Older Forms

Other Insolvency Arrangement

The older Deeds of Arrangement legislation has been largely superseded by the Personal Insolvency Act.  The legislation remains in force. It does not require the involvement of Court or the Insolvency Service. It requires the consent of all creditors. Its principal objective is to require registration of arrangement so that they can be notified to the public.

The preferential creditors plus fees and costs must generally be paid under the bankruptcy arrangements. Therefore, unless this is possible, the arrangement will not be possible. It may be possible to have an arrangement with the consent of all creditors which avoids this limitation, but this of itself may not be possible.

The attraction of a debtor’s agreement with creditors is that it avoids the cost, stigma, disability and the full expenses of bankruptcy. From the creditor’s perspective, the debtor may be more willing to cooperate. The debtor, a relative or another third party may be prepared to make a payment, or there may be an arrangement to operate a business under supervision. The creditors may conclude that the agreement offers more than they would recover in bankruptcy proceedings.


Deeds of Arrangement

Deed of Arrangement to which the Act applies include any of the following made by, for, or in respect of the affairs of a debtor for the benefit of his creditors generally (otherwise in pursuance of the law for the time being in force relating to bankruptcy), that is to say: —

  • an assignment of property;
  • a deed of or agreement for a composition;

Where creditors of a debtor obtain any control over his property or business it includes a deed of inspectorship entered into for the purpose of carrying on or winding up a business;

  • a letter of licence authorising the debtor or any other person to manage, carry on, realise, or dispose of a business, with a view to the payment of debts; and
  • any agreement or instrument entered into for the purpose of carrying on or winding up the debtor’s business or authorising the debtor or any other person to manage, carry on, realise, or dispose of the debtor’s business, with a view to the payment of his debts.

Requirements and Nature

The Deed of Arrangement does not require court approval, but it must in practice have the approval of all creditors. It is a private contract outside of court control. It is only binding on those creditors who agree it.  If the arrangement does not have the approval of all creditors, it can be set aside by the excluded creditor taking bankruptcy proceedings.

A Deed of Arrangement is void unless it has been registered under the Act within seven clear days after the first execution thereof by the debtor or any creditor in the High Court Central office.   This registration is the principal purpose of the legislation. The policy of the legislation is similar to the Bill of Sale Acts which require registration of mortgage of goods by way notice to other traders

A deed of arrangement itself is a ground for a bankruptcy application and order. It can be used by a non-participating creditor party to initiate bankruptcy proceedings within a certain period.


Terms of Arrangement I

The debtor usually offers to make a settlement with all of his creditors and invites all to come in and share in the benefit of a deed by which assets are transferred to a trustee for their benefit. The debtor and creditors meet to consider the proposal for the arrangement or so-called composition.

The creditors will first need to be satisfied as to the accuracy and completeness of all information furnished. Once the creditors agree to the terms of the arrangement, it is contractually binding on them.

Once agreed, the arrangement is embodied in a contract or a deed and signed by the debtors, creditors and a trustee.  A majority of creditors cannot bind the others. If all do not consent, it is unlikely to succeed. Creditors agree to release the debtor from all claims in return for participation. This may be without prejudice to security or recourse against a guarantor.


Terms of Arrangement II

Specified payments may be provided for. Certain assets may be transferred to the trustee to realise and make payments under the terms of the deed. The trustee agrees to realise the assets and hold the trust proceeds for the creditors in accordance with the terms of the arrangement.

The trustee’s main function is to realise the assets. The trustee may have the power to carry out business for a period in order to realise value.

The trustee should be an independent person. Preferred creditors with priority must be paid in accordance with the bankruptcy priority rules. The trustee has the power to remunerate itself and pay for expenses.  There may be provisions requiring creditors to furnish proof of their debts. The trustee is appointed the debtor’s attorney to undertake his obligations under the deed.


Former Court Supervised Arrangements

Prior to the Personal Insolvency Act, there was a much more cumbersome and expensive form court-supervised arrangement.  A debtor could petition for his own protection from enforcement to allow for the negotiation of an arrangement.

This form of arrangement is no longer available and has been superseded by the Personal Insolvency Act which is much more flexible, inexpensive and accessible.

If a specified majority of the creditors agree and the court approved, the arrangement was binding on all creditors. Generally, a proposal was negotiated in advance between the debtor and his creditors, before the requisite preliminary meeting and private court sitting took place.


Former Court Supervised Arrangements; Procedure I

An “arranging” debtor could present a petition for protection setting out his inability to pay his debts. He was required to disclose his debts and assets in full, together with the estimated value of assets and liabilities and details of any creditors who have issued proceedings.

The court could grant protection on such terms as it saw fit, to allow proposals to be put. The debtor was protected from enforcement (including bankruptcy) during this period.  The debtor was prohibited from transferring his assets.  If the court granted protection, it directed a preliminary meeting of creditors and set a further court date.

The Official Assignee’s office facilitated creditors in proving their debts in the prescribed form. The debtor made himself available and gave notice to each of his creditors with a statement containing the required information.

A private sitting of the court was held to consider the proposals.  The debtor would usually have met the creditors before the sitting and ascertained whether the proposal would be acceptable. The debtor filed with the Official Assignee at least two days before the private sitting, a statement of affairs, together with his proposals in relation to debts and obligations.


Former Court Supervised Arrangements; Procedure II

The creditors’ meeting was held under the auspices of the court. The debtor attended the meeting and could be examined regarding his circumstances and his proposals for the arrangement. A creditor whose debt was less than €130 is not permitted to vote. A creditor given any special advantage under the arrangement is not counted in the vote. The creditors are given the opportunity to assess the value of assets.

Three fifths in number and value of creditors voting at the meeting, personally or by proxy, must approve the proposal. The proposal must be confirmed by the court. After the creditors meeting, a court hearing was set.

The grounds for refusal of consent were broad.  The court could refuse consent if the proposals were

  • unfair to the opposing minority
  • the debtor’s conduct had been commercially unfair
  • it was not a bona fide arrangement and
  • certain other grounds.

Once the arrangement is approved by the court, it was binding on all creditors who have had notice of the creditors meeting.

The debtor ran the risks that if he failed to comply with the procedure or if his offer is not accepted, he will become bankrupt. If the arrangement was breached, the creditors’ original rights are reinstated


Post-Bankruptcy Compositions

It is possible to have an arrangement with creditors after bankruptcy commences. This is known as a composition in bankruptcy. This procedure still exists. Unlike the position with a Debt Relief Notice, Debt Settlement Arrangement or Personal Insolvency Arrangement, the debtor has already been made bankrupt.

The procedure offers an alternative early exit from bankruptcy. It is of less importance given that there is now an automatic discharge of bankruptcy after one year. There are now provisions requiring that bankruptcy not be granted if there is any reasonable possibility of an arrangement outside the bankruptcy under the 2012 Act.


Procedure

The procedures commence with an application to the court which if granted, suspends bankruptcy proceedings. The Court may, on the application of a bankrupt, grant a stay on the realisation of his estate, for such time and under such conditions as it thinks fit, to enable him or any persons acting on his behalf to make an offer of the composition to his creditors.

Where a stay on the realisation of the estate of the bankrupt has been granted or where the Official Assignee has otherwise consented in writing to suspend the realisation of the bankrupt’s estate on such terms as he may specify in such consent, the bankrupt shall call a meeting of his creditors before the Court for the purpose of making an offer of composition to them.

At least ten days before the meeting a notice of the meeting specifying the precise offer of the composition to be made shall be inserted in Iris Oifigiúil and shall also be sent by post to each creditor at his last known address.

A creditor whose debt is less than €500 shall not be entitled to vote. If for any reason the bankrupt has not filed a statement of his affairs he shall do so at or before the meeting.  Debts may be proved at the meeting.


Composition

A composition can be paid by payment of cash within a certain time, payment in instalments or cash payment and instalments. The bankruptcy may be discharged;

  • In the case of a composition payable in cash, upon lodgement with the Official Assignee of the necessary amount to pay the composition, expenses, fees, costs, such further sums as the court may direct and the preferential payments;
  • in the case of a composition payable by instalments which are secured to the satisfaction of the creditors, upon lodgement with the Official Assignee of the completed securities, the necessary amount to pay expenses, fees, costs, such further sums as the court may direct and the preferential payments;
  • in the case of a composition payable partly in cash and partly by instalments which are secured to the satisfaction of the creditors, upon lodgement with the Official Assignee of the completed securities, the necessary amount to pay the cash composition, expenses, fees, costs, such further sums as the court may direct and the preferential payments.

Discharge of Bankruptcy

The Court, on the application of the bankrupt or his personal representatives, shall, on the report of the Official Assignee and in the absence of fraud, discharge the adjudication order

  • in the case of a composition payable in cash, upon lodgment with the Official Assignee of the necessary amount to pay the composition, expenses, fees, costs, such further sums as the Court may direct and the preferential payments;
  • in the case of a composition payable by instalments which are secured to the satisfaction of the creditors, upon lodgment with the Official Assignee of the completed bills, notes or other securities, the necessary amount to pay expenses, fees, costs, such further sums as the Court may direct and the preferential payments;
  • in the case of a composition payable partly in cash and partly by instalments which are secured to the satisfaction of the creditors, upon lodgment with the Official Assignee of the completed bills, notes or other securities, the necessary amount to pay the cash composition, expenses, fees, costs, such further sums as the Court may direct and the preferential payments.

Vesting and Non-Vesting Arrangements

A scheme may be implemented with or without the input of the Official Assignee. Under some types of scheme, the Official Assignee is involved in collecting and distributing assets (a vesting arrangement).  Assets may be lodged with the Assignee under a vesting arrangement, for the purpose of distribution to creditors.

The Assignee must agree to the arrangement. The Assignee is given powers to realise and sell the assets in a vesting arrangement. He must report to the court on the realisation of the assets. The court may make directions in respect of distribution.

When the Official Assignee has sufficient funds to implement the terms of a vesting arrangement, he shall present to the Court for approval:

  • a list of creditors admitted by him or by the Court;
  • a copy of the relevant account of the arranging debtor;
  • particulars of expenses, fees, costs, preferential payments, dividend payable to creditors; and
  •  his report on the realisation of the estate. The Court may make such order as it thinks fit for the distribution of the estate or any part thereof by the payment of the expenses, fees, costs and preferential payments as well as the relevant dividend.

Where a non-vesting proposal of an arranging debtor has been approved, the arranging debtor must, within a prescribed period, lodge with the Official Assignee for purposes of distribution the necessary amount to pay expenses, fees, costs and the preferential payments, together with the cash, bills or promissory notes (if any) provided for in the proposal.


References and Sources

Irish Books

Burke & Comyn         Personal Insolvency Law        2014

Bracken Practioner’s Personal Insolvency Handbook 2013

Law Society (Wright) Insolvency Law                      2009

Sanfey & Holohan      Bankruptcy Law & Practice2nd Ed    2010

Farry, Holohan            Consolidated Bankruptcy & Personal Insolvency Legislation2013

Forde, Kennedy & Simms      Company Insolvency              2015

Forde & Simms Bankruptcy Law 2nd Ed 2009

UK Books

Insolvency Law and Practice (Report of the review committee chaired by Sir Kenneth Cork CBE, 1982, Cmnd 8558) (the Cork report)

V Finch, Corporate Insolvency Law: Perspectives and Principles 3rd Ed 2017

RM Goode, Principles of Corporate Insolvency Law (4th Ed, 2011)

A Keay and P Walton, Insolvency law: corporate and personal (4rd Ed, 2017)

Marsh Bankruptcy Insolvency and the Law 2016

WW McBryde, Bankruptcy 2nd Ed, 1995

Butterworths Insolvency Law Handbook 14th Ed 2012

Core Statutes on Insolvency Law and Corporate Rescue (annual editions)

Legislation

Personal Insolvency Legislation

Personal Insolvency Act 2012

Personal Insolvency (Amendment) Act 2015

Personal Insolvency Act 2012 (Part 6) (Commencement) Order 2013, S.I. No. 14 of 2013

Personal Insolvency Act 2012 (Commencement) (No. 2) Order 2013, S.I. No. 63 of 2013

Personal Insolvency Act 2012 (Establishment Day) Order 2013, S.I. No. 64 of 2013

Personal Insolvency Act 2012 (Authorisation and Supervision of Personal Insolvency Practitioners) Regulations 2013, S.I. No. 209 of 2013

Personal Insolvency Act 2012 (Authorisation of Approved Intermediaries) Regulations 2013, S.I. No. 216 of 2013

Personal Insolvency Act 2012 (Personal Insolvency Practitioner Authorisation and Renewal of Authorisation Prescribed Fees) Regulations 2013, S.I. No. 246 of 2013

Personal Insolvency Act 2012 (Accounts and Related Matters) Regulations 2013, S.I. No. 247 of 2013

Personal Insolvency Act 2012 (Commencement) (No. 3) Order 2013, S.I. No. 285 of 2013

Personal Insolvency Act 2012 (Value of interest in property) Regulations 2013, S.I. No. 330 of 2013

Personal Insolvency Act 2012 (Prescribed Protective Certificate Personal Insolvency Arrangement Application Form) Regulations 2013, S.I. No. 331 of 2013

Personal Insolvency Act 2012 (Prescribed Protective Certificate Debt Settlement Arrangement Application Form) Regulations 2013, S.I. No. 332 of 2013

Personal Insolvency Act 2012 (Prescribed Debt Relief Notice Application Form) Regulations 2013, S.I. No. 333 of 2013

Personal Insolvency Act 2012 (Schedule of Creditors) Regulations 2013, S.I. No. 334 of 2013

Personal Insolvency Act 2012 (Procedures for the Conduct of Creditors’ Meetings) Regulations 2013, S.I. No. 335 of 2013

Personal Insolvency Act 2012 (Notification in relation to Excludable Debt) Regulations 2013, S.I. No. 337 of 2013

Personal Insolvency Act 2012 (Additional Information to be contained in the Registers) Regulations 2013, S.I. No. 356 of 2013

Personal Insolvency Act 2012 (Part 4) (Commencement) Order 2013, S.I. No. 462 of 2013

Personal Insolvency Act 2012 (Prescribed Fees in Bankruptcy Matters) Regulations 2013, S.I. No. 465 of 2013

Personal Insolvency Act 2012 (Prescribed Financial Statement) Regulations 2014, S.I. No. 259 of 2014

Personal Insolvency Act 2012 (Regulatory Disclosure Statement of a Personal Insolvency Practitioner) Regulations 2014, S.I. No.319 of 2014

Personal Insolvency Act 2012 (Written Statement Disclosing All of the Debtor’s Financial Affairs) Regulations 2015, S.I. No. 416 of 2015

Personal Insolvency Act 2012 (Prescribed Fees) Regulations 2015, S.I. No. 620 of 2015

Personal Insolvency Act 2012 (Renewal of Authorisation of Personal Insolvency Practitioners) Regulations 2016, S.I. No.226 of 2016

Justice Courts and Civil Law (Miscellaneous Provisions) Act 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Part8) (Commencement) Order 2013, S.I. No. 286 of 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Part 7) (Commencement) Order 2013, S.I. No. 463 of 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Section 2) (Commencement) Order 2014, S.I. No. 334 of 2014

Personal Insolvency (Amendment) Act 2015 (Commencement) Order 2015, S.I. No. 414 of 2015

Personal Insolvency (Amendment) Act 2015 (Commencement) (No. 2) Order 2015, S.I. No. 514 of 2015