Repudiating Contracts
Companies Act
Repudiation by examiner of contracts made before period of protection and of negative pledge clauses
525. (1) Without prejudice to subsection (2), nothing in section 524 shall enable an examiner to repudiate a contract that has been entered into by the company to which he or she has been appointed prior to the period during which the company is under the protection of the court.
(2) A provision referred to in subsection (4) shall not be binding on the company at any time after the service of the notice under subsection (3)(b) and before the expiration of the period during which the company is under the protection of the court if the following 2 conditions are satisfied.
(3) Those conditions are—
(a) the examiner is of the opinion that the provision, were it to be enforced, would be likely to prejudice the survival of the company or the whole or any part of its undertaking as a going concern; and
(b) the examiner serves a notice on the other party or parties to the agreement in which the provision is contained informing the party or parties of that opinion.
(4) The provision referred to in subsection (2) is a provision of an agreement entered into by the company concerned and any other person or persons at any time (including a time that is prior to the period during which the company is under the protection of the court) that provides that the company shall not, or shall not otherwise than in specified circumstances—
(a) borrow moneys or otherwise obtain credit from any person other than that person or those persons; or
(b) create or permit to subsist any mortgage, charge, lien or other encumbrance or any pledge over the whole or any part of the property or undertaking of the company.
Repudiation of Certain Contracts
537. (1) Where proposals for a compromise or scheme of arrangement are to be formulated in relation to a company, the company may, subject to the approval of the court, affirm or repudiate any contract under which some element of performance other than payment remains to be rendered both by the company and the other contracting party or parties.
(2) Any person who suffers loss or damage as a result of such repudiation shall stand as an unsecured creditor for the amount of such loss or damage.
(3) In order to facilitate the formulation, consideration or confirmation of a compromise or scheme of arrangement, the court may hold a hearing and make an order determining the amount of any such loss or damage mentioned in subsection (2) and the amount so determined shall be due by the company to the creditor as a judgment debt.
(4) Where the examiner is not a party to an application to the court for the purposes of subsection (1), the company shall serve notice of such application on the examiner and the examiner may appear and be heard on the hearing of any such application.
(5) Where the court approves the affirmation or repudiation of a contract under this section, it may, in giving such approval, make such orders as it thinks fit for the purposes of giving full effect to its approval, including orders as to notice to, or declaring the rights of, any party affected by such affirmation or repudiation.
Power to deal with charged property, etc.
530. (1) Where, on an application by the examiner, the court is satisfied that—
(a) the disposal (with or without other assets) of any property of the company concerned which is subject to a security which, as created, was a floating charge, or
(b) the exercise by the examiner of his or her powers in relation to such property,
would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may by order authorise the examiner to dispose of the property, or exercise his or her powers in relation to it, as the case may be, as if it were not subject to the security.
(2) Where, on an application by the examiner, the court is satisfied that the disposal (with or without other assets) of—
(a) any property of the company concerned subject to a security other than a security to which subsection (1) applies, or
(b) any goods in the possession of the company concerned under a hire-purchase agreement,
would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may by order authorise the examiner to dispose of the property as if it were not subject to the security or to dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.
(3) Where property is disposed of under subsection (1), the holder of the security shall have the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he or she would have had in respect of the property subject to the security.
(4) An order under subsection (2) shall include a condition that—
(a) the net proceeds of the disposal of the property or goods concerned; and
(b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property or goods concerned in the open market by a willing vendor, such sums as may be required to make good the deficiency,
shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.
(5) Where a condition imposed in pursuance of subsection (4) relates to 2 or more securities, that condition operates to require the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the sums mentioned in that paragraph to be applied towards discharging the sums secured by those securities in the order of their priorities.
(6) A certified copy of an order under subsection (1) or (2) in relation to a security shall, within 7 days after the date of the making of the order, be delivered by the examiner to the Registrar.
(7) If the examiner, without reasonable excuse, fails to comply with subsection (6), he or she shall be guilty of a category 4 offence.
(8) References in this section to a hire-purchase agreement include references to—
(a) a conditional sale agreement;
(b) a retention of title agreement; and
(c) an agreement for the bailment of goods which is capable of subsisting for more than 3 months.
Provisions with respect to leases
544. (1) Subject to subsection (3), proposals for a compromise or scheme of arrangement shall not contain, nor shall any modification by the court under section 541 of such proposals result in their containing, a provision providing for either or both—
(a) a reduction in the amount of any rent or other periodical payment reserved under a lease of land that falls to be paid after the date from which the compromise or scheme of arrangement would come into effect under section 542 (3) or the complete extinguishment of the right of the lessor to any such payments;
(b) as respects a failure—
(i) to pay an amount of rent or make any periodical payment reserved under a lease of land; or
(ii) to comply with any other covenant or obligation of such a lease, that falls to be paid or complied with after the date referred to in paragraph (a), a requirement that the lessor under such a lease shall not exercise, or shall only exercise in specified circumstances, any right, whether under the lease or otherwise, to—
(I) recover possession of the land concerned;
(II) effect a forfeiture of the lease or otherwise enter on the land;
(III) recover the amount of such rent or other payment; or
(IV) claim damages or other relief in respect of the failure to comply with such a covenant or obligation.
(2) Subject to subsection (3), proposals for a compromise or scheme of arrangement in relation to a company shall not be held by the court to satisfy the condition specified in section 541 (4)(b)(ii) if the proposals contain a provision relating to a lease of, or any hiring agreement in relation to, property other than land and, in the opinion of the court—
(a) the value of that property is substantial; and
(b) that provision is of like effect to a provision referred to in subsection (1)(a) or (b).
(3) Subsection (1) or (2) shall not apply if the lessor or owner of the property concerned has consented in writing to the inclusion of the provision referred to in subsection (1) or (2) in the proposals for the compromise or scheme of arrangement.
(4) In deciding, for the purposes of subsection (2), whether the value of the property concerned is substantial, the matters to which the court shall have regard shall include the length of the unexpired term of the lease or hiring agreement concerned.
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.