Commencement
Companies Act
Power of court to appoint examiner
509. (1) Subject to subsection (2), where it appears to the court that—
(a) a company is, or is likely to be, unable to pay its debts,
(b) no resolution subsists for the winding up of the company, and
(c) no order has been made for the winding up of the company,
the court may, on application by petition presented, appoint an examiner to the company for the purpose of examining the state of the company’s affairs and performing such functions in relation to the company as may be conferred by or under this Part.
(2) The court shall not make an order under this section unless it is satisfied that there is a reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern.
(3) For the purposes of this section, a company is unable to pay its debts if—
(a) it is unable to pay its debts as they fall due,
(b) the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities, or
(c) the circumstances set out in section 570 (a), (b) or (c) are applicable to the company.
(4) In deciding whether to make an order under this section, the court may also have regard to whether the company has sought from its creditors significant extensions of time for the payment of its debts, from which it could reasonably be inferred that the company was likely to be unable to pay its debts.
(5) The court shall not make an order under this section unless—
(a) the court is satisfied that the company has no obligations in relation to a bank asset that has been transferred to the National Asset Management Agency or a NAMA group entity, or
(b) if the company has any such obligation—
(i) a copy of the petition has been served on that Agency, and
(ii) the court has heard that Agency in relation to the making of the order.
(6) In subsection (5) “bank asset” and “NAMA group entity” have the same respective meanings as in the National Asset Management Agency Act 2009 .
(7) In this section “court” means—
(a) in the case of any company (including one referred to in paragraph (b)), the High Court; or
(b) in the case of a company that, in respect of the latest financial year of the company that has ended prior to the date of the presentation of the petition, fell to be treated as a small company by virtue of section 350 , the Circuit Court,
and—
(i) subject to subsection (9), all subsequent references to the court in this Part shall, as respects the powers and jurisdiction of the court with respect to an examinership on foot of an appointment made under this section by the Circuit Court, be read accordingly; and
(ii) the jurisdiction under section 512 (7) to appoint an examiner on an interim basis, and the jurisdiction to do the things referred to in section 513 , are likewise available to the Circuit Court in the case of a company specified in paragraph (b).
(8) For the purpose of paragraph (b) of subsection (7), if the latest financial year of the company concerned ended within 3 months prior to the date of the presentation of the petition, the reference in that paragraph to the latest financial year of the company shall be read as a reference to the financial year of the company that preceded its latest financial year (but that reference shall only be so read if that preceding financial year ended no more than 15 months prior to the date of the presentation of the petition).
(9) Subsection (7) does not confer on the Circuit Court any jurisdiction that is provided under this Part to hear a petition for the winding up of, or to wind up, a company.
(10) The jurisdiction of the Circuit Court under this Part in relation to a company shall be exercisable by the judge of the Circuit Court—
(a) for the circuit in which the registered office of the company is situated at the time of the presentation of the petition or in which it has, at that time, its principal place of business, or
(b) if, at that time, there is no registered office of the company and its principal place of business is outside the State, for the Dublin Circuit.
(11) On the making of an order appointing an examiner to a company, the proper officer of the Central Office of the High Court or, as the case may be, the county registrar shall, on request and payment of the prescribed fee and subject to any conditions that may be specified in rules of court, give to the examiner concerned—
(a) a copy of the order, certified by the officer to be a true copy, and
(b) any other prescribed particulars.
Petition for court
510. (1) Subject to subsections (2) and (3), a petition in relation to a company may be presented by all or any of the following (separately or together):
(a) the company;
(b) the directors of the company;
(c) a creditor, or a contingent or prospective creditor (including an employee), of the company;
(d) a member or members of the company holding at the date of the presentation of the petition not less than one tenth of such of the paid-up share capital of the company as carries at that date the right of voting at general meetings of the company.
(2) Where the company referred to in section 509 is the holding company of an insurer, a petition may be presented only by the Central Bank, and subsection (1) shall not apply to the company.
(3) Where the company referred to in section 509 is—
(a) the holding company of a credit institution, or
(b) a company which one or more trustee savings banks have been reorganised into pursuant to an order under section 57 of the Trustee Savings Banks Act 1989 ,
a petition may be presented only by the Central Bank, and subsection (1) shall not apply to the company.
(4) Where the company referred to in section 509 is a Schedule 5 company, the following provisions shall apply:
(a) a petition may be presented by—
(i) any of the persons referred to in paragraph (a), (b), (c) or (d) of subsection (1) (including by one or more of such persons acting together);
(ii) the Central Bank; or
(iii) one or more of such persons and the Central Bank acting together;
(b) if the Central Bank does not present a petition—
(i) the petitioner shall, before he or she presents the petition at the office of the court, cause to be received by the Central Bank a notice in writing of his or her intention to present the petition, and shall serve a copy of the petition on the Central Bank as soon as may be after the presentation of it at that office;
(ii) the Central Bank shall be entitled to appear and be heard at any hearing relating to the petition.
(5) In this section “ Schedule 5 company” means a company falling within any provision (in so far as applicable to a private company limited by shares) of Schedule 5 .
Independent expert’s report
511. (1) In addition to the matters specified in section 512 , a petition shall be accompanied by a report in relation to the company prepared by a person who is either the statutory auditor of the company or a person who is qualified to be appointed as an examiner of the company.
(2) The person who undertakes the preparation of that report is referred to in this Part as the “independent expert”.
(3) The report of the independent expert shall comprise the following:
(a) the names and addresses of the officers of the company;
(b) the names of any other bodies corporate of which the directors of the company are also directors;
(c) a statement as to the affairs of the company, showing in so far as it is reasonably possible to do so, particulars of the company’s assets and liabilities (including contingent and prospective liabilities) as at the latest practicable date, the names and addresses of its creditors, the securities held by each of them and the dates when the securities were given to each of them;
(d) his or her opinion as to whether any deficiency between the assets and liabilities of the company has been satisfactorily accounted for or, if not, as to whether there is evidence of a substantial disappearance of property that is not adequately accounted for;
(e) his or her opinion as to whether the company, and the whole or any part of its undertaking, would have a reasonable prospect of survival as a going concern and a statement of the conditions which he or she considers are essential to ensure such survival, whether as regards the internal management and controls of the company or otherwise;
(f) his or her opinion as to whether the formulation, acceptance and confirmation of proposals for a compromise or scheme of arrangement would offer a reasonable prospect of the survival of the company, and the whole or any part of its undertaking, as a going concern;
(g) his or her opinion as to whether an attempt to continue the whole or any part of the undertaking would be likely to be more advantageous to the members as a whole and the creditors as a whole than a winding-up of the company;
(h) recommendations as to the course he or she thinks should be taken in relation to the company including, if warranted, draft proposals for a compromise or scheme of arrangement;
(i) his or her opinion as to whether the facts disclosed would warrant further inquiries with a view to proceedings under sections 610 and 611 or section 722 ;
(j) details of the extent of the funding required to enable the company to continue trading during the period of protection and the sources of that funding;
(k) his or her recommendations as to which liabilities incurred before the presentation of the petition should be paid;
(l) his or her opinion as to whether the work of the examiner would be assisted by a direction of the court in relation to the role or membership of any creditor’s committee referred to in section 538 ; and
(m) such other matters as he or she thinks relevant.
Supplemental provisions in relation to sections 510 and 511 — other matters to be mentioned in petition, hearing of petition, etc.
512. (1) A petition shall nominate a person to be appointed as examiner.
(2) A petition shall be accompanied—
(a) by a consent signed by the person nominated to be examiner, and
(b) if proposals for a compromise or scheme of arrangement in relation to the company’s affairs have been prepared for submission to interested parties for their approval, by a copy of the proposals.
(3) The court shall not give a hearing to a petition presented by a contingent or prospective creditor until such security for costs has been given as the court thinks reasonable.
(4) The court shall not give a hearing to a petition if a receiver stands appointed to the whole or any part of the property or undertaking of the company the subject of the petition and such receiver has stood so appointed for a continuous period of at least 3 days prior to the date of the presentation of the petition.
(5) On hearing a petition the court may dismiss it, or adjourn the hearing conditionally or unconditionally, or make any interim order, or any other order it thinks fit.
(6) Without prejudice to the generality of subsection (5), an interim order under that subsection may restrict the exercise of any powers of the directors or of the company (whether by reference to the consent of the court or otherwise).
(7) Without limiting subsection (5) or (6), on or after the presentation of a petition, the court may, on application to it, appoint an examiner to the company on an interim basis.
Cases in which independent expert’s report not available at required time: powers of court
513. (1) If a petition is presented and the court is satisfied—
(a) that, by reason of exceptional circumstances outside the control of the petitioner, the report of the independent expert is not available in time to accompany the petition, and
(b) that the petitioner could not reasonably have anticipated the circumstances referred to in paragraph (a),
and, accordingly, the court is unable to consider the making of an order under section 509 , the court may make an order under this section placing the company concerned under the protection of the court for such period as the court thinks appropriate in order to allow for the submission of the independent expert’s report.
(2) That period shall be a period that expires not later than the 10th day after the date of the making of the order concerned or, if the 10th day after that date would fall on a Saturday, Sunday or public holiday, the first following day that is not a Saturday, Sunday or public holiday.
(3) For the avoidance of doubt, the fact that a receiver stands appointed to the whole or any part of the property or undertaking of the company at the time of the presentation of a petition in relation to the company shall not, in itself, constitute, for the purposes of subsection (1), exceptional circumstances outside the control of the petitioner.
(4) If the petition concerned has been presented by any of the persons referred to in section 510 (1)(c) or (d) and an order under subsection (1) is made in relation to the company concerned, the directors of the company shall co-operate in the preparation of the report of the independent expert, particularly in relation to the matters specified in section 511 (3)(a) to (c).
(5) If the directors of the company concerned fail to comply with subsection (4), the petitioner concerned or the independent expert may apply to the court for an order requiring the directors to do specified things by way of compliance with subsection (4) and the court may, as it thinks fit, grant such an order accordingly.
(6) If the report of the independent expert is submitted to the court before the expiry of the period of protection specified in an order under subsection (1), the court shall proceed to consider the petition together with the report as if they were presented in accordance with section 509 .
(7) If the report of the independent expert is not submitted to the court before the expiry of the period of protection specified in an order under subsection (1), then, at the expiry of that period, the company concerned shall cease to be under the protection of the court, but without prejudice to the presentation of a further petition.
Certain liabilities may not be certified under section 529 (2)
514. Any liabilities incurred by the company concerned during the period of protection specified in an order under section 513 (1) may not be the subject of a certificate under section 529 (2).
Creditors to be heard
515. (1) The court shall not make an order dismissing a petition presented to it or an order appointing an examiner to a company without having afforded each creditor of the company who has indicated to the court his or her desire to be heard in the matter an opportunity to be so heard.
(2) Nothing in this section shall affect the power of the court under section 512 (5) or (7) to make an interim order, including the appointment of an examiner on an interim basis, in the matter.
Availability of independent expert’s report
516. (1) The independent expert shall supply a copy of the report prepared by him or her under section 511 to the company concerned or any interested party on written application being made to the independent expert in that behalf.
(2) If the court, on application to it in that behalf, directs that that supply may be the subject of such omission, there may be omitted from any copy of the report supplied to the company or an interested party such parts of it as are specified in the direction of the court.
(3) The court may, in particular, on such an application, direct that there may be omitted from such a supply of a copy of the report any information the inclusion of which in such a copy would be likely to prejudice the survival of the company or the whole or any part of its undertaking as a going concern.
(4) If—
(a) the company concerned is a company referred to in section 509 (4), and
(b) the Central Bank does not propose to present, or has not presented, (whether alone or acting together with other persons) a petition in relation to the company,
the independent expert shall, as soon as may be after it is prepared, supply a copy of the report prepared by him or her under section 511 to the Central Bank and subsections (2) and (3) shall not apply to such a copy.
Related companies
517. (1) Subject to subsections (2), (3), (6) and (8), where the court appoints an examiner to a company, it may, at the same or any time thereafter, make an order—
(a) appointing the examiner to be examiner for the purposes of this Act to a related company; or
(b) conferring on the examiner, in relation to such company, all or any of the functions conferred on him or her in relation to the first-mentioned company.
(2) In deciding whether to make an order under subsection (1), the court shall have regard to whether the making of the order would be likely to facilitate the survival of the company, or of the related company, or both, and the whole or any part of its or their undertaking, as a going concern.
(3) However, the court shall not, in any case, make such an order unless it is satisfied that there is a reasonable prospect of the survival of the related company, and the whole or any part of its undertaking, as a going concern.
(4) A related company to which an examiner is appointed by an order under subsection (1) shall be deemed to be under the protection of the court for the period beginning on the date of the making of the order and continuing for the period during which the company to which it is related is under such protection.
(5) Where an examiner stands appointed to 2 or more related companies, he or she shall have the same functions in relation to each company, taken separately, unless the court otherwise directs.
(6) The court shall not make an order under this section unless—
(a) the court is satisfied that the related company has no obligations in relation to a bank asset that has been transferred to the National Asset Management Agency or a NAMA group entity, or
(b) if the related company has any such obligation—
(i) a copy of the application for the order has been served on that Agency, and
(ii) the court has heard that Agency in relation to the making of the order.
(7) In subsection (6) “bank asset” and “NAMA group entity” have the same respective meanings as in the National Asset Management Agency Act 2009 .
(8) The Circuit Court shall only have jurisdiction to make an order referred to in subsection (1)(a) or (b) if the related company is a company that, in respect of the latest financial year of it that has ended prior to the relevant time referred to in subsection (1), fell to be treated as a small company by virtue of section 350 .
(9) For the purposes of subsection (8), if the latest financial year of the company concerned ended within 3 months prior to the relevant time referred to in subsection (1), the reference in subsection (8) to the latest financial year of the company shall be read as a reference to the financial year of the company that preceded its latest financial year (but that reference shall only be so read if that preceding financial year ended no more than 15 months prior to the relevant time referred to in subsection (1)).
Duty to act in utmost good faith
518. The court may decline to hear a petition presented to it or, as the case may be, may decline to continue hearing such a petition if it appears to the court that, in the preparation or presentation of the petition or in the preparation of the report of the independent expert, the petitioner or independent expert—
(a) has failed to disclose any information available to him or her which is material to the exercise by the court of its powers under this Part; or
(b) has in any other way failed to exercise utmost good faith.
Qualification of examiners
519. (1) A person shall not be qualified to be appointed or act as an examiner of a company unless he or she would be qualified to act as its liquidator (but disregarding for this purpose the requirements of section 634 concerning professional indemnity cover).
(2) A person who acts as examiner of a company when he or she is not qualified to do so under subsection (1) shall be guilty of a category 2 offence.
Effect of petition to appoint examiner on creditors and others
520. (1) Subject to section 513 , a company is, for the purposes of this Part, under the protection of the court during the following period.
(2) That period is one—
(a) beginning with the date of the presentation of a petition in relation to the company, and
(b) (subject to section 534 (3) and (4)) ending on—
(i) the expiry of 70 days after that date, or
(ii) the withdrawal of, or refusal by the court of, the petition,
whichever first happens.
(3) The reference in subsection (2) to the refusal by the court of the petition shall be deemed to include a reference to its deciding to decline to hear, or to continue to hear, the petition under section 518 .
(4) For so long as a company is under the protection of the court in a case under this Part, the following provisions shall have effect:
(a) no proceedings for the winding up of the company may be commenced or resolution for winding up passed in relation to the company and any resolution so passed shall have no effect;
(b) no receiver over any part of the property or undertaking of the company shall be appointed, or, if so appointed before the presentation of a petition shall, subject to section 522 , be able to act;
(c) no attachment, sequestration, distress or execution shall be put into force against the property or effects of the company, except with the consent of the examiner;
(d) where any claim against the company is secured by a mortgage, charge, lien or other encumbrance or a pledge of, on or affecting the whole or any part of the property, effects or income of the company, no action may be taken to realise the whole or any part of that security, except with the consent of the examiner;
(e) no steps may be taken to repossess goods in the company’s possession under any hire-purchase agreement (within the meaning of section 530 ), except with the consent of the examiner;
(f) where, under any enactment, rule of law or otherwise, any person other than the company is liable to pay all or any part of the debts of the company—
(i) no attachment, sequestration, distress or execution shall be put into force against the property or effects of such person in respect of the debts of the company; and
(ii) no proceedings of any sort may be commenced against such person in respect of the debts of the company;
(g) no order for relief shall be made under section 212 against the company in respect of complaints as to the conduct of the affairs of the company or the exercise of the powers of the directors prior to the presentation of the petition.
(5) Subject to subsection (4), no other proceedings in relation to the company may be commenced except by leave of the court and subject to such terms as the court may impose and the court may, on the application of the examiner, make such order as it thinks proper in relation to any existing proceedings including an order to stay such proceedings.
(6) Complaints concerning the conduct of the affairs of the company while it is under the protection of the court shall not constitute a basis for the making of an order for relief under section 212 .
Restriction on payment of pre-petition debts
521. (1) No payment may be made by a company, during the period it is under the protection of the court, by way of satisfaction or discharge of the whole or a part of a liability incurred by the company before the date of the presentation of the petition in relation to it unless—
(a) the report of the independent expert contains a recommendation that the whole or, as the case may be, the part of that liability should be discharged or satisfied, or
(b) the court authorises such payment under subsection (2).
(2) The court may, on application being made to it in that behalf by the examiner or any interested party, authorise the discharge or satisfaction, in whole or in part, by the company concerned of a liability referred to in subsection (1) if it is satisfied that a failure to discharge or satisfy, in whole or in part, that liability would considerably reduce the prospects of the company or the whole or any part of its undertaking surviving as a going concern.
Effect on receiver or provisional liquidator of order appointing examiner
522. (1) Where, at the date of the presentation of a petition in relation to a company, a receiver stands appointed to the whole or any part of the property or undertaking of that company the court may make such order as it thinks fit, including an order as to any or all of the following matters:
(a) that the receiver shall cease to act as such from a date specified by the court;
(b) that the receiver shall, from a date specified by the court, act as such only in respect of certain assets specified by the court;
(c) directing the receiver to deliver all books, papers and other records, which relate to the property or undertaking of the company (or any part of it) and are in his or her possession or control, to the examiner within a period to be specified by the court;
(d) directing the receiver to give the examiner full particulars of all his or her dealings with the property or undertaking of the company.
(2) Where, at the date of the presentation of a petition in relation to a company, a provisional liquidator stands appointed to that company, the court may make such order as it thinks fit, including an order as to any or all of the following matters:
(a) that the provisional liquidator be appointed as examiner of the company;
(b) appointing some other person as examiner of the company;
(c) that the provisional liquidator shall cease to act as such from a date specified by the court;
(d) directing the provisional liquidator to deliver all books, papers and other records, which relate to the property or undertaking of the company (or any part of it) and are in his or her possession or control, to the examiner within a period to be specified by the court;
(e) directing the provisional liquidator to give the examiner full particulars of all his or her dealings with the property or undertaking of the company.
(3) The court shall not make an order under subsection (1)(a) or (b) or subsection (2)(c) unless the court is satisfied that there is a reasonable prospect of the survival of the company, and the whole or any part of its undertaking, as a going concern; this subsection is in addition to sections 509 (2) and 517 (3).
(4) Where the court makes an order under subsection (1) or (2), it may, for the purpose of giving full effect to the order, include such conditions in the order and make such ancillary or other orders as it deems fit.
(5) Where a petition is presented in respect of a company at a date subsequent to the presentation of a petition for the winding up of that company, but before a provisional liquidator has been appointed or an order made for its winding up, both petitions shall be heard together.
Disapplication of section 440 to receivers in certain circumstances
523. (1) This section applies where either—
(a) an examiner has been appointed to a company, or
(b) an examiner has not been appointed to a company but, in the opinion of the court, such an appointment may yet be made.
(2) Where this section applies, on application being made to it in that behalf, the court may, subject to subsections (4) and (5), make, in relation to a receiver who stands appointed to the whole or any part of the property or undertaking of the company referred to in subsection (1), the following order.
(3) That order of the court is one providing that section 440 shall not apply as respects payments made by the receiver out of assets coming into his or her hands as such receiver.
(4) The court shall only make such an order if it would, in the opinion of the court, be likely to facilitate the survival of the company, and the whole or any part of its undertaking, as a going concern.
(5) An order referred to in subsection (2) shall not be made without each creditor of the company of the following class being afforded an opportunity to be heard, namely a creditor any of the debts owed to whom by the company are debts which in a winding up are (by virtue of the provisions of Part 11 relating to preferential payments) required to be paid in priority to all other debts.
(6) Subsection (2) is without prejudice to the generality of section 522 (1).
Notification of appointment of examiner
531. (1) Where a petition has been presented, notice of the petition in the prescribed form shall, within 3 days after the date of its presentation, be delivered by the petitioner to the Registrar.
(2) An examiner shall, within the respective periods specified in subsection (3), cause to be published in Iris Oifigiúil and in at least 2 daily newspapers circulating in the district in which the registered office or principal place of business of the company is situated a notice of his or her appointment and the date of that appointment.
(3) The periods referred to in subsection (2) are—
(a) 21 days after the date of the examiner’s appointment — in the case of Iris Oifigiúil, and
(b) 3 days after the date of the examiner’s appointment — in the other case referred to in that subsection.
(4) An examiner shall, within 3 days after the date of his or her appointment, deliver to the Registrar a copy of the order appointing him or her.
(5) Where a company is (by virtue of section 520 ) under, for the purposes of this Part, the protection of the court, every invoice, order for goods or business letter issued by or on behalf of the company, being a document on or in which the name of the company appears, shall, immediately after the mention of that name, include the words “in examination under Part 10 of the Companies Act 2014”.
(6) A website of a company that is (by virtue of section 520 ) under, for the purposes of this Part, the protection of the court, and any electronic mail sent to a third party by, or on behalf of, such a company, shall contain a statement that the company is in examination under this Part (and such a statement on a website shall be in a prominent and easily accessible place on it).
(7) In subsection (6) “third party” means a person other than—
(a) an officer or employee of the company concerned, or
(b) a holding company or subsidiary of the company or an officer or employee of that holding company or subsidiary.
(8) A person who fails to comply with subsection (1), (2), (4) or (5) shall be guilty of a category 4 offence.
(9) If default is made in complying with the requirement under subsection (6) concerning the company’s website, the company concerned and any officer of it who is in default shall be guilty of a category 4 offence.
(10) If default is made by a company, or any person acting on its behalf, in complying with the requirement under subsection (6) concerning electronic mail, then—
(a) in every case, the company and any officer of it who is in default, and
(b) where the default is made by a person acting on the company’s behalf, that person,
shall be guilty of a category 4 offence.
General provisions as to examiners — resignation, filling of vacancy, etc.
532. (1) An examiner may resign or, on cause shown, be removed by the court.
(2) If, for any reason, a vacancy occurs in the office of examiner, the court, on application to it, may by order fill the vacancy.
(3) An application for an order under subsection (2) may be made by—
(a) any committee of creditors established under section 538 in relation to the company concerned, or
(b) the company concerned, or
(c) any interested party.
(4) An examiner shall be described by the style of “the examiner” of the particular company in respect of which he or she is appointed and not by his or her name.
(5) The acts of an examiner shall be valid notwithstanding any defects that may afterwards be discovered in his or her appointment or qualification.
(6) An examiner shall be personally liable on any contract entered into by him or her in the performance of his or her functions (whether such contract is entered into by the examiner in the name of the company concerned or in his or her own name as examiner or otherwise) unless the contract provides that he or she is not to be personally liable on such contract.
(7) The examiner shall, in respect of that personal liability, be entitled to indemnity out of the assets of the company concerned.
(8) Nothing in subsection (6) or (7) shall be taken as limiting any right to indemnity which the examiner would have apart from either subsection, or as limiting the examiner’s liability on contracts entered into without authority or as conferring any right to indemnity in respect of that liability.
(9) A company to which an examiner has been appointed or an interested party may apply to the court for the determination of any question arising out of the performance or otherwise by the examiner of his or her functions.
Appointment of creditors’ committee
538. (1) An examiner may, and if so directed by the court shall, appoint a committee of creditors to assist the examiner in the performance of his or her functions.
(2) Save as otherwise directed by the court, a committee appointed under subsection (1) shall consist of not more than 5 members and shall include the holders of the 3 largest unsecured claims who are willing to serve.
(3) The examiner shall provide such a committee with a copy of any proposals for a compromise or scheme of arrangement and the committee may express an opinion on the proposals on its own behalf or on behalf of the creditors or classes of creditors represented on the committee.
(4) As soon as practicable after the appointment of a committee under subsection (1), the examiner shall meet with the committee to transact such business as may be necessary.
The text in italics on this page is sourced from the Irish Statute Book and is re-published under the Licence for Re-Use of Public Sector Information made pursuant to Directive 2003/98/EC Directive 2013/37/EU of the European Parliament and of the Council on the re-use of public sector information transposed into Irish law by the European Communities (Re-Use of Public Sector Information) Regulations 2005 to 2015.
Rules of the Superior Courts
Proceedings under Part 10 of the Companies Act 2014 (Examinership)
[1] – Proceedings under Part 10 of the Companies Act 2014 (Examinership)
1. (1) In this Order, unless the context or subject matter otherwise requires: “the Act” means the Companies Act 2014;
“centre of main interests” shall be construed in accordance with the Insolvency Regulation;
“Examiner” shall include Interim Examiner;
“the Insolvency Regulation”, “liquidator in main proceedings”, “main proceedings”, “Member State”, “secondary proceedings” and “territorial proceedings” each has the same meaning as in Order 74.
(2) Words and expressions contained in this Order shall have the same meaning as in the Act.
(3) In any case in which main proceedings have been opened in a Member State other than the State, the Examiner shall, where such document may be relevant to the main proceedings concerned, immediately send a copy of every petition, notice, report, affidavit or other document in the proceedings to the liquidator in the main proceedings by electronic mail or facsimile where possible or otherwise by registered prepaid post, in accordance with and for the purposes of Article 31 of the Insolvency Regulation.
(4) The provisions of this Order which apply to a company shall apply to an industrial and provident society to the extent that the provisions of the Act concerning examinership are applied to industrial and provident societies and subject to the modifications made in, or necessitated by, the application of the provisions of the Act concerning examinership to industrial and provident societies.
2. All applications and proceedings for or in relation to an appointment of an examiner under the Act or concerning such examination shall be assigned to such Judge or Judges as the President of the High Court shall from time to time assign to hear such applications and proceedings, but if such Judge or Judges shall be unable to dispose of such applications or proceedings, any other Judge or Judges of the High Court may dispose of any such application.
3. (1) An application under section 509 of the Act shall be grounded on the petition and the verifying affidavit of the party making such application and shall be heard and determined on affidavit unless the Court otherwise orders.
(2) The petition referred to in sub-rule (1) shall
(a) contain either:
(i) statements that the Insolvency Regulation applies to the proceedings and that the company’s centre of main interests (determined in accordance with the Insolvency Regulation) is situated in the State and the facts and grounds supporting each statement; or
(ii) statements that the Insolvency Regulation applies to the proceedings and that the company’s centre of main interests is situated in another specified Member State and the facts and grounds supporting each statement; or
(iii) a statement that the Insolvency Regulation does not apply to the proceedings, and the facts and grounds supporting that statement, and in such case, shall contain a statement of the reasons why the debtor is entitled to apply for the appointment of an examiner;
(b) contain a statement that, to the petitioner’s knowledge, no insolvency proceedings (within the meaning of Article 2 of the Insolvency Regulation) have been opened in respect of the company in any Member State (other than the State), or that such insolvency proceedings have been opened and if so, whether the proceedings which have been opened are main proceedings, territorial proceedings or secondary proceedings.
(3) Where insolvency proceedings have been opened in any other Member State, the affidavit verifying the petition shall exhibit a certified copy of the original decision appointing the liquidator in the main proceedings or any other certificate of the court having jurisdiction (as referred to in Article 19 of the Insolvency Regulation) and if such decision or certificate is not in one of the official languages of the State, a translation of that decision or certificate into the Irish or the English language certified by a person competent and qualified for the purpose.
(4) Where the petitioner applies for an order under section 556 of the Act for the hearing of the proceedings otherwise than in public the reasons for such an application shall be specified in the petition.
4. (1) This rule applies only where, in the petitioner’s belief, the centre of the company’s main interests is situated within the territory of a Member State other than the State.
(2) In a case to which this rule applies, the petition shall also:
(a) identify the place within the State where the company has an establishment (determined in accordance with Article 2(h) of the Insolvency Regulation);
(b) where main proceedings have not been opened in another Member State, contain a statement as to which of the conditions referred to in Article 3(4)(a) or Article 3(4)(b) of the Insolvency Regulation is met and the facts and grounds supporting that statement.
5. (1) A petition for the appointment of an Examiner under the Act shall be presented at and shall be retained in the Central Office. A sealed copy thereof shall be taken out by the petitioner or by his solicitor and shall be used as if it were an original.
(2) The petition shall be brought to the office of one of the Registrars who shall appoint the time and place at which the petition is to be heard.
(3) Every petition for the appointment of an Examiner shall be verified by affidavit. Such affidavit shall be made by the petitioner or by one of the petitioners if more than one, or in case the petition is presented by a corporation or company, by one of the directors, secretary or other officer thereof and shall be sworn before the presentation of the petition and filed with such petition and such affidavit shall be sufficient prima facie evidence of the statements in the petition. The form of the petition shall comply with sections 510 to 512 of the Act and shall also, so far as applicable, comply with Form No. 2 in Appendix M.
(4) On the same day as the petition shall have been presented, the petitioner shall apply ex parte to the Court for directions as to proceedings to be taken in relation thereto.
6. (1) On the hearing of the ex parte application referred to in rule 5(4) or on any adjourned hearing or hearings thereof or on any subsequent application, the Court may make such order or orders as it thinks fit and may give such directions as it thinks fit and in particular may give directions as to the parties on whom the petition should be served, the mode of service, the time for such service, the date for the hearing of the petition (if different to that appointed by the Registrar) and whether the said petition should be advertised and if so, how the same should be advertised.
(2) On the hearing of such ex parte application, the Court may, if it thinks fit, treat the application as the hearing of the petition and may make such interim order or any other order it thinks fit including adjourning the hearing and may appoint any proposed Examiner on an interim basis until such adjourned hearing and an Examiner so appointed over any company or any related company shall be referred to as the Interim Examiner and shall have the same powers and duties in relation to such company until the date of the adjourned hearing as if he were an Examiner appointed other than on an interim basis.
(3) The Court may adjourn the hearing of the petition or any adjourned hearing until any party or parties which the Court considers should be notified have been notified of the presentation of the petition, whether by advertisement or otherwise, and may adjourn any hearing of the petition for any other reason that appears to the Court to be just and equitable.
(4) An application for directions under section 516 of the Act concerning the supply of the independent expert’s report shall be by motion ex parte, provided that the Court may direct that notice be given to such person or persons as it may deem fit.
(5) An application for orders under section 522 of the Act shall be by motion on notice to the receiver or, as the case may be, the provisional liquidator.
(6) An application for an order under section 523 of the Act shall be by motion on notice to the receiver but in any case where no petition to appoint an examiner has been presented, the application may be made by originating notice of motion on notice to the receiver.
(7) On the hearing of a petition or on the adjournment or the further hearing of such petition, the Court may, having heard the petitioner and any interested party or any person who has been notified of the petition and who appears thereto, as the case may be, appoint an Examiner, and may make such further or other order as it thinks fit.
7. (1) An application for the appointment of an Examiner to be appointed an Examiner of a related company pursuant to section 517 of the Act if brought by the petitioner or by the Examiner shall be made ex parte to the Court provided that on the hearing of any such application, the Court may make such orders or give such directions as it thinks fit including directions as to whether, and if so, upon which parties notice of the application should be served, the mode of such service and the time allowed for such service and whether the application should be advertised and if so, how the same should be advertised and may adjourn the hearing of such application to a date to be specified.
(2) The Court may, if it thinks fit, while adjourning such application, make such interim order as it sees fit including the appointment of the Examiner as the Examiner of the related company on an interim basis and may also confer on such Examiner in relation to such company all or any of the powers and duties conferred on him in relation to the first mentioned company on an interim basis until the adjourned hearing.
(3) An application for the appointment of an Examiner to be the Examiner of a related company shall, if brought by any person other than the petitioner or the Examiner of the first mentioned company, be brought by way of notice of motion served upon the Examiner and petitioner.
(4) The moving party in an application under this rule shall in his or its affidavit grounding such application:
(a) verify that, to the moving party’s knowledge, no insolvency proceedings have been opened in respect of the related company in any Member State or Member States (other than the State), or that such insolvency proceedings have been opened and if so, whether those insolvency proceedings are main proceedings, territorial proceedings or secondary proceedings;
(b) in a case where, in that party’s belief, the centre of the related company’s main interests is situated within the territory of a Member State other than the State, identify the Member State concerned and the place within the State where, in the moving party’s belief, the company has an establishment (determined in accordance with Article 2(h) of the Insolvency Regulation).
8. In any case where an Interim Examiner has been appointed to any company or an Examiner has been appointed Interim Examiner of a related company of that company, and where upon the final hearing of the application or of the petition, as the case may be, no Examiner is appointed to that company or to that related company, as the case may be, or where a person other than the Interim Examiner is appointed as Examiner to the company or to the related company, such Interim Examiner shall prepare a written report for the Court in relation to the company or to the related company or both in such time as the Court shall direct. Such Examiner shall keep and maintain a true record of all liabilities certified by him under section 529 of the Act and shall in his written report give a full account of all liabilities so certified to the Court and shall deal with such further or other matters as may be directed by the Court.
9. (1) Any application by any Examiner of a company pursuant to section 520(5) of the Act in relation to any existing proceedings involving that company shall be brought by motion on notice to all the parties to such proceedings including the company in relation to which the Examiner was appointed.
(2) An application by any person under section 520(5) of the Act seeking the leave of the Court to commence proceedings in relation to the company shall be brought by way of motion on notice to the Examiner and to the company.
(3) An application under section 521(2) of the Act to the Court to authorise the discharge or satisfaction, in whole or in part, by the company of a liability referred to in section 521(1) of the Act shall be brought by way of motion on notice to the Examiner and to the company.
10. (1) Any application by an Examiner pursuant to section 524(7)(a) of the Act may be made ex parte to the Court and on hearing of any such application the Court may deal with the application and may make such order or orders in relation thereto as it thinks fit or may adjourn the application and give such directions as to proceedings to be taken upon it as it thinks fit.
(2) An application by an Examiner pursuant to section 524(7)(b) of the Act shall be by way of motion on notice to any member, contributory, creditor or director of the company who may be affected.
(3) An application by the company or by an interested party pursuant to section 532(9) of the Act shall be made by motion on notice to the Examiner and to any other interested party or the company, as the case may be.
11. Once an Examiner has certified any refusal or refusals specified in section 526(6) of the Act, he shall thereupon apply ex parte to the Court for leave to produce the said certificate in relation to such refusal and shall verify the facts in the certificate by affidavit and thereupon the Court upon notice to the party concerned, may make such enquiries and give such directions in relation to the said refusals as it thinks fit and shall hear such evidence as may be produced in relation thereto and may make such order as seems just and proper in the circumstances.
12. Any application to the Court by the Examiner pursuant to section 528 of the Act for the vesting in him of all or any of the powers or functions vested in or exercisable by the directors of the company shall be made by notice of motion served upon the said directors, grounded on the affidavit of the Examiner specifying which, if not all, of the powers he seeks to have vested in him by order of the Court and the Court may give such directions in relation to the hearing of the said application as it thinks fit.
13. An application by the Examiner, pursuant to section 530 of the Act for the disposal of any property which is the subject of any security or of any goods which are in the possession of the company under a hire purchase agreement, shall be made by notice of motion grounded upon affidavit of the Examiner and served upon the holder of such security or the hire purchase company, as the case may be, or upon any other person who appears to have an interest in the property and the Court may upon the hearing of the application make such order under section 530 of the Act as appears just and proper and may give such directions concerning the proceeds of all such disposals as shall have been authorised by the Court.
14. (1) An Examiner wishing to resign pursuant to section 532 of the Act, shall do so by an application ex parte to the Court. On the hearing of the application the Court may, if it thinks fit, direct that notice of the application be served on the petitioner, the company, the directors of the company or any other interested party as may be appropriate. The application of the Examiner shall be grounded upon an affidavit sworn by him, specifying the reasons for the said proposed resignation, and the date of the said proposed resignation. Upon the application, the Court may make such order as appears just and proper in the circumstances.
(2) An application to the Court pursuant to section 532 of the Act to remove an Examiner shall be made by motion on notice to the Examiner, to the petitioner, to the company and its directors and to any other party as the Court may direct. Such application shall be grounded upon an affidavit of the moving party specifying the cause alleged to exist justifying the removal of the Examiner by the Court. On the hearing of the application, the Court may make such order as appears just in the circumstances and, if satisfied that cause has been shown for the removal of the Examiner by the Court shall order that he be removed forthwith or upon such date as the Court shall specify. The Court may either before or after ruling upon the application for the removal of the Examiner make such order for the production of any document or documents, or the preparation of such report or reports as it thinks fit.
(3) An application pursuant to section 532(2) of the Act to fill a vacancy in the office of an Examiner shall be made ex parte to the Court provided that the Court may, if it thinks fit, adjourn the application and make such order or give such directions as appear proper in the circumstances, including directions for service of notice of the making of the application upon such party as it thinks proper.
15. (1) Where it appears to the Court that there is evidence of a substantial disappearance of property of the company that is not adequately accounted for, or of other serious irregularities in relation to the company’s affairs having occurred, and the Court directs the holding of a hearing under section 533 of the Act to consider that evidence, the Court shall give such further directions in relation to the preparations for and conduct of that hearing as it considers appropriate, which may include directions as to the filing of any affidavit by any person entitled to be heard or by any other person, and directions as to the preparation of any report by the Examiner.
(2) An application for directions under section 533(5) of the Act concerning the supply of the examiner’s report under section 533 shall be by motion ex parte provided that the Court may direct that notice be given to such person or persons as it may deem fit.
16. (1) When an Examiner is formulating proposals pursuant to section 534 of the Act for a compromise or scheme of arrangement, any application for an extension of time for the delivery by the Examiner of his report thereon, shall be made ex parte to the Court within the time for the delivery of the report or as extended by the Court. Any party affected by the extension, may on notice of motion to the Examiner apply to the Court to set the said order aside upon grounds to be specified and verified in an affidavit and on such application, the Court may make such orders as it thinks fit.
(2) An application by the Examiner for directions under section 535 of the Act shall be made ex parte to the Court in the first instance and the Court may direct service of notice of the application on any person. Any party affected by such directions, may on notice of motion to the Examiner apply to the Court to vary or set aside any directions upon grounds to be specified and verified in an affidavit and on such application, the Court may make, vary or set aside such directions as it thinks fit.
17. (1) When an Examiner has prepared a report pursuant to section 534 of the Act within the time prescribed or within such time as shall have been fixed by the Court, he shall effect delivery of his report by making an ex parte application to the Court to deliver it.
(2) The report shall contain a full account of each meeting convened by the Examiner and of the proposals put before each such meeting and shall contain as an appendix to the said report a copy of the said proposals which shall deal with each of the matters specified in section 539 of the Act in the order set out in that section.
(3) The Examiner shall in his application specify whether and if so, what portions of the report should be omitted from delivery under section 534(5) of the Act and he shall draw to the attention of the Court any particular aspects of the report which are or may be relevant to the exercise by the Court of any other of its functions under the Act.
(4) When the Examiner has been given leave to deliver his report pursuant to sub-rule (1) and where the Examiner has formulated proposals pursuant to section 534 of the Act for a compromise or scheme of arrangement and has reported to the Court thereon in the period prescribed or within such further period as may have been specified by the Court, the Examiner may apply to the Court ex parte for an extension of the period of protection pursuant to section 534(4) of the Act for such further period as may be necessary for the Court to enable it to take a decision in relation to the report of the Examiner on the proposals. Upon the making of the application, the Court may direct that the Examiner serve notice of the application on such party or parties as the Court thinks fit. The Court may adjourn the application to enable the service to take place, but may extend the period concerned until the adjourned date of the hearing or such other date as to the Court may seem fit, and the Court may further extend the period concerned in the event of any further adjournments of the said hearing.
18. All meetings of members or classes of members or creditors or classes of creditors convened for the purposes of section 534 or section 540 of the Act shall be governed by the following rules:
1. The Examiner shall summon all meetings of creditors and members by sending by post not less than three days before the day appointed for the meeting to every person appearing in the company’s books to be a creditor of the company or a member of the company, notice of the meeting of creditors or members as the case may be.
2. The notice to each creditor or member shall be sent to the address given in the report of the Examiner of the company, if any or to such other address as may be known to the Examiner.
3. An affidavit by the Examiner or solicitor or by some other officer or clerk of the company or its solicitor that the notice of any meeting has been duly posted shall be sufficient evidence of such notice having been duly sent to the person to whom the same was addressed. The Examiner may fix a meeting or meetings to be held at such place as in his opinion is most convenient for the majority of creditors or members, or both and different times and/or places may be named for the meetings of creditors and members.
4. The Examiner shall preside at and be chairman of any meeting which he has convened and shall conduct the business of the meeting in an orderly manner so as to ensure the proper discussion of all proposals placed by him before the said meeting.
5. Where a meeting of creditors or members is summoned by notice, the proceedings and resolutions of the meeting shall unless the Court otherwise orders be valid, notwithstanding that some creditors or members may not have received the notice sent to them.
6. The Examiner may with the consent of the meeting adjourn from time to time and from place to place but the adjourned meeting shall be held at the same place as the original meeting unless in the resolution for adjournment another place is specified or unless the Court otherwise orders.
7. (a) A meeting may not act for any purpose except the adjournment of the meeting unless there are present or represented thereat in the case of a creditors meeting, at least three creditors ruled by the Examiner to be entitled to vote or in the case of a meeting of members, at least two members.
(b) If within 15 minutes from the time appointed for the meeting, a quorum of creditors or members as the case may be is not present or represented, the meeting shall be adjourned for the same day in the following week at the same time and place or to such other day or time or place as the Examiner may appoint but so that the day appointed shall be not less than three, nor more than 21 days from the date from which the meeting was adjourned.
8. (a) The Examiner shall cause minutes of the proceedings of the meeting to be drawn up and entered in a book kept for that purpose and the minutes shall be signed by him.
(b) The Examiner shall cause a list of creditors or members present at every meeting to be kept and every such list shall be signed by him.
9. A creditor or member may appear either in person or by proxy. Where a person is authorised in the manner provided by section 185 of the Act to represent a corporation at any meeting of creditors or members, such person shall produce to the Examiner a copy of the resolution so authorising him. Such copies shall be under the seal of the corporation or be certified to be a true copy by the secretary or director of the corporation.
10. Every instrument of proxy shall be, as far as possible, in either the Form No. 18 or Form No. 19 in Appendix M.
11. A general and a special form of proxy shall be sent to each of the creditors or members with a notice summoning the meeting and neither the name nor the description of the Examiner or any other person shall be printed or inserted in the body of any instrument of proxy before it is sent.
12. A creditor or a member may appoint any person a special proxy to vote at any specified meeting or adjournment thereof on all questions relating to any matter arising at the meeting or an adjournment thereof.
13. A creditor or member may appoint the Examiner to act as his general or special proxy.
14. (a) Every instrument of proxy shall be lodged with the Examiner no later than four o’clock in the afternoon of the day before the meeting or adjourned meeting at which it is to be used and the same shall be kept by the Examiner.
(b) No person who is a child shall be appointed a general or special proxy.
(c) Where a company is a creditor, any person who is duly authorised under the seal of such company to act, generally on behalf of the company at meetings of creditors and members, may fill in and sign the instrument of proxy on such company’s behalf and appoint himself to be such company’s proxy and the instrument of proxy so filled in and signed by such person shall be received and dealt with as a proxy of such company.
15. The Examiner shall have power to allow or disallow the vote of a person claiming to be a creditor or member, if he thinks fit, but his decision may be subject to appeal to the Court. If he is in doubt whether a vote should be allowed or disallowed, he shall allow it and record the vote as such subject to the vote being declared invalid in the event of an objection being taken and sustained by the Court.
19. An application by the company pursuant to section 537 of the Act authorising approval or repudiation of any contract or any application arising out of any such repudiation shall be made by motion on notice to the Examiner and on notice to the other contracting party or parties and on notice to any person referred to in section 537(2) of the Act.
20. When on the consideration of a report under section 541 of the Act, the Court considers that an order for the winding up of the company in accordance with section 542(5) of the Act should be made, the Court may order that the application for the winding up of the company or of any related company be made by the Examiner or by such other person as the court may direct and the court may order that the provisions of Order 74, either in whole or in part, shall apply to the winding up as ordered by the Court.
21. (1) An application to the Court pursuant to section 553 of the Act for the revocation of confirmation of proposals confirmed by the Court, shall be made ex parte for directions as to the proceedings to be taken and the application shall be grounded upon an affidavit which shall specify the fraud alleged and shall supply full particulars thereof and shall specify the names and addresses of all parties who have or may have acquired interests or property in good faith and for value and in reliance on the confirmation of the proposals by the Court.
(2) Upon such application, the Court may make such order and give such directions for the hearing of the said application including directions for service of notice of the application upon all such parties as appear proper in the circumstances and may give such further directions as to the application, including particularly, whether and if so, how the same should be advertised and if it seems fit, direct the filing of any pleadings in the matter.
22. An application by the Examiner pursuant to section 554 of the Act for payment to him of remuneration and costs and reasonable expenses properly incurred by him shall be made by application ex parte to the Court and upon an affidavit of the Examiner in which he shall set forth a full account of the work carried out by him to the date of the application and a full account of the costs and expenses incurred by him and shall vouch same, and of the basis for the proposed remuneration which he is seeking to be paid. The Court may, where it thinks fit, order that notice of the application be given to all such persons as the Court may direct, and may give directions as to the service of the said notice and fix a date for the hearing of the application of the Examiner. The affidavit of the Examiner shall also specify what use, if any, he has made of the services of the staff and/or of the facilities of the company to which he has been appointed and the extent of such use.
23. A request by a liquidator in main proceedings pursuant to Article 37 of the Insolvency Regulation for the conversion into winding-up proceedings of proceedings under the Act previously opened in the State in respect of a company shall be by notice of motion in the proceedings by the liquidator in the main proceedings. Such notice of motion shall be grounded upon an affidavit sworn by or on behalf of the liquidator in the main proceedings, which affidavit shall specify the reasons why it is alleged the conversion of the proceedings into winding-up proceedings would be in the interests of the creditors in the main proceedings. A copy of the notice of motion and a copy of the grounding affidavit and any exhibits thereto shall be served upon the company and the examiner not later than seven days before the return date. On the return date, the Court may make such orders or give such directions for the conduct and hearing of the application as seem appropriate.
24. An application for a declaration under section 416(6) of the Act in the case of a company in examinership shall be brought by motion on notice to the person against whom such an order is sought.
25. An application for an order under section 557 of the Act shall be brought by motion on notice to the person against whom such an order is sought.
[1] Order 74A inserted by SI 255 of 2015, effective 1 July 2015.
Cases
Aston Colour Print Ltd., Re
[1997] IEHC 33
Kelly J.
“34. If I am wrong in the view which I have formed concerning the lack of a board meeting, was there passed at the meeting which did occur, the resolution which is contended for in the Petition and Affidavit verifying it?
35. It is common case that there was no formal resolution and certainly no vote taken on the topic at the meeting which took place.
36. The presentation of a Petition to this Court and the invocation of the jurisdiction given to the Court under the 1990 Act is a matter of some considerable solemnity and importance, not merely for the Company but also for its creditors and its work-force.
37. A decision by a board of directors to take such a step must be made in a manner which makes the will of the board clear. The usual way to do that is by the proposal of a resolution and its being voted upon. That did not occur here. Had it occurred, I think that Mr. Blakely would have voted against it since he did not want his name associated with the Petition.
38. In this case there is considerable doubt that any, even informal resolution, was put to the meeting. First, the minute of the 31st January, 1997 prepared by Mr. Campion does not make it clear that the decision was made to apply for the appointment of an Examiner. On the contrary, that minute merely says “no choice but examiner or liquidate”. Secondly, Mr. Power cannot recall who decided that these steps should be taken. He was the Chairman of the meeting.
39. I believe that there was a general understanding arrived at between four of the five people present at the meeting. It was to the effect that an application would be made to Court for the appointment of an Examiner. But the fifth person was of course the second Director. He did not appreciate what was to happen. The level of informality was such that I do not think that he can be blamed or criticised for this. There was no resolution put before him nor was there any question put in such a way as to alert him as to what was to occur. Such being so, I do not accept that there was any resolution, formal or informal, passed by the board. Having answered both questions in the negative it is not therefore necessary for me to deal with the other submissions which were made, particularly those concerning the effect of Article 103 of the Articles of Association of the Company.
40. As a result of my findings, it is clear that the Petition was improperly presented to the Court. There was no entitlement to present it and it must now be struck out and the Interim Examiner discharged.
42. Although this Petition is struck out for the reasons stated, I do not regard any of the matters which I have dealt with in this Judgment as precluding the presentation of a further Petition by a party or parties duly authorised so to do.
In the Matter of Belohn Ltd & Anor -v- Companies Acts
[2013] IEHC 157
Hedigan J.
“The nature of an order appointing an interim examiner
5. The very fact the Bank of Scotland have applied to have the order appointing an interim examiner thereby placing the company under the protection of the court discharged, obliges us to consider afresh the nature of the examinership system. It is true that the examinership procedure is generally disliked by secured creditors because the appointment of an examiner not only tends to involve the company incurring additional costs, but it also affects the otherwise settled scheme of priorities for creditors. Just as importantly, it also postpones the right of those creditors to enforce their loan agreements during the course of the examinership procedure.
6. There is accordingly no doubt that both the act of placing companies under the protection of the court and the appointment of an examiner actually or potentially affects the rights of secured creditors. Of course, by virtue of the presentation of a petition, a company is (subject to certain exceptions not here relevant) “deemed to be under the protection of the court”, so that the enforcement of debts against the company is there suspended for that period of protection: see s. 5(1) and s. 5(2) of the 1990 Act. The Oireachtas has, however, determined that in the general public interest that those rights shall suffer temporary and limited abridgment in the more general public interest of rescuing otherwise viable companies.
7. Yet there is equally no doubt but the rights of creditors are affected by the making of any interim orders in the examinership process. It is, of course, perfectly clear from s. 3(7) of the 1990 Act and s. 3B(2) of the 1990 Act (as inserted by s. 10 of the 1999 Act) that the Oireachtas expressly contemplated that such orders could be – and in many cases, would have to be – made ex parte. It would quite often be too late if the decision to either to afford protection or to appoint an examiner had to await the actual appointment of an examiner following a contested hearing because in that crucial period many creditors would then irreversible steps to realise their security. Yet while there are obvious reasons why the court has to have jurisdiction to make orders ex parte, it is equally clear from the established case law that an order of this kind is not – and could not constitutionally be regarded as – a final order.
Whether an Interim Examiner Ought to have been Appointed
22. At the heart of the present case lies the question of whether an interim examiner ought to have been appointed on an ex parte basis. At the hearing of the application to set aside the appointment of the interim examiner, no issue was as such taken with the adequacy of the jurisdictional issues as stipulated by s. 2 of the 1990 Act (as amended) namely, insolvency and reasonable prospects of survival although, of course, these are questions which will be explored at the full hearing.
23. In essence, therefore, the argument now advanced by the Bank then must be that I wrongly exercised my jurisdiction in such an erroneous fashion as would merit the setting aside of that decision. Mr. Walker relied strongly for this purpose on the comments of Kelly J. in Re Eircom Limited [2012] IEHC 107:-
“The appointment of an interim examiner ought to be the exception rather than the rule. Most cases of examinership do not require the appointment of such an officer.”
24. Mr. Walker urged that Eircom constituted an authority for the proposition that the appointment of an interim examiner must be regarded as being warranted only in exceptional cases. It is, however, important to be clear on what Kelly J. actually decided in that case. He did not say that the appointment of an interim examiner ought to be confined to exceptional cases. Rather, Kelly J. observed that in a majority of cases such an appointment was unnecessary and that this step should constitute “the exception rather than the rule”.
25. At the hearing before me on 28th March, various arguments were advanced on both sides regarding the appointment of an interim examiner. Mr. Maguire S.C., counsel for the petitioners, relied on the various arguments set out in Mr. Foley’s affidavits to justify such an appointment including, for example, dealing with payments to suppliers and the insurance issue. For his part Mr. Walker contended that these arguments amounted essentially to post-hoc rationalisations, especially when some of these issues (e.g., the insurance question) had not been raised when this petition was first moved before me on Saturday 23rd March.
26. It is true that the petition as presented did not in terms directly address itself to the question of whether an interim examiner ought to have been appointed. It must, of course, be recalled that the application was moved of not inconsiderable urgency on a Saturday morning following the decision of Gilligan J. on the previous day. At that hearing concerns was expressed that the Bank of Scotland might move quickly to appoint a receiver – and, indeed, that they might already have done so – and it was therefore necessary to apply with considerable expedition so as to ensure that the three day time limit would not otherwise expire. (This is a topic to which I will revert in more detail in a later part of this judgment).
27. In my view, even if the petition did not quite in terms address the interim examiner issue, the underlying reason for such an appointment is at least nonetheless necessarily implicit therein. One consequence of the decision of Gilligan J. it that it is plain the directors were wrongfully excluded from the company for the best part of six months. This in itself is a highly unusual state of affairs since there can be few – if, indeed, any – cases where the appointment of a receiver has been heretofore held to be invalid in this fashion. It seems obvious in these circumstances that the appointment of an interim examiner would be appropriate (provided, of course, that the jurisdictional stipulations contained in s. 2 of the 1990 Act were otherwise satisfied) because the appointment of an independent officer who would report – if only on an interim basis- as to the present state of affairs of the company, would be of benefit to all concerned. Indeed, the petition itself referred to some of these matters and further stated (at para. 63):
“The independent accountant has prepared a statement of affairs for the petitioner on both a going concern basis and on a liquidation basis…The statement of affairs was prepared when the receiver was invalidly in control of the petitioner and the independent accountant notes that further inquiries will have to be made as a result.”
28. The interim examiner’s report would, I think, be of considerable assistance in these unusual circumstances to any court called upon to decide whether to make a final order under s. 2 of the 1990 Act. This is especially so when the persons most intimately connected with the company – namely, the directors – and who would normally be best placed to put all relevant information before the court regarding the up to date trading and financial position of the company would have been handicapped in that process in the present unusual circumstances by reason of their exclusion for the last six months from the day to day running of the company. For this reason, I consider that the appointment of the interim examiner was justified given this unusual state of affairs.
29. For the avoidance of any possible doubt, I should make it plain that all that I have found that the appointment of an interim examiner was justified in the highly unusual circumstances of the present case in order that the court – and all interested parties – can have an up to date and independent report on the company’s affairs. It does not at all follow from this that at the full hearing the appointment of an examiner will be confirmed by this Court.
The Application of Merrow
When does the three day time period specified by s. 3(6) of the 1990 Act begin to run?
42. The first question which arises at this juncture is the date upon which the three day period commenced to run. Section 18(h) of the Interpretation Act 2005 (“the 2005 Act”) provides:
“Where a period of time is expressed to begin on or be reckoned from a particular day, that day shall be deemed to be included in the period and, where a period of time is expressed to end on or be reckoned to a particular day, that day shall be deemed to be included in the period.”
43. The time period specified in s. 3(6)(as amended)(“..a continuous period of at least three days prior to the presentation of the petition….”) is one which is “reckoned from a particular day” in the sense understood by s. 18(h) of the 2005 Act, since time runs from the day the receiver was actually appointed. It follows further from this sub-section that that particular day (i.e., the day on which the receiver is actually appointed) is included in the computation of the three day period.
44. It should also be noted that s. 3(6) uses the term “day” simpliciter. This compels one to the conclusion that Saturday and Sunday are to be included in the period of computation. If, for example, the Oireachtas had intended that Saturday and Sunday be excluded from the computation, it would easily have used the term “working day”, as the Part II of the Schedule to the 2005 Act provides that this is deemed to mean “a day which is not a Saturday, Sunday or public holiday.” Here it may also be noted that s. 3A(2) of the 1990 Act (as inserted by s. 9 of the 1990 Act) excludes Saturdays, Sundays and public holidays from the calculation of the maximum 10 day period during which companies can be placed under court protection pending the presentation of the independent accountant’s report. The very fact that this was done in respect of that period of time computation for the purposes of s.3A(2) must further re-inforce the conclusion that time does run on a Saturday and Sunday in calculating the three day period during which for examinership can be brought following the appointment of a receiver given that, unlike s. 3A(2), s. 3(6) draws no such distinction between the weekdays, Saturdays or Sundays for the purposes of the running of time.
45. In the present case, therefore, the effect of the appointment of the receiver on Friday evening was that Friday was included for the purposes of the calculation of the three day period. It followed accordingly that the period for the presentation of the petition therefore expired at midnight on the following Sunday, March 24th. I should, perhaps, have added in my earlier account that the Bank had, in fact, given written notice of the appointment of the receiver. This, however, was done by post, so that the first written notice Merrow would have received would have been on Monday, at which point it would have been then too late to present an examinership petition.
46. During the course of the hearing I was informed that Friday was the preferred day of choice for banks wishing to appoint receivers, because, of course, in such circumstances applications for examinership at a weekend are contingent on (i) learning that a receiver has already been appointed and (ii) on locating the duty judge in time. It is too late to apply on Monday, as the time for the presentation of an examinership petition will by then have already lapsed. For those well versed in these matters, one can refine this further and make sure that the appointment of the receiver takes effect after close of business on the Friday evening, so that time then expires on Sunday at midnight, even though the effective limitation period will then have been compressed into little more than two (non-working) days.
47. As Courtney has observed, Law of Private Companies (Dublin, 2012)(at 23.040):
“Secured creditors often try to take advantage of this provision by appointing a receiver on Thursday or Friday. The hope is that petitioners seeking to have an examiner appointed will not have ready access to the courts on a Saturday or Sunday. Determined petitioners however, will succeed in allocating a High Court judge on such days, at their home if necessary.”
48. Counsel for the Bank, Mr. Walker, quite fairly described all of this this as a game of “cat and mouse”. If that is so, then it is the duty of the Court to decree that this particular game shall henceforth cease. The Oireachtas has provided in the public interest for the examinership procedure in s. 2 of the 1990 Act. It likewise sought to take account of the interests of creditors by restricting the right to apply for examinership once a receiver had been in situ for three days. What it certainly did not intend was that the statutory right to apply for examinership should be carefully frustrated by calculated counter-manoeuvring on the part of the banks which, in other circumstances, might well encourage a form of trickery which would be just a stone’s throw away from actual deceit.
49. This is especially so given that access to justice is fundamental to the constitutional mandate of the judicial branch generally (Article 34.1) and of this Court in particular (Article 34.3.1). In these circumstances, the courts should not – and simply will not – allow what is in effect a very short limitation period (albeit, more accurately, a jurisdictional bar to the appointment of an examiner) to be manipulated in this manner so that by good timing and calculated silence on the part of the entity appointing the receiver this limitation period would expire before any person contemplating applying for examinership would realise it.
50. This principle is fundamental to private law and public law alike. Private law has long used doctrines such as estoppel by conduct and concealed fraud to ensure that limitation periods are not manipulated by the tactic of allowing time to run silently against an unsuspecting potential litigant. Effective access to justice is likewise recognised as a constitutional fundamental so far as public law is concerned.
Whether an examiner could be appointed to a non-trading company such as Merrow
69. In these circumstances it is now unnecessary to consider other questions which might otherwise have called for adjudication. Specifically, it is unnecessary to examine the question of whether a non-trading holding company such as Merrow can properly be the subject of an examinership application is an issue which may yet arise so far as the balance of these proceedings are concerned. While Mr. Walker strenuously argued that such a company fells outside the examinership scheme, yet the Supreme Court’s decision in Re Tivway Ltd.(in examination) [2010] IESC 11, [2010] 3 IR 49 might be thought to all but determined this particular point to the contrary, provided – as Denham J. put it in her judgment – “the court is satisfied that there is a reasonable prospect of survival of the related companies as a going concern”: [2010] 3 IR 49, 72.
Conclusions
70. It remains only to summarise the main conclusions contained in this judgment:
A. Any interim order made ex parte under the 1990 Act (including an order appointing an interim examiner under s. 2 and an order under s. 3A granting interim court protection from creditors where no independent accountant’s report accompanies the petition) is in the nature of a provisional order. Any creditor affected by such an order may accordingly apply to have such an order discharged.
B. The decision to appoint an interim examiner in the case of Belohn may be justified on the ground that having regard to the very special circumstances which preceded the petition (namely, the fact that a receiver had been appointed for the six months previously prior to the decision of Mr. Justice Gilligan on 22nd March, 2013), it was desireable that such an examiner would present a report on the current state of affairs of the company prior to any final decision on the examinership petition itself.
C. The time allowed by the Bank – at most 45 minutes – for the repayment of the €1.068m. loan by Merrow prior to the appointment of the receiver to that company sometime after 5pm on Friday, 22 March was neither realistic nor reasonable given, in particular, that this demand was not made during banking hours. It is likewise hard to see how a demand for repayment in a matter of minutes could ever be regarded as a reasonable one, even if under certain conditions it might be reasonable to demand repayment within a matter of hours.
D. The three day time limit stipulated by s. 3(6) of the 1990 Act nonetheless operated from the day (Friday, 22 March) the receiver was appointed and included Saturdays and Sundays: see s. 18(h) of the Interpretation Act 2005. It followed, therefore, that the time within any application for an examinership petition had to be presented by Merrow expired on Sunday evening 24th March.
E. The assertion which was made by the petitioner’s solicitor to the solicitor for the Bank to the effect that I had made a mandatory interlocutory order on the evening of Sunday 24th March requiring the receiver of Belohn to hand over certain papers and documents to the directors of the company was both incorrect and unfortunate. It was nevertheless plainly a bona fide error and an apology has been tendered. Nevertheless, as it had no bearing on any order which I made, I would not set aside the order which I made under s. 3A on this ground.
F. Different considerations apply, however, to the failure to disclose the email correspondence from the Bank’s solicitor which clearly showed a willingness on the part of the receiver to hand over the documents in question. While I am perfectly satisfied that the failure to make disclosure came about by reason of bona fide error, caused in part by the hurried nature of the application on that Sunday evening, the failure to disclose was nonetheless objectively relevant and highly material to the exercise of my discretion under s. 3A.
G. It follows, accordingly, that the order made ex parte under s.3A must accordingly be set aside.”
Cavan Crystal Glass Ltd., Re
[1998] IEHC 57; [1998] 3 IR 570
Kelly J.
“6. The purpose of the provision of Section 5 is to afford the company protection. It is important to bear this in mind in the application of the Act. In the course of his judgment in In Re: Atlantic Magnetics Limited (1993) 2 IR 561, McCarthy J. said:-
“It is, I believe, of great importance to bear in mind in the application of the Act that its purpose is protection – protection of the company and consequently of its shareholders, workforce and creditors. It is clear that Parliament intended that the fate of the company and those who depend upon it should not lie solely in the hands of one or more large creditors who can by appointing a receiver pursuant to a debenture, effectively terminate its operation and secure as best they may the discharge of the monies due to them to the inevitable disadvantage of those less protected. The Act is to provide a breathing space, albeit at the expense of some creditor or creditors”.
7. That statement was approved by Finlay C.J. In Re: Holidair Limited (1994) 1 IR at 439 where he said in reference to that quotation:-
“I am satisfied that this identification of the purpose of the Act is correct, and that it is consistent with the view of the Court expressed in a judgment which I delivered in that case, concerning specific questions with regard to the powers of an examiner which were raised before the Court”.
8. It is clear, therefore, from a consideration of the Act and the jurisprudence which has developed on foot of it that gone are the days where the fate of a company can be decided exclusively by a secured creditor. Such a creditor may not appoint a receiver over the company whilst it is under the protection of the Court. Such an appointment may, of course, be made beforehand and in such case, unless a petition is presented within three days of the appointment of a receiver, the Court is specifically prohibited from giving a hearing to a petition presented under Section 2 of the Act (see Section 3(6) of the Act).
9. The case is made by Ulster Bank and the Receiver that this Petition has been improperly presented, has no validity and has not attracted the protection of the Court to the Company. Moreover, they contend that this impropriety cannot be cured retrospectively. It follows that the Receiver appointed by Ulster Bank is now and always has been free to act. Since this point is of fundamental importance, I will consider it presently. Before doing so, however, I should complete the dramatis personae who have appeared before the Court and the attitudes they have adopted.
THE APPOINTMENT OF AN EXAMINER
38. The factors which must be taken into account by the Court in deciding whether an Examiner should be appointed have been considered by the Supreme Court on a number of occasions and by this Court on a great many more. In Re: Butlers Engineering Limited (unreported 1st March, 1996) Keane J. (then a Judge of this Court) analysed the two reported Supreme Court decisions on the topic. They were Re: Atlantic Magnetics Limited (1993) 2 IR 561 and Re: Holidair Limited (1994) 1 ILRM 483. He said:-
“The jurisdiction of the Court to appoint an examiner is not limited, as Finlay C.J. noted, to cases in which the Court considers that it would be likely to facilitate the survival of the company and the whole or part of its undertaking as a going concern. It arises in every case where the company is or is likely to be unable to pay its debts and has not been wound up or no petition for winding up has been presented within the preceding seven days. It would appear, however, that while the jurisdiction is not thus confined to cases where it will facilitate the survival of the business, the Court should be very slow to make the order unless, in the words of the Chief Justice, there is at least an identifiable possibility that it will survive. It is also clear that the terms of Section 2 confer a wide discretion on the Court in deciding whether to appoint an examiner. While the Court is bound to exercise that discretion having regard to the particular circumstances of each case, it must do so judicially and with strict regard to the criteria laid down by the Supreme Court in the decisions already cited.
In that context, it should be noted that the majority judgments in the Supreme Court in Re: Atlantic Magnetics Limited expressly approved the formulation of the test by Lardner J. at first instance with what Finlay C.J. described as the minor qualification of the omission of the adjective ‘reasonable’ in the last sentence. To the extent that the judgment of McCarthy J. suggests that the passage in Lardner J.’s judgment only represents the appropriate test if one omits the words ‘there being some reasonable prospect of survival’, it appears in my respectful view to go further than what is contained in the judgment approved by the majority and not form part of the ratio of the decision”.
39. I agree with the views of Keane J. in this regard. Utilising the test proposed by Lardner J. as amended by the majority judgments in the Supreme Court, the question which I must pose myself is “Does the evidence lead to the conclusion that in all the circumstances it appears worthwhile to order an investigation by the Examiner into the Company’s affairs and see can it survive, there being some prospect of survival?” Before applying that test to the facts of this case, it is, I think, worthwhile to consider a number of other matters which were addressed by Keane J. in his judgment. He pointed out that the Court is not confined in appointing an Examiner to cases in which the company may survive but having done so, he went on the deal with the application before him as one which ought to be approached on the basis that the Court’s jurisdiction to appoint an Examiner would arise provided that there was at least a possibility that the company would survive if an Examiner was appointed. I propose to adopt the same approach in the instant case and there was no suggestion in the three days at which this Petition was at hearing last week that I should do otherwise. Like Keane J. I am also of the view that in a case such as this where there is a conflict both on the evidence and the inferences which are sought to be drawn from it, the application of the criteria approved by the Supreme Court become of particular significance although, of course, they must be borne in mind in every case in which the appointment of an Examiner is sought.
40. I also concur in the view expressed by Keane J. that whilst the purpose of the Act is the protection of the company and, as a result, its shareholders, employees and creditors, the Court must not lose sight of the abridgement that the giving of protection effects to the rights of creditors. I also agree with Keane J. that the onus clearly rests on those presenting the Petition to establish that there is, at least, an identifiable possibility that the company will survive as a going concern if an Examiner is appointed. A mere bold assertion that such a possibility exists is insufficient. I also agree with him where he said :-
“A petitioner who undertakes the onus, however modest, of satisfying the Court that there is an identifiable possibility of the survival of the company or at least a part of its undertaking as a going concern must present the Court with at least some reliable evidence as to the state of the company’s finances”.
41. Bearing in mind the views of the Supreme Court in the two cases analysed by Keane J. and his own observations in Butlers Engineering , I now proceed to consider whether in this case an Examiner should be appointed to this Company.”
In the matter of Vantive Holdings & ors
[2009] IESC 69
Murray C.J Supreme Court
“As counsel for the appellant petitioner pointed out the test to be exercised by the Court in reaching its determination, concerning “the reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern” is uncontroversial and it was the test applied by the learned High Court Judge. The learned trial Judge had cited the dicta of McCracken J., in In the matter of Tuscar Resources plc [2001] 1 IR 668 which Fennelly J., has in turn cited with approval in In the matter of Gallium Limited trading as First Equity Group (Unreported), the Supreme Court 3rd February 2009. The passage in McCracken J’s judgment is the following:
“In re Atlantic Magnetics… Finlay C.J. also stated there cannot be an onus of proof on a Petitioner to establish as a matter of probability that the Company is capable of surviving as a going concern. It seems to me that this is no longer the position under the Act of 1999 by reason of the wording of the new sub-section 2. Under the Act of 1990 as originally enacted there would appear to be a wide discretion given to the Court. However, the new sub-section prohibits the Court from making an Order unless they are satisfied there is a reasonable prospect of survival. If the Court is to be “satisfied”, it will have to be satisfied on the evidence before it, which is in the first instance the evidence of the Petitioner. If that evidence doesn’t satisfy the Court, the order cannot be made, and in my view this is tantamount to saying that there is an onus of proof on the Petitioner at the initial stage to satisfy the Court that there is a reasonable prospect of survival. For this reason, the Court has to view the evidence in a different matter to that applicable prior to the Act of 1999.”
In the Gallium case Fennelly J., went on to say
“McCracken J was undoubtedly correct to say that there is an onus of proof on the petitioner. However, the statutory requirement is to show that “there is a reasonable prospect of the survival of the company…” A petitioner does not, by getting over that threshold, acquire a right to have an order made. I still think it is fair to say that the section confers a “wide discretion” on the court, or alternatively, that the court should take account of all the circumstances. The establishment of a reasonable prospect of the survival merely triggers the power, which remains discretionary. The view of Lardner J, as expressed In re Atlantic Magnetics could be described as pragmatic: he asked whether it “seems worthwhile to order an investigation by the examiner into the Company’s affairs.” The court has the power to appoint an examiner if satisfied that there is a reasonable prospect of survival of the company.
The entire purpose of examinership is to make it possible to rescue companies in difficulty. The protection period is there to facilitate examination of the prospects of rescue. However, that protection may prejudice the interests of some creditors. The court will weigh the existence and degree of any such prejudice in the balance. It will have regard to the report of the independent accountant.
The Court has to take account of all relevant interests. The independent accountant must consider whether examinership would be “be more advantageous to the members as a whole and the creditors as a whole than a winding-up of the company…” This does not limit the range of interests to be taken into account by the court under section 2. The interests of employees cannot be excluded. In the case of an insolvent company, it is natural that the creditors will have the greatest interest in the future, if any, of the company. The court will take a balanced approach, as suggested by the reference to the creditors as a whole.”
Accordingly the first step which a Court must take in examining an application for the appointment of an examiner is whether, on the evidence or material placed before it the Court it is satisfied that the company has a reasonable prospect of survival, as regards the whole or any part of its undertaking, as a going concern. A Court must be so satisfied before it has jurisdiction to take the further step so as to exercise its broader discretion whether, in all the relevant circumstances of the case, an examiner should be appointed. It is at this second step that the other factors, including those that are mentioned by Fennelly J., may be taken into account on their own. The general circumstances may of course be part of the factual matrix to which the Court has regard when deciding whether there is a reasonable expectation of survival.
However for the purpose of deciding whether a petitioner has satisfied the Court as to the first step in the test it is not sufficient for a petitioner to simply demonstrate that the assets of the company could be disposed of in a more orderly fashion to the benefit of its creditors since the provisions of subsection (2) preclude that as a sufficient test at that stage. Equally the fact that liquidation might be a far less attractive option from the point of view of the members of the company or its creditors is not sufficient to meet the test laid down in subsection (2) nor is the fact that the chances of the company surviving being simply better than an inevitable collapse following liquidation sufficient to meet the test. In order to be satisfied that a company has a reasonable prospect of survival as a going concern the Court must have before it sufficient evidence or material which will permit it to arrive at such a conclusion on the basis of an objective appraisal of that evidence or material. Mere assertions on behalf of a petitioner that a company has a reasonable prospect of survival as a going concern cannot be given significant weight unless it is supported by an objective appraisal of the circumstances of the company concerned and an objective rationale as to the manner in which the company can be reasonably expected to overcome the insolvency in which it finds itself and survive as a going concern.
The opinion of the independent accountant as set out in the report which a petitioner is required to provide to the Court under the provisions of the Act, must be given due weight. Again, the weight to be attached to the accountant’s opinion will depend on the degree and extent to which he supports that opinion by his or her own objective reasoning and the appraisal of material or factors relied upon for reaching his or her conclusions.
Since, the court may not make an order appointing an examiner unless it is satisfied that there is a reasonable prospect of the survival of the company as a going concern, it follows that there is an onus on the appellant to satisfy the court that such a reasonable prospect exists. The applicant must provide objective evidence to satisfy the court of this fact. Examinership is a process designed to facilitate the rescue or survival of companies in financial difficulties. Whether the appointment of an examiner is supported by creditors of the company and the extent and reasons for that support is a relevant consideration but not determinative in considering whether there is a reasonable prospect of survival.
It is not necessary, at the stage of application for the appointment of the examiner to show that the company will probably survive. The period of protection is designed to provide a “breathing space,” during which the company will be protected from actions by its creditors, particularly a petition for winding up. The period of protection is short. It is intended to enable the examiner, if appointed, to look into the financial state of the company.
The fact, if established, that there is a reasonable prospect of survival of the company does not lead automatically to the appointment of the examiner. It merely triggers the power. The court retains a broad discretion. The court may consider whether one or more creditors will suffer prejudice as a result of the appointment of an examiner. The interests of the employees of the company and of employment generally may also be relevant. The independent accountant is required by section 3B(g) of the Act as amended to express his opinion as to whether “an attempt to continue the whole or any part of the undertaking would be likely to be more advantageous to the members as a whole and the creditors as a whole than a winding-up of the company.” Thus it must be relevant to the exercise of the court’s discretion to consider the effects of the alternatives of an examinership and of a winding-up. It is not possible to envisage every circumstance which may bear on the exercise of the court’s discretion. The above are but a number of examples.”
In the Matter of Tivway Limited (In Examination) & ors
[2010] IESC 11
Denham J. Supreme Court
“39. In deciding whether a court may appoint an examiner the court must have evidence or material before it upon which the court is satisfied that the company has a reasonable prospect of survival, in whole or in part of its undertakings, as a going concern. It is only if a court is so satisfied that it has jurisdiction to exercise its discretion to determine whether, in all the circumstances, an examiner should be appointed. The requirement of such evidence or material is clearly implicit given that it is an express fundamental requirement to the obtaining of an order for the appointment of an examiner in the first place. Further steps in an examinership may be taken only upon such a statutory foundation.
40. A court has jurisdiction to appoint an examiner or make consequential orders only if the statutory requirements are met. This Court held in In the Matter of Vantive Holdings and Ors [2009] IESC 68, in a judgment of the Court delivered by Murray C.J.:-
“In order to be satisfied that a company has a reasonable prospect of survival as a going concern the Court must have before it sufficient evidence or material which will permit it to arrive at such a conclusion on the basis of an objective appraisal of that evidence or material. Mere assertions on behalf of a petitioner that a company has a reasonable prospect of survival as a going concern cannot be given significant weight unless it is supported by an objective appraisal of the circumstances of the company concerned and an objective rationale as to the manner in which the company can be reasonably expected to overcome the insolvency in which it finds itself and survive as a going concern.
The opinion of the independent accountant as set out in the report which a petitioner is required to provide to the Court under the provisions of the Act, must be given due weight. Again, the weight to be attached to the accountant’s opinion will depend on the degree and extent to which he supports that opinion by his or her own objective reasoning and the appraisal of material or factors relied upon for reaching his or her conclusions.
Since, the court may not make an order appointing an examiner unless it is satisfied that there is a reasonable prospect of the survival of the company as a going concern, it follows that there is an onus on the appellant to satisfy the court that such a reasonable prospect exists. The applicant must provide objective evidence to satisfy the court of this fact. Examinership is a process designed to facilitate the rescue or survival of companies in financial difficulties. Whether the appointment of an Examiner is supported by creditors of the company and the extent and reasons for that support is a relevant consideration but not determinative in considering whether there is a reasonable prospect of survival.”
I apply that analysis to the facts of this case.
41. The Court is required to be satisfied that the terms of the legislation are met. Consequently, there is an onus on those who are requesting a court to exercise this jurisdiction. Primarily this burden is carried by the examiner.
42. For an examinership to proceed in relation to each company the Court is required to be satisfied that there is a reasonable prospect of survival as a going concern of Tivway, Construction and Holdings. Section 2(2) of the Act of 1990, indicates a firm policy by the Oireachtas that a court does not have jurisdiction to make an order appointing an examiner unless the court is satisfied that there is a reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern. That is the foundation upon which all orders may be made.
43. Thus the purpose of the legislation is clear – its objective is to assist companies by enabling an examiner be appointed, but only if the court is satisfied that there is a reasonable prospect of the survival of the company as a going concern.
Section 24(4)
44. This is an appeal from the High Court on a decision pursuant to s.24 of the Act of 1990. It is an appeal by ACC, opposing the examinerships. The burden falls largely on the examiner to establish that the Court has jurisdiction to approve the Schemes of Arrangement.
45. The terms of section 24(4) have been set out earlier in this judgment. However, in addition to specific issues on the terms of s.24, a party may raise fundamental issues arising on the legislation. Thus, for example, the statutory purpose may be raised, and it may be argued, as here, that the Schemes of Arrangement do not fulfil the legislature’s object for the survival of the company or companies in whole or in part as a going concern.
46. Indeed the purpose, as stated in section 2(2) of the Act of 1990, is so fundamental a principle that the Court would not have a jurisdiction to proceed under s.24(4) of the Act of 1990 unless the terms of s.2(2) of the Act of 1990 had been met.
74. It is entirely understandable that the companies would wish to hold on until there is an upturn in the property market. It is understandable that this would be a reasonable aspiration, subjectively, for the companies. But that is not the test which is required of the Court in assessing whether it has jurisdiction under section 2(2), and in an examinership, to make orders. As was stated in In the Matter of Vantive Holdings and Ors [2009] IESC 68, the court must have sufficient evidence before it, which will permit an objective appraisal so that it may arrive at a conclusion that the company has a reasonable prospect of survival as a going concern.
75. It is entirely understandable that the companies, and indeed the banks, would wish to retain control over the companies, and the property, in the hope that a rising market will enable a build out in the future. However, that is neither the test laid down by the Oireachtas nor the objective of the legislation.
76. The Schemes of Arrangement are analogous to a planned holding pattern for three airplanes ordered by the control tower of an airport, where it is ordered that three planes maintain a holding pattern over a specified area, at a specific height, until, say, the weather improves, at which time they will be permitted to land. By analogy, the three Schemes of Arrangement envisage a holding situation hovering over the property market, then if the property market improves, and if they have the support of the banks, they will be permitted to continue business. Failing an improved property market, or support of the banks, they will land in 10 years and the scrappage will be divided. This is not a plan for survival of the three companies as a going concern.
77. The Schemes of Arrangement do not provide for the survival of each of the companies as a going concern, as required by s.2(2). As the Schemes of Arrangement do not comply with the legislation, the Court had no jurisdiction to appoint an examiner. Thus the question arising under s.24(4) does not arise, nor is it necessary to consider the issue of unfair prejudice.
78. For the reasons given I would allow the appeal. I would propose an order reversing the order of the High Court and in its place an order pursuant to s.24(3) of the Act of 1990, refusing to confirm the proposals for Schemes of Arrangement.”
Tuskar Resources plc, Re
[2001] IEHC 27; [2001] 1 IR 668
Mr Justice McCracken
“16. The 1999 Act also introduced the requirement for a report by an independent accountant to be available to the Court at the time of the application for the appointment of an Examiner. To understand these amendments it is helpful to consider the decision both in the High Court and in the Supreme Court in Re Atlantic Magnetics Limited (1993) 2 IR 561, which concerned the appointment of an Examiner under the 1990 Act. In his judgment in the High Court Lardner J. said:
“In some cases the evidence may make it clear that survival of the company is not a practical possibility and the order is likely to be refused. In other cases the evidence may give a strong possibility of requisite adjustment. With requisite adjustment the company will survive and prosper therein. Here, it may be clearly possible to make an order appointing the Examiner. In other cases, such as the present, the evidence may not lead to a clear-cut conclusion. There may, as here, be a conflict of evidence on matters concerning the company’s affairs – in such a case by what standards should the Court make its decision? It seems to me that the standard is this: does the evidence lead to the conclusion that in all the circumstances it appears worthwhile to order an investigation by the Examiner into the company’s affairs and see can it survive, there being some reasonable prospect of survival?”
17. The Supreme Court took the view that there was a much wider discretion in relation to the appointment of an examiner. Finlay C.J. said at page 573 having quoted the above passage from the judgment of Lardner J. said:-
“I am satisfied that this analysis of the situation arising under Section 2 and, in particular, the learned trial judge’s statement of the standard to be applied to the question in a case which was not clear-cut is correct, subject to the minor qualification that I would consider it more in accordance with my view of the true standard if the last line of this quotation were to read:
‘There being some prospect of survival'”
18. McCarthy J. seems to have gone ever further and said at page 578:-
“He quoted from Keane, Company Law in the Republic of Ireland (2nd edition) at p.455 where the author expressed the view that the Court should consider that there is a real prospect that either the company will be rescued or that the interests of those financially interested in its future will be better served by such an order than by a winding-up, before appointing an examiner. In contrast with the English Insolvency Act, 1986, which prescribes four stated purposes at least one of which must be served before the Court will make the order, there is no criterion expressed in the Act of 1990. Sub-section 2 appears to require that the order be made if the Court is satisfied that it will facilitate the survival of the company. I reject the ‘real prospect’ test; I would adopt the test applied by Lardner J., omitting the words ‘there being some reasonable prospect of survival’. It is not that I consider such may not enter the equation, but it appears to me to be difficult to come to a firm conclusion on such a matter until the examiner has carried out his preliminary task within the first statutory period – that of three weeks.”
19. The amendments introduced by the 1999 Act are much more in keeping with the decision of Lardner J. in the Atlantic Magnetics case than with the decision of the Supreme Court, and further, by introducing the independent accountant’s report at the preliminary stage, the Legislature clearly disagreed with the views of McCarthy J. that no real decision can be reached until the Examiner has been in place for some weeks. The requirement for an independent accountant’s report clearly means that the decision must be made at the initial stages of the application.
In the Atlantic Magnetics case Finlay C.J. also stated that there cannot be an onus of proof on a Petitioner to establish as matter of probability that the company is capable of surviving as a going concern. It seems to me that this is no longer the position under the 1999 Act by reason of the wording of the new sub-section 2(2). Under the 1990 Act as originally enacted there would appear to be a wide discretion given to the Court. However, the new sub-section prohibits the Court from making an order unless it is satisfied there is a reasonable prospect of survival. If the Court is to be “satisfied” , it must be satisfied on the evidence before it, which is in the first instance the evidence of the Petitioner. If that evidence does not satisfy the Court, the order cannot be made, and in my view this is tantamount to saying that there is an onus of proof on the Petitioner at the initial stage to satisfy the Court that there is a reasonable prospect of survival. For this reason, the Court has to view the evidence in a different manner to that applicable prior to the 1999 Act.
20. This gives rise to a number of issues which have been argued before me and which I propose to consider individually.
Conclusion
30. I am not satisfied there is a reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern for the following reasons:-
1. I do not think the Court can make an order or appoint an Examiner of a company that is purely a holding company, because such a company has no undertaking to continue as a going concern.
2. Even if I am wrong in this, the Court has a discretion as to whether to appoint an Examiner, and in the circumstances of this case, where the subsidiary company is a company registered in Nigeria and subject to Nigerian law, in my discretion I would not appoint an Examiner.
3. The company and the Nigerian company are in serious disputes with both Green Sea and Cavendish, and there is evidence before me that neither entity is prepared to negotiate with the company or with an Examiner. The company has no prospect of success unless it can come to terms with these protagonists.
4. The company owes an indeterminate, but very large sum of money to Green Sea and I can see no real prospect of that being discharged.
5. The company or the Nigerian company owe considerable sums of money to the Revenue and other authorities in Nigeria. While I accept that the Nigerian authorities have used their best endeavours to bring the parties together, I have no information as to the status of monies owing to them, for example whether they are preferential creditors in Nigerian law.
6. The proposal put forward by Reliance is not really a proposal to continue the undertaking of either the company or the Nigerian company as a going concern. It is a proposal that other businesses at present operated by Reliance will be transferred to the company in return for a majority shareholding in the company. That is certainly well outside the purposes of the Act, and has nothing to do with the survival of any part of the undertaking of the company as a going concern. It is introducing a new undertaking to the company.
7. I have no evidence whatever of the financial position of the Nigerian company. No accounts have been exhibited and I have no evidence of the attitude of its creditors. “
Missford Limited v Companies Acts
[2010] IEHC 11
Kelly J.
“At a time of national recession of unprecedented dimensions, I find it extremely difficult to believe that this Company’s fortunes are going to improve in the manner opined by the independent accountant.
The court is entitled to look critically at the independent accountant’s opinion and analysis. It is the unfortunate experience of the court that in an ever increasing number of cases, optimistic expressions of opinion by independent accountants at this stage of an examinership are, about 60 – 70 days into such examinership, shown to have been far too optimistic and the examinership collapses.
In the present case, I am highly sceptical of this expression of opinion. It runs entirely counter to what is actually happening in the hospitality sector of the economy. As the judge in charge of the Commercial List, I deal on a daily basis with the results of the present economic depression. The three areas of the national economy (apart from banking) which most manifest themselves in that list as being under strain are the building trade, the motor trade and the hospitality business. The projections which are made in the instant case and which suggest that this Company which has never made a net profit will move into profitability in the course of the present year bear no resemblance to the trend in the hospitality sector.
The independent accountant says that survival as a going concern is subject to five conditions. They are:-
(a) The ability of directors to maintain efficiencies already implemented on an ongoing basis;
(b) An investor agreeing to invest in the Company;
(c) Membership subscriptions paid in advanced being recognised in full and not written down in order to preserve the Company’s good will;
(d) The acceptance of an appropriate scheme of arrangement by the creditors; and
(e) The bank’s ongoing support.
Crucial to any scheme therefore is the presence of an investor. In evidence before me, the independent accountant indicated that an investment of €1m would be required in order to produce an acceptable scheme of arrangement
The legal position
The court is precluded from making an order for the appointment of an examiner unless it is satisfied that there is a reasonable prospect of the survival of the Company and the whole or any part of its undertaking as a going concern. (See s. 2(2) of the Companies Amendment Act 1990, as amended.)
In the present case, I have with reluctance accepted the only evidence proffered to me and so this threshold of proof has been met by the Company.
As was made clear by Fennelly J. in In Re Gallium Limited [2009] IESC 8 at para. 46:-
“A petitioner does not, by getting over that threshold, acquire a right to have an order made. I still think it is fair to say that the section confers a ‘wide discretion’ on the court, or alternatively, that the court should take account of all the circumstances. The establishment of a reasonable prospect of the survival merely triggers the power, which remains discretionary.”
In exercising its discretion, the court is entitled to take all of the circumstances into account. In doing so, it should bear in mind the principal purpose of an examinership. That was expressed in the following terms by Fennelly J. in the Gallium case and by Clarke J. in In Re Traffic Group Limited [2008] 2 ILRM 1.
Fennelly J. said “the entire purpose of examinership is to make it possible to rescue companies in difficulty.”
Clarke J. said:-
“It is clear that the principal focus of the legislation is to enable, in an appropriate case, an enterprise to continue in existence for the benefit of the economy as a whole and, of equal, or indeed greater, importance to enable as many as possible of the jobs which may be at stake in such enterprise to be maintained for the benefit of the community in which the relevant employment is located. It is important both for the court and, indeed, for examiners, to keep in mind that such is the focus of the legislation. It is not designed to help shareholders whose investment has proved to be unsuccessful.”
I would add that neither is it the purpose of the legislation to provide directors with a ready form of absolution in respect of corporate wrongdoings.
Discretion
I have already recited in short form that the business of this Company from its inception has been carried on with scant regard for its obligations under company law, to the Revenue Commissioners or indeed to its employees who had taxes and PRSI deductions made from their wages but never forwarded to the relevant authorities.
At s. 10 of the independent accountant’s report where he was asked to express his opinion as to whether the facts disclosed to him would warrant further inquiries with a view to proceedings under ss. 297 or 297A of the Principal Act, he said as follows:-
“Based on the work carried out in preparing this report I have not identified any matters which would warrant further inquiries with a view to proceeding under s. 297 or 297A of the Principal Act. I recognise, however, that this report has been prepared within a short timeframe and it may be that the examiner may become aware of other factors, which may require to be brought to the attention of the court.”
That statement in his report was heavily qualified by him in giving oral evidence to me. He accepted that it was not possible to stand over that statement until further examination takes place concerning the way in which this Company was run and in particular its dealings with the related companies Mayfair and Auldcarn. The interim examiner is of like view.
The conduct of an inquiry in respect of s. 297A is an additional burden which will have to be undertaken by an examiner if appointed. It will not be the only additional burden. From the submissions made in court it is likely that an examiner, if appointed, will have to make an application to the court under s. 9 of the Act seeking to have the functions and powers of the directors performable or exercisable only by him. Even if he did not make such an application, it was made clear through his counsel that he would not be prepared to sanction any further payments out of the Company save with his express authority and approval. Given the way in which the Company has been run this is reasonable but will give rise to additional duties over and above the norm.
But the real problem is that an investigation of matters dealt with under s. 297A of the Act and any proceedings which might ensue simply could not be completed during the short period of examinership. It is well recognised by anybody who is involved in the operation of this legislation that although s. 297A is applicable in the course of an examinership, it is simply impossible within the limited time that an examiner is given to conduct a full inquiry and if appropriate to bring such proceedings to fruition. Counsel for the Company, whilst accepting that to be so, suggested that the matter could be met by an appropriate provision in any scheme of arrangement which might be presented. I do not accept that that suggestion has any practicality about it.
The effect of all of this will be that if an examiner is appointed a proper investigation and the bringing of proceedings if required under s. 297A will not be possible. Instead, if a scheme of arrangement is approved by the court, the directors over which there is at least a question mark concerning the propriety of their behaviour will succeed in having the liabilities of the Company written down, the Company continuing to trade and they avoiding a proper or full investigation, still less any consequences should it demonstrate a basis for a liability under Section 297A. That is not the purpose or object of this legislation. This is a case which on the facts disclosed to me warrants a proper investigation of the directors’ conduct. That is not possible in the context of an examinership.
A further factor which I bear in mind in exercising my discretion is that to grant the relief sought here would not be to allow the continuation of the Company to trade profitably as is stated at para. 26 of the petition. Rather it would be to allow the Company to commence trading profitably. During the course of the hearing, I expressed myself as being unaware of any case where an examiner had been appointed in such circumstances. Counsel referred anecdotally to a small number of cases involving start up companies which had not made a profit but where the protection of the court was nonetheless given. They are few and far between and very much the exception. But they were not, as far as I am aware, companies which although they had not returned a profit, were trading by treating other people’s money as part of their working capital.
There must come a time when companies that have flouted the obligations of company law, revenue law, and their obligations to employees should not be allowed to call in aid the very legislation that they have ignored so as to save the enterprise. Still less should it be allowed when it has or is likely to have the beneficial effect for delinquent directors that I have referred to earlier in this part of the judgment. This is such a case.
I am, of course, extremely mindful of the position of the employees. From what I was told they are employed for the most part, if not entirely so, under contracts of employment that are terminable on a short period of notice. Nonetheless they do have jobs and I am anxious to ensure, as far as I can, that they will not be jeopardised. I believe that my refusal to appoint an examiner will not in the circumstances give rise to any greater jeopardy to their jobs than would be the case if an examiner were to be appointed.
First, it is clear that even with an examiner in situ, it is likely that there will be a further reduction in the number of staff employed. Secondly, on refusing the appointment of an examiner either the bank will appoint a receiver or alternatively, the court will appoint a liquidator or perhaps both will take place. If the bank really believes that this enterprise can be saved then it will make perfect sense for it to appoint a receiver and allow him to run the business for a period of time so as to enable the various expressions of interest which have been made to crystallise. If a liquidator is appointed, it is my intention to enable the liquidator to continue to run the business for the benefit of the winding up so as to produce a like effect.
It is clear from the independent accountant’s report that the real attraction of this business is its venue. That will continue to be the case with or without an examiner. The enterprise can continue in being for a short period of time just as well as heretofore under a receiver of liquidator. If the expressions of interest have any reality about them then a purchase from the liquidator or receiver can be effected.
The fact that the business, if sold in the course of a liquidation or receivership, would be devoid of the involvement of the current directors will matter little because it was accepted that even if an examiner were to be appointed, it was essential that the current management be replaced.
Finally, of course, there is the position of creditors. The secured creditors are well secured as I have already described. The unsecured creditors are unlikely to do much better if at all in the case of an examinership. The Revenue Commissioners have preferential entitlement for part of their debt but it is difficult to ascertain whether they will do worse in a winding up, particularly if an investigation under s. 297A leads to proceedings and ultimate success.
It is in these circumstances that in the exercise of my discretion I refuse to appoint an examiner.”
Re Mc Sweeney Dispensers 1 Ltd
[2011] IEHC 494
Clarke J.
“4. The legal framework
4.1 In Re Traffic Group Ltd. [2008] 3 IR 253, at 260, I held that:
“It is important to note that the Companies (Amendment) Act 1990 is not designed to immunise the principals or shareholders of a company from the consequences of the company concerned getting into financial difficulties. The value which shareholders may have in a company (whether they are involved in its management or not) may, in practice, be extinguished or greatly diminished by bad judgment in investing in the company in the first place, by bad management (either on the part of the investors themselves or those whom they trusted to run the company) or, indeed, plain bad luck. Whatever may be the cause, it does not seem to me that it is any part of the purpose of the Act to solve the difficulties of such shareholders howsoever those difficulties may have arisen.”
I went on to hold that:
“It is clear that the principal focus of the legislation is to enable, in an appropriate case, an enterprise to continue in existence for the benefit of the economy as a whole and, of equal, or indeed greater, importance to enable as many as possible of the jobs which may be at stake in such enterprise to be maintained for the benefit of the community in which the relevant employment is located. It is important both for the court and, indeed, for examiners, to keep in mind that such is the focus of the legislation. It is not designed to help shareholders whose investment has proved to be unsuccessful.”
These latter comments were later cited with approval by Kelly J. in Missford Ltd t/a Residence Members Club v Companies Acts [2010] IEHC 11.
4.2 In In re Atlantic Magnetics Ltd. (In receivership) [1993] 2 I.R. 561, at 573, Finlay C.J. expressly approved the approach adopted by Lardner J. in this Court which was to pose the question:
“[…] does the evidence lead to the conclusion that in all the circumstances it appears worthwhile to order an investigation by the examiner into the company’s affairs and see can it survive, there being some reasonable prospect of survival?”
4.3 This approach was described as “pragmatic” and followed by the Supreme Court in In the matter of Gallium Limited [2009] 2 ILRM 11 and again by Murray C.J. in In the matter of Vantive Holdings [2010] 2 ILRM 156, where he held that the approach to be adopted by the court was the following:
“[…] the first step which a Court must take in examining an application for the appointment of an examiner is whether, on the evidence or material placed before it the Court it is satisfied that the company has a reasonable prospect of survival, as regards the whole or any part of its undertaking, as a going concern. A Court must be so satisfied before it has jurisdiction to take the further step so as to exercise its broader discretion whether, in all the relevant circumstances of the case, an examiner should be appointed. It is at this second step that the other factors, including those that are mentioned by Fennelly J. [in In re Gallium Ltd.], may be taken into account on their own. The general circumstances may of course be part of the factual matrix to which the Court has regard when deciding whether there is a reasonable expectation of survival.”
4.4 The factors mentioned by Fennelly J. were in the following terms:-
“The court has to take account of all relevant interests. The independent accountant must consider whether examinership would be ‘be more advantageous to the members as a whole and the creditors as a whole than a winding-up of the company […]’. This does not limit the range of interests to be taken into account by the court under s.2. The interests of employees cannot be excluded. In the case of an insolvent company, it is natural that the creditors will have the greatest interest in the future, if any, of the company. The court will take a balanced approach, as suggested by the reference to the creditors as a whole.”
4.5 The jurisprudence thus appears to make clear that the examinership regime does not have as its purpose the saving of shareholders from their unsuccessful investments; that said, the legislation is equally designed to prevent the interests of any single creditor being advanced above those of the creditors as a whole or indeed those of the other interested parties. In addition it is clear that a threshold jurisdictional issue arises as to whether the petitioner has established that the companies have a reasonable prospect of survival. If that matter is not established then the court cannot appoint an examiner. If that matter is established then the court can go on to consider a range of other factors which can have a bearing as to whether it is appropriate, on the facts of the case in question, to make the appointment. In those circumstances, it seems to me that it is appropriate to turn, first, to the question of whether the companies in this case have a reasonable prospect of survival. “