Access to Information
Examiners are entitled to access to the company’s books, account and records. They may require persons to give sworn evidence regarding the affairs of the company. Directors, secretaries and other officers of the company are obliged to co-operate with the examiner. The may be required to attend and may be examined on oath, either verbally or by written questions.
When an examiner is appointed, the officers and agents
- must produce books and documents in their custody relating to the company;
- must attend before the examiner if required to do so;
- must give the examiner all assistance in connection with their functions which they are reasonably able to give;
The examiner is entitled to notice of meetings of the directors and of the shareholders, including copies of any agenda. He may convene such meetings and is entitled to be heard and propose motions. He is not entitled to vote, but he is not bound by the results of the meeting. The court may confer the powers of the directors on the examiner.
Officers and agents may be obliged to appear before the examiner and be examined on the above matters. If they refuse to co-operate, the examiner may certify this matter and apply to the court. The court may then enquire about the alleged default. It may make may make such order or direction as is appropriate. It may, for example, decide, that the officer or agent, is or is not obliged to produce a particular document.
Information from Outsiders
The directors and other agents of the company must co-operate with the examiner. Both present and past directors are obliged to cooperate. There is no time limit. Officers of connected companies must also co-operate. They include group companies and companies under common control.
Agents, including the company’s solicitors, bankers and auditors may be required to co-operate, provided that they are not obliged to disclose matters which would be subject to legal privilege.
The examiner can require the director to produce documents relating to his own bank account under certain circumstances. There must be reasonable grounds to believe that certain criteria are met. They are
- that the bank account is in the State;
- monies have been paid into the account resulting from transactions, arrangements or agreements which are not disclosed in a company’s accounts or
- monies have been paid into or out of the account in connection with an act or omission which constituted misconduct on the part of the director, whether fraudulent or not.
A negative pledge is a clause in a loan agreement and/or mortgage which prevents the company from borrowing money (at all or other than from the lender party) or from creating further charges. The examiner may circumvent a negative pledge clause, where it is deemed necessary to do so.
The examiner may serve notice on the relevant party requiring the condition to terminate until the examination ends. This may be done, only if the negative pledge would be likely to prejudice the company’s survival, such as where it is necessary in order to raise funds.The examiner must form the opinion that the clause would if enforced, prejudice the survival of the company or part of the company’s undertaking, as a going concern.
An examiner may apply to the court for directions in relation to the exercise of his powers. An examiner does not ordinarily have the power to disclaim a contract. Exceptionally, the court may confer this power on an examiner.
The company in examinership may affirm or repudiate a contract which has not yet completed. This does not apply to payment obligations. The approval of the Court is required. There must be a proposal for a compromise or scheme of arrangement.
The examiner must be given notice of the application. The provision does not apply to payment obligations. The court may grant relief where a scheme or an arrangement is being formulated. If this occurs, the counterparty is an unsecured creditor for any damages which resulting from the breach thereby caused.
Powers of Examiner
The examiner does not ordinarily have the power to contract on behalf of the company. The powers of the powers of the directors may be conferred on him by the court.
An examiner may be personally liable in relation to contracts entered. He may, however, exclude personal liability by the terms of the contract.
The examiner has the power to convene, set the agenda for, and preside at meetings of the board of directors and general meetings of the company to which he or she is appointed and to propose motions or resolutions and to give reports to such meetings.
An examiner is entitled to reasonable notice of, to attend and be heard at, all meetings of the board of directors of a company and all general meetings of the company to which he or she is appointed. Reasonable notice requires a description of the business to be transacted at any such meeting.
Where an examiner becomes aware of an act, proposed act or omission by or on behalf of the directors, employees etc. which is likely to be to the detriment of the company or other interested parties such as creditors, the examiner may take such steps as are necessary to halt, prevent and rectify the effect of such act, omission, decision or contract.
Vesting of Powers I
An examiner may apply to the court for an order vesting the powers of the company’s directors in the examiner exclusively. The court has regard to the manner in which the directors are conducting the company’s affairs. The court may do so if it is just and equitable. The vesting may be in respect of all or any of the directors’ powers.
Where it appears to the court, on the application of the examiner, that, having regard to the below matters, it is just and equitable to do so, it may make an order that all or any of the functions which are vested in the directors (whether by virtue of the constitution of the company or by law or otherwise) shall be performed only by the examiner. The court may vest him the same powers as a liquidator.
Where the court makes such an order, 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 sees fit. The court may, having regard to the above matters provide, by the order or by a further order, that the examiner shall have all or any of the powers that he or she would have if he or she were a liquidator appointed by the court in respect of the company.
Where such an order so provides, the court shall have all the powers that it would have if it had made a winding-up order and appointed a liquidator in respect of the company concerned.
Vesting of Powers II
The matters to which the court is to have regard before making an order vesting the powers of the directors in the examiner are:
- that the affairs of the company are being conducted, or are likely to be conducted, in a manner which is calculated or likely to prejudice the interests of the company or of its employees or of its creditors as a whole; or
- that it is expedient, for the purpose of preserving the assets of the company or of safeguarding the interests of the company or of its employees or of its creditors as a whole, that the carrying on of the business of the company by, or the performance of the functions of, its directors or management should be curtailed or regulated in any particular respect; or
- that the company, or its directors, have resolved that such an order should be sought; or any other matter in relation to the company the court thinks relevant.
Debts and Expenses
Debts contracted before examinership may not be discharged during the period of protection, unless the report of the independent accountant recommends such discharge and the court authorises the discharge, in whole or in part. The Court must be satisfied that failure to discharge the liability would reduce the prospects for the company’s survival as a going concern considerably.
Certified liabilities incurred by the company during the protection period may be treated as expenses properly incurred by the examiner. The liabilities are those certified in writing by the examiner, at the time they are incurred, to have been incurred in circumstances where, in the opinion of the examiner, the survival of the company as a going concern during the protection period would otherwise be seriously prejudiced.
The court must sanction the liabilities certified by the examiner. When sanctioned, they have priority over the claims of unsecured creditors. The expenses must benefit the company. The expenditure must be shown to be necessary. The examiner may borrow for the purpose of paying pre-petition debts, where this is necessary.
The cost of the petition and the examiner’s cost may not be certified. However, these enjoy separate priority.
Sanction of Costs
The court must sanction the examiner’s costs, remuneration, and expenses. The expenses may be approved if the examiner certifies that they are necessary to prevent serious prejudice to the survival of the company as a going concern, during the period of protection.
An application is made to the court for approval of the examiner’s costs remuneration and expenses. The court will scrutinise the claim and determine the level of costs, remuneration, and expenses which it is prepared to approve.
Sums sanctioned by the court may be paid in full. The expenses are generally paid out of the revenue of the business and the proceeds of the sale of assets.They are paid in priority to all other costs and expenses, including liquidator’s remuneration. They rank ahead of other unsecured claims.
Certified and sanctioned costs, remuneration and expenses have priority over the proceeds of a floating charge security. They rank behind the claims of a fixed charge holder, mortgagees and the holders of liens in respect of the proceeds of the secured assets concerned.
The examiner may apply to the court to determine any question arising in the course of his or her office, or for the exercise in relation to the company of all or any of the powers which the court may exercise under insolvency legislation.
The examiner shall, if so directed by the court, have the power to ascertain and agree on claims against the company to which he or she has been appointed. No professional or legal duty which an examiner owes to a company is contravened by, and no liability to the company or others attach to, by reason of his or her compliance with directions made by the court.
The court may hold hearings in relation to irregularities in the company’s affairs. This will commonly arise in relation to issues concerning the company’s assets, in particular, failures to account for them.
The examiner must also supply a copy of a report to each person who is mentioned in it and any interested party on written application being made to him or her in that behalf. If the court, on application so directs, there may be omitted from any copy of the report supplied to such person or an interested party, such parts of it as are specified in the direction of the court.
The court may, in particular, on such an application, direct that there may be omitted, 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.
The following persons shall be entitled to appear and be heard at a hearing in the above application.
- the examiner;
- if the court decides to hold a hearing because of matters contained in the report of the independent expert, the independent expert;
- the company concerned;
- any interested party;
- any person who is referred to in the report of the independent expert or the report;
- the Director of Corporate Enforcement.
The court may, on a hearing, make such order or orders as it deems fit (including, where appropriate, an order for the trial of any issue relating to the matter concerned). The court may if it considers it appropriate to do so, direct that a certified copy of an order shall be delivered to the Registrar by the examiner or such other person as it may specify.
Return of Assets
Where on the application of an examiner of a company it is shown that any property of the company was disposed of either by way of conveyance, transfer, mortgage, security, loan, or in any way whatsoever whether by act or omission, direct or indirect; and the effect of such disposal was to perpetrate a fraud on the company, its creditors or members, then the court may if it deems it just and equitable to do so, make the following order.
The order which the court may make in the above cases, is one requiring any person who appears to have the use, control or possession of such property or the proceeds of the sale or development of it to deliver it or pay a sum in respect of it to the examiner on such terms or conditions as the court sees fit.
In deciding whether it is just and equitable to make an order under this section, the court shall have regard to the rights of persons who have bona fide and for value acquired an interest in the property the subject of the application.
Disposal of Charged Assets
The examiner may dispose of property that is subject to a charge or other security. An application must be made to the court to approve the power to dispose of the property.
The court may make such order as it considers just and equitable. It must be satisfied that the disposal will be likely to facilitate the survival of the whole or a part of the company’s undertaking or business.
Where the property is subject to a floating charge, the holder retains it rights over the asset or monies which represent the proceeds.
In the case of fixed charge security, the disposal must be on condition that the proceeds are used towards the discharge of sums secured by the security or hire purchase. If the proceeds are less than what the court considers to be the market value, the sum paid to the fixed charge holder must be topped up to the market value.
Committee of Creditors
A committee of creditors may be appointed. The court may order the appointment of a committee consisting five members. The court may issue directions in relation to the confirmation hearing to enable persons, creditors, etc. to participate.
The committee must include the three largest unsecured creditors, who are willing to serve. The committee of creditors is to assist the examiner in the performance of his or her functions.
The examiner shall provide the committee with a copy of any proposals for a compromise or scheme of arrangement. 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. As soon as practicable after the appointment of a committee, the examiner shall meet with the committee to transact such business as may be necessary.
References and Sources
Companies Act 2014 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Courtney
Keane on Company Law 5th Ed. (2016) Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Gore Browne on Companies
Palmer’s Company Law