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Insolvency law, policy and procedure

i Statutory framework and substantive law

Insolvency and restructuring proceedings in Ireland are primarily governed by the Companies Act 2014 (as amended), the Bankruptcy Act 1988 (as amended) and the Personal Insolvency Act 2012 (as amended). These are supplemented by principles of common law.

The Irish legal framework is embedded in the EU framework under the Recast Insolvency Regulation, augmented by the provisions of the Rome Regulation and the Recast Brussels Regulation. The overall Irish framework is both creditor-friendly and flexible, featuring processes that facilitate rescue and restructuring of corporate groups with complex structures.

In terms of substantive provisions applicable to insolvency proceedings, a liquidator and any creditor may seek to set aside eligible transactions. Such powers arise when (1) the transaction occurred within specified periods before the company entered into liquidation; and (2) the company was insolvent at the time it entered into the transaction.

Three types of transactions are particularly vulnerable in this regard:

  1. unfair preference: a transaction in favour of a creditor taking place within six months of the commencement of a winding up (or within two years if in favour of a connected person) and made with the dominant intention of putting the other party in a better position than they would be in if the company enters liquidation;
  2. avoidance of a floating charge: if a floating charge has been created within 12 months of the commencement of a winding up, it will be invalid unless it can be shown that, immediately after the creation of the charge, the company was solvent. However, it will not be invalid to the extent of money or goods or services actually provided as consideration for the charge; and
  3. fraudulent transfers: a liquidator or creditor of a company can apply to the High Court for the return of assets or for compensation where they can establish that the transfer of the assets had the effect of the perpetration of a fraud on the company, its creditors or its members. However, transactions that are unfair preferences are excluded.

The underlying principle concerning distribution in a liquidation is that the property of a company should be applied pari passu in satisfaction of its liabilities. This allows for all creditors, particularly those within the same class, to be treated equally. If the realised assets of a company are insufficient to pay any class of creditors in full, they are paid in equal proportion to their debts.

A combination of legislation, contract law and common law establishes a 'waterfall' of claims in insolvency proceedings. The following order of priority is therefore a general guide only:

  1. super-preferential claims (e.g., certain employees' social insurance contributions);
  2. remuneration, costs and expenses of an examiner that have been sanctioned by the court;
  3. fixed charge holders (a fixed charge holder is entitled to realise its security outside a winding up of the company);
  4. expenses certified by an examiner;
  5. liquidation costs and expenses;
  6. preferential debts (e.g., certain rates and taxes, wages and salaries);
  7. holders of any charge created as a floating charge;
  8. unsecured debts; and
  9. deferred debts of members.

When proceeds are insufficient to meet the claims of one category in full, payments for that category are pro-rated.

ii Policy

The Irish restructuring regime lends itself towards rescue where appropriate. The threshold for each restructuring process is designed to ensure that only companies with a genuine prospect of survival can engage in a restructuring process.

'Examinership' is a court-supervised process whereby a court-enforced moratorium is in place on creditor action to facilitate the restructuring and survival of a company. However, although the Irish framework provides for and encourages restructuring regimes, and the vast majority of examinerships have a successful outcome, the level of examinerships remains relatively low. This is largely because of the fact that it can be a costly process and, therefore, is not suited to every company.

Like the United Kingdom, it is also possible for companies in Ireland to avail themselves of a statutory scheme of arrangement, which can be used to implement a variety of arrangements between a company and its creditors or its members. While schemes of arrangement can be used to implement even the most complex of debt restructurings, they are not used as often as the examinership process in Ireland, not least because in an examinership, there is a lower voting threshold.

iii Insolvency proceduresLiquidation

An insolvent company can be wound up by the High Court (compulsory liquidation) or by way of a shareholders' resolution followed by a creditors' meeting (creditors' voluntary liquidation). The main criterion required to liquidate an insolvent company is that the company is unable to pay its debts. This usually entails an assessment of whether (1) the company is unable to pay its debts as they fall due (the cash flow test); or (2) the value of the company's assets is less than its liabilities, taking into account its contingent and prospective liabilities (the balance sheet test).

The time frame for the completion of a winding up is dependent upon the size of the company and its trading patterns. A relatively straightforward liquidation can complete within a year; however, it is common for larger and more complex liquidation procedures to take significantly longer.


Examinership is the main rescue process for companies in Ireland. Although there are a number of differences, international corporates will recognise examinership as being similar in many respects to the Chapter 11 procedure in the United States and, to a lesser extent, administration in the United Kingdom.

In an examinership, the maximum period in which a company may be under the protection of the court is 100 days. An examiner (a court-appointed insolvency practitioner) has to have formulated a scheme, convened creditors' meetings and reported back to the court by day 100 and the approval of the scheme is typically heard by the High Court shortly thereafter. The scheme must be approved by more than 50 per cent (in value and number) of any one impaired class in order for it to be put before the court for approval.

Statutory schemes of arrangement

Although the statutory scheme of arrangement is not necessarily an insolvency process, its flexibility allows it to be used to restructure debt. However, the scheme is more commonly used in Ireland to give effect to a reorganisation of shareholdings of large corporates and has tended to be the tool of choice for effecting the large-scale corporate inversion transactions that have been in vogue in recent times with US and Irish pharmaceutical companies.

In a statutory scheme of arrangement, once a scheme proposal document has been finalised and circulated, it would not be unrealistic for the court process to be completed within eight to 10 weeks. The scheme must be approved by more than 75 per cent of value and a majority in number of each class of creditors or members.


While a receivership is a method of enforcing security, it is in practice treated as a form of insolvency procedure. It is possible to restructure companies by way of a pre-pack receivership, in which case the sale of a distressed company's business can be negotiated before it enters into receivership and executed shortly after the receiver is appointed. The aim is to minimise disruption and cost, and an advantage is that out-of-the-money junior creditors can be left behind in the insolvent company.

Ancillary insolvency proceedings

The Recast Insolvency Regulation applies to all collective insolvency proceedings relating to a company with its centre of main interests (COMI) in an EU Member State. The regime under the Recast Insolvency Regulation allows for the opening of secondary proceedings in another Member State in which the company has an establishment where main proceedings have been opened and are pending in another Member State.

It is possible for the insolvency office holder in the main proceedings to give a unilateral undertaking to creditors in the secondary proceedings that local distribution and priority rules will be respected as though secondary proceedings were opened there, which generally negates the requirement for secondary proceedings.

It is possible for liquidators of companies in non-EU countries to apply to the court in Ireland under common law for an order in aid of the foreign proceedings. The court has discretion to grant such an order in appropriate cases.

iv Starting proceedings

The question of who may commence such proceedings depends on which procedure is used.

Compulsory liquidation

In a compulsory liquidation, the court has jurisdiction to appoint a liquidator if it is satisfied that the company is unable to pay its debts or that it is just and equitable to do so. Those entitled to petition the court to liquidate a company include the company itself, a creditor of the company, a contributory of the company and the country's Director of Corporate Enforcement. A compulsory liquidation is deemed to commence at the time of filing the petition.

Notice of the petition must be advertised, which allows parties (including the company itself and its creditors) to object to the appointment of a liquidator at the hearing of the petition.

Creditors' voluntary liquidation

A creditors' voluntary liquidation is usually initiated by the directors of a company. A shareholders' meeting and a creditors' meeting are called. The shareholders resolve that the company is insolvent and a liquidator is appointed. A statement of affairs is compiled and presented by the directors at the creditors' meeting, including a list of creditors and amounts owed.


When a company is, or is unlikely to be, unable to pay its debts, the shareholders, directors or creditors may petition the court to appoint an examiner. It is generally the company itself that petitions the court for the appointment of an examiner. Notice of the petition must be advertised, and it is possible for interested parties to object at the hearing of the petition to the appointment of an examiner. If an examiner has formulated proposals for a scheme of arrangement for consideration by the creditors, it is possible to challenge the proposals on the basis that one class of impaired creditors has not voted in favour of the scheme (which could be based on arguments in relation to the composition of classes). Challenges are also possible on the basis that the proposals are unfairly prejudicial to a particular creditor or are not fair and equitable in relation to any class of creditors.

Statutory scheme of arrangement

It is generally the directors of a company who apply to the court to summons a meeting between the members and creditors to formulate a scheme of arrangement. However, the company itself, any creditor or member of the company or, in the case of a company being wound up, the liquidator, may also apply to the court to initiate the process.

v Control of insolvency proceedingsLiquidation

Once an insolvent company is in liquidation, the directors' powers cease and the liquidator assumes the management of the company.

The Companies Act 2014 places a compulsory liquidation on the same footing as a creditors' voluntary winding up once the order for winding up is made, thereby reducing the supervisory role of the court in favour of greater creditor involvement and liquidator autonomy.


In an examinership, the company will continue to trade and the directors usually remain in control of a company during the protection period. This is subject to the court's discretion to direct, upon application, that the examiner assumes some or all of the director's functions only for the period of examinership. In practice, this is rarely done, and usually when there has been a suggestion of some sort of wrongdoing on the part of the directors. The examiner's scheme of arrangement requires court approval before it becomes binding.

Statutory scheme of arrangement

The directors and shareholders are usually instrumental in putting together the scheme and running the process. As with an examinership, the company can continue trading and the directors can stay in control of the company.

vi Special regimes

Modified insolvency regimes apply in certain sectors and special situations. Examples include the following.

The Insurance (No. 2) Act 1983 provides for the appointment of an administrator to non-life insurance insolvent companies at the request of the Central Bank in certain circumstances with a view to ensuring the survival of the company.

Ireland took a series of exceptional steps to contain the crisis in the banking sector that emerged in 2008. Its strategy included transferring non-performing eligible assets to a government-backed entity, the National Asset Management Agency, and to provide capital and liquidity to weakened and distressed banks and building societies.

The European Communities (Reorganisation and Winding up of Credit Institutions) Regulations 2011 (SI 48 of 2011) and the Central Bank and Credit Institutions (Resolution) Act 2011 apply to the winding up of credit institutions and banks and aim to provide an effective and expeditious regime for dealing with failing credit institutions.

The Irish Bank Resolution Corporation Act 2013 was enacted in February 2013 and provided for the immediate liquidation of Irish Bank Corporation Limited (formerly Anglo Irish Bank Corporation Limited) by way of 'special liquidation'. As the special liquidators were appointed by the Minister for Finance, they are obliged to comply with instructions given to them by the Minister and are under an obligation to act in the interests of the Irish taxpayer, putting them in a somewhat different position than other liquidators, who are answerable primarily to the creditors of the company.

Ireland is an internationally recognised centre of excellence in aviation finance and recently gave effect to the 'Alternative A' insolvency remedy of the Aircraft Protocol to the Cape Town Convention on International Interests in Mobile Equipment, the primary purpose of which is to provide a protective regime for aircraft financiers and creditors in insolvency proceedings similar to the US Chapter 11 procedure.

vii Cross-border issues

The Recast Insolvency Regulation applies to all collective insolvency proceedings and some restructuring proceedings relating to a company with its COMI in the European Union. The Recast Insolvency Regulation provides for automatic recognition in Ireland of proceedings to which the Regulation applies.

Ireland has not adopted the UNCITRAL Model Law on Cross-Border Insolvency Proceedings (the Model Law). In November 2018, the Irish Company Law Review Group reported to the Minister for Business, Enterprise and Innovation on the Model Law and recommended that be adopted in Ireland. The report has been under consideration by the minister's department. For a company that does not have its COMI in the European Union, the foreign insolvency officeholder can apply to the High Court pursuant to common law for recognition and an order in aid of the foreign proceedings. In the exercise of that jurisdiction, the Court has given consideration to the following factors:

  1. whether recognition is being sought for a legitimate purpose;
  2. that there is no prejudice to any creditor in Ireland in affording recognition;
  3. that there is no infringement of any local law in affording recognition;
  4. where the insolvency procedure in the other state is sufficiently similar to that in Ireland; and
  5. that to afford recognition would not infringe public policy in Ireland.

Insolvency metrics

Ireland's gross domestic product grew by 1.2 per cent in in the first quarter of 2020, despite a decline in private consumption. The total number of corporate insolvencies recorded in Ireland in 2019 was 568, resulting in a 26 per cent decrease from the total of 767 recorded in 2018. When compared with 2012, during which 1,684 insolvencies were recorded, the 2019 figures represent a 66 per cent decrease in corporate insolvencies over the past seven years.

According to analysis carried out by Deloitte, the total number of corporate insolvencies recorded in the first quarter of 2020 was 159 which represented a decrease of 18 per cent from the same period in 2019. In this regard, court liquidation appointments, corporate receiverships and examinerships showed a decrease in activity when compared with the same period in 2019. According to Deloitte, there is likely to be an increase in receivership activity as the year progresses and various moratoriums offered by lending institutions are lifted. Economic activity is expected to have plunged in the second quarter of the year because of the covid-19 pandemic and its associated lockdown. Official unemployment remained low at about 5.3 per cent in the second quarter of 2020 while covid-19 adjusted unemployment (i.e., including persons who are receiving unemployment payments for losing their job because of the pandemic) surged to 28.2 per cent in April, before declining to 26.6 per cent in May and 22.5 per cent in June.

Of the four main industry sectors, the services industry once again recorded the highest number of corporate insolvencies in the first quarter of 2020 with 54 appointments (34 per cent of total insolvencies). In light of the covid-19 pandemic and its impact on international travel, the global airline industry has suffered a significant decline in operations. This is highlighted in Ireland by the recent examinership of CityJet DAC and the restructuring of Nordic Aviation Capital (the world's largest regional aircraft lessor) (both detailed below). The pandemic has also had a significant impact on Ireland's retail sector as demonstrated by the liquidation of Debenhams Retail (Ireland) Limited and the examinership of Compu B Retail Limited (both detailed below)

There has been an increase in the number of personal insolvency applications in the first quarter of 2020 when compared with 2019. However, activity in the first quarter of 2020 has been impacted by the effects of the covid-19 pandemic with March seeing a significant decrease in the numbers of protective certificates and personal insolvency arrangements with that trend expected to carry over into the second quarter of 2020. According to statistics published by the Insolvency Service of Ireland, the downward trend in the number of bankruptcies evident in 2019 has continued into 2020.