Insolvency
Niall Farrell and Elaine McCormack run our Insolvency and Corporate Restructuring Department.
We advise you on all aspects of insolvency or company restructuring.
1. Options available to your Company if it is insolvent.
2. Options available to your Company if it is solvent.
Is your Company insolvent?
There are two tests for establishing insolvency;
1. The “cash flow” test which requires you to show that your company is unable to pay its debts as they fall due for payment and
2. The “balance sheet” test which requires you to show that the value of the company’s assets is insufficient to meet its liabilities.
Do you think your Company satisfies the tests above? If so, there are a number of formal insolvency and winding up procedures available to your Company.
1. Examinership
2. Receivership
3. Creditors’ Voluntary Liquidation
4. Compulsory Liquidation
1. Examinership:
The Examinership procedure is intended to facilitate the rescue of insolvent and nearly insolvent companies. Examinership enables the company to petition to the High Court for a period of 70-100 days “protection of the court”. In order for a company to be suitable for Examinership, the High Court has to be satisfied that the company would have a reasonable prospect of survival. In essence, there must be a business that is either viable or can be made viable. The High Court, once satisfied that there is a reasonable prospect of survival, appoints an Examiner whose function is to formulate proposals for a compromise or scheme of arrangement between the company, its members and its creditors. During the period of protection, the creditors are restrained from exercising their rights to pursue claims and secured creditors are prohibited from exercising their security. The company will continue to trade during the protection period and the directors remain in control of and responsible for the day to day running of the company. It is important to note that not all companies are suitable for examinership and that the other three options above may be more suitable for your company.
2. Receivership:
Receivership is a temporary condition affecting a company which does not necessarily lead to the company’s dissolution. A Receiver is appointed on foot of a debenture or charge which confers on a secured creditor the power in defined circumstances, usually including default by the borrower, to appoint its own receiver for the purposes of realising the assets secured by the debenture. This happens in certain circumstances, usually where there is default by the borrower. The most common type of receivership in Ireland occurs where a secured creditor (usually a bank or building society) appoints a receiver under contractual powers granted by the company in a debenture or charge. The appointment of the receiver does not change the legal status of the company. However the directors do cease to control the assets over which the receiver has been appointed. The function of a receiver appointed by a debenture holder is to take possession of the assets subject to the debenture holder’s charge. The receiver will realise those assets and pay off the debenture holder.
3. Creditors voluntary liquidation:
In this form of liquidation, the directors are responsible for the preparation of anthe estimated statement of the company’s affairs setting out its assets and liabilities. The process of a creditors’ voluntary winding up commences withby a resolution by the members that the company be wound up voluntarily. A shareholders resolution is then held and once this resolution is passed, the company is put into liquidation. A liquidator is appointedment at a creditors meeting and the liquidator is then answerable to and reports to the creditors of the company.
4. Compulsory Liquidation:
Where a company is unable to pay its debts as they fall due or where it is just and equitable that the company be wound up, the High Court can order the winding up of a company. A petition to the court for a winding up order can be presented by a creditor, the company itself or a member of the company. A winding up order places the company in liquidation and appoints an Official Liquidator. The Official Liquidator will then wind up the affairs of the company which involves the realisation and distribution of the company’s assets.
Is your company solvent?
If so, you can still wind up your company by way of a Members Voluntary Liquidation.
5. Members Voluntary Liquidation:
This form of liquidation arises where the members of a solvent company decide for their own commercial reasons to wind up the company voluntarily and distribute its assets. The company must be solvent and any debts must be paid in full. The Directors of the company must file in the Companies Registrar a Declaration of Solvency which is simply a sworn declaration to the effect that the company will be able to pay its debts in full within a period not exceeding one year from the commencement of the liquidation. A statement of assets and liabilities is attached to the declaration. A report must also be prepared by an independent person (usually an auditor) and appended to the statement of assets and liabilities. The directors’ powers cease on the appointment of the liquidator and the liquidator is answerable to and reports to the members of the company.
Contact:
If we can help you in relation to any of the above, please do not hesitate to contact Niall Farrell at niall.farrell@pjf.ie or Elaine McCormack at elaine.mccormack@pjf.ie or call 045 431 542
Testimonials
"I have always found the service provided by your firm to be highly professional and first class. Attention to detail and advice given is always 'spot on'. No complaints whatsoever. It is always a pleasure to deal with your company."
- Liam Doherty
I am really pleased to recommend Niall Farrell. Working on behalf of the Sisters of Mercy during the past four years I have found Niall to be efficient, solution orientated and very accurate in dealing with some extremely complicated title to property. His availability to us as clients, despite a busy practice, both pleases and amazes me.
- Sr. Anne Doyle
"The service was very good. Whenever I had a query it was dealt with promptly. It was great that most of it could be done via email as it's not always easy to go to the office in person."
How likely on a scale of one to ten would you be to recommend us to others? "10."
-Margaret McLoughlin, conveyancing client.
"I have never interacted with a Solicitor who has demonstrated such dedication to duty above and beyond what could have been expected. Helen is an exceptional ambassador for your company, a real lady who dealt with my complicated legal issues in a manner that has forever enhanced my perception of the legal profession."
- Family Law Client
