISCHARGE Effect - Released from all bankruptcy debts and interests - Restrictions no longer apply - Remaining estate reverts in bankrupt
  33. 33. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. ORDER OF PRIORITIES • Expenses, Fees & Costs • Preferential debts being •R t Rates •Arrears of Wages •Holiday Pay (usual ceiling) •Sick Pay •Pension Arrears •Taxes under 1889 Act and other liquidation • Unsecured Creditors • Debtors SCHEME OF ARRANGMENT COMPARISONS WITH BANKRUPTCY • Creditors agree to accept portion of debt in full and final settlement • Creditors will receive greater return over shorter period • No formal proceedings • Independent firm of accountants prepares and agrees Informal Scheme of Arrangement
  34. 34. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. COURT BASED SCHEMES • Petition for composition of debts • Protection – consequences q • Preliminary meeting (Act of Court) • Statement of Affairs (to be filed after) • Location • O/A assesses liability 4 days notice (Form 27) • Can be fully examined • Private Meeting • Statement of Affairs & proposal St t t f Aff i l • Copy minutes and statement forms preliminary meeting • Requisite Majority 3/5th number/value • Court approval necessary NEW DEVELOPMENTS • Thursday 16th December 2010: The Law Reform Commission’s Report on Personal Debt Management and Debt Enforcement was launched at the Commission’s Annual Conference held at Dublin Castle. • 440 page Report makes 200 recommendations for reform, and also includes a draft Personal Insolvency Bill. • Under Irelands Memorandum of understanding with the International Monetary Fund, new personal bankruptcy legislation must be passed by the first Quarter 2012
  35. 35. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. REPORT ON PERSONAL DEBT MANAGEMENT AND DEBT ENFORCEMENT The main recommendations in the Report are: 1. Debt Enforcement Office to oversee non-judicial debt settlement system 2. Two new processes: Debt Settlement Arrangement and Debt Relief Order 3. Proportionate and holistic debt enforcement mechanisms 4. Replacing outdated processes and abolishing imprisonment for debt 5. 5 Judicial personal insolvency law: reform of the Bankruptcy Act 1988 6. Regulation of debt collection undertakings NEW DEVELOPMENTS • The Minister for Justice, Equality and Defence Mr. Alan Shatter, T.D. on the 24 June 2011 announced the publication of the Civil Law (Miscellaneous Provisions) Bill 2011. ) • The Bill provides for amendments to provisions across the range of civil and regulatory law including· amendments to the Bankruptcy Act 1988 to allow for application for a reduction in the discharge period from 12 years to 5years and to provide for automatic discharge of bankruptcies existing for 12years or more (Part 7),
  36. 36. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. NEW DEVELOPMENTS • DEBT SETTLEMENT AND MORTGAGE RESOLUTION OFFICE ACT 2011 • Fianna Fail published on 12th October 2011 the Debt Settlement and Mortgage Resolution Office Bill 2011. The Bill, as currently drafted by Fianna Fail, incorporates many of the changes recommended in the Law Reform Commission mentioned above. • If the Bill was enacted as drafted, of particular interest to many people would be the proposed Debt Settlement Arrangement ("DSA"). Unlike a United Kingdom Individual Voluntary Arrangement which requires 75% of creditors to vote in favour of the scheme, the DSA, as presently drafted, would require 60% DEBT SETTLEMENT ARRANGEMENTS – CRYSTAL BALL • This is a legally binding agreement which is proposed by the debtor to their unsecured creditors and if accepted by 60% in value of the creditors voting at the creditors meeting is binding on all unsecured creditors as full and final g g settlement of their liabilities. • It stops all other legal actions being instigated or continued in respect of any amount due at the date of the creditors meeting. • It is capable of being offered once you are insolvent and can prove that you are insolvent. • Can be offered before bankruptcy p y • Can be offered as a means of annulling a bankruptcy order
  37. 37. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. DEBT SETTLEMENT ARRANGEMENTS – CRYSTAL BALL • It may help secure the family home • It probably will not affect your professional status • You will be able to operate a bank account although it will likely not have an overdraft facility • You only have to concentrate on 1 monthly contribution payment • Stops any legal actions continuing or being instigated in respect of existing debts DEBT SETTLEMENT ARRANGEMENTS – CRYSTAL BALL • It may help secure the family home • It probably will not affect your professional status • You will be able to operate a bank account although it will likely not have an overdraft facility • You only have to concentrate on 1 monthly contribution payment • Stops any legal actions continuing or being instigated in respect of existing debts
  38. 38. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. BANKRUPTCY FORUM SHOPPING • “Forum shopping” e.g. moving to United Kingdom. Automatic discharge after 1 year in UK. Must establish “Centre of Main Interest”. COMI = “Place where debtor “conducts the administration of his interests on a regular basis and is g therefore ascertainable by third parties” • UK very popular: bankruptcy v/s Individual Voluntary Arrangement • Watch out for new legislation in the pipeline. • “SEAN QUINN” • Lead to more people considering it • COMI central issue • Pension an attraction (? In Mr. Quinns case) BANKRUPTCY Forum Shopping – when would to consider it • Vexatious Creditor • Likelihood of post acquired asset (e.g.. inheritance) • Large Pension Pot
  39. 39. A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone. Thank you!! TOM MURRAY Friel Stafford 44 Fitzwilliam Place Dublin 2 Tel: 01 6614066 Fax: 01 661 4145 Mobile: 087 834 9495 Email: tom.murray@frielstafford.ie www.frielstafford.ie

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