International Issues

EU Insolvency Recognition I

The EU Insolvency Regulation determines the proper state, in which to take insolvency proceedings.  The primary jurisdiction is that of the company’s “centre of main interests. It also provides for secondary insolvency proceedings in limited cases.The Regulation provides for the automatic recognition of a liquidation throughout the European Union, which is undertaken in accordance with the law of the company’s centre of main interests.

The “liquidator” as defined, is the administrator of the assets in insolvency. This may be a corporate liquidator, official assignee, trustee in bankruptcy or another equivalent insolvency officer. Broadly similar requirements apply to individual and corporate insolvencies.

There is a risk that by the time a liquidator establishes the fact of the liquidation and takes steps under it in a foreign jurisdiction, that foreign creditors may have seized whatever assets may be available under local enforcement procedures. The assets may be otherwise disposed of, transferred or concealed.  Accordingly, the Regulation seeks to facilitate the liquidator asserting rights and control over EU situated assets.

EU Insolvency Recognition II

Under the Insolvency Regulation, the courts of EU states must immediately recognise within their state, a court order of insolvency made by the appropriate court within the EU.  The validity of the insolvency order must be accepted automatically, with the very limited possibility of being challenged/re-opened. The validity of the proceedings themselves and the liquidator’s appointment is to be accepted.

The opening (commencement) of insolvency proceedings has the same effect in other EU states, as it has under the law of the state in which it is taken. No further formality is required. In the case of a creditor’s voluntary winding up, where there is no judicial order, a certificate of confirmation must be provided.

The Regulation provides certain exceptions.  Secondary (furthermore limited) insolvency proceedings may be opened in any other state, which relates only to assets within that state and which are subsidiary to the main proceedings.

Insolvency Officer’s Powers

The liquidator (used in the above wider sense) may exercise all the powers conferred on him by the law of the state in which the original order for insolvency is made,  as long as no secondary proceedings have been opened in the other EU  state and no preservation measure to the contrary has been taken further to the opening or request for the opening of secondary proceedings in that state.

The liquidator may remove the debtor’s asset from the state in which they are situated.  He must comply with the law of that state in doing so.

The Regulation confers EU-wide jurisdiction on the state in which insolvency proceedings are taken to determine actions which relate directly to those proceedings and which are closely connected with it.  This includes action to set aside a transaction by reason of the insolvency, taken against an entity situated in another state.

A claim lodged with a liquidator by a creditor under the Regulation may, if it is not in the English or Irish, be required by the liquidator to be translated, into either of those languages.

Enforcement I

The same broad principles apply to corporate and individual insolvency procedures. The application for enforcement of insolvency proceedings taken (“opened”) in another other EU state, within Ireland, is made to the Master of the High Court.  The Master must declare the insolvency proceedings to be enforceable on proof of completion of the formalities set out in the Brussels Convention without review.

Interim preservation measures as may be required upon commencement of insolvency proceedings. The Master of the High Court must make the requisite enforcement orders pursuant to an application made by the liquidator, where (the largely formal) requirements are shown to be fulfilled.   The enforcement order has the same effect as a High Court order.

Proceedings and compositions approved by courts, and other court orders made in the course of the insolvency and its termination, are to be recognised in other EU states without formality.  They are to be directly enforceable.  Most judgments and orders which are not an intimate part of the insolvency are likely to be recognised under the Judgments Regulation / Convention.

A request for preservation orders against the debtor’s assets in the State must be made to the High Court.  The court may make an order of the type which it could make within its jurisdiction. It may do so unless in the exercise of its ordinary jurisdiction, it would not have made such order or it would be inexpedient to do so.

The liquidator may procure the registration of the insolvency order in the Land Registry.   States may make registration mandatory, in which event liquidators must take the requisite steps to register. The publication in the Land Registry gives notice and inhibits dealings by the insolvent debtor, in registered real property.

There are some limited grounds on which the High Court can refuse recognition.  A state may refuse to recognise insolvency proceedings in another state, where the debtor’s right to be heard has not been given effect.

A state is not obliged to recognise or enforce a judgment that might result in the limitation of personal freedom or where the effect may be manifestly contrary to that state’s public policy, in particular, its fundamental or constitutional principles, rights and liberties, which are guaranteed to the individual.

Publication of EU Insolvency

The state of the debtor’s place of establishment usually requires publication of the insolvency proceedings in accordance with its domestic law.  The publication usually requires identification of the liquidator and the nature and origin of the jurisdiction.  The liquidator is obliged to ensure that the requisite publication is made in the relevant other EU states.

In Ireland, in the case of an insolvency in another jurisdiction, the publication is required of the fact of the proceedings, the decision appointing the liquidator, the name and business address of the liquidator (insolvency officer) and the provisions giving jurisdiction.  The cost of publication and the registration are expenses of the liquidation proceedings.

A certified copy of the order appointing a corporate liquidator must be delivered to the CRO.  The notice must be accompanied by a translation if not in English or Irish.  The Registrar issues a certificate of Registration. Similar publications requirements apply in Iris Oifigiúil and two newspapers.

Publication is required of

• the notice of the court order  commencing  insolvency proceedings;
• where appropriate, the decision appointing the liquidator in those proceedings;
• the name and address of the liquidator and
• the provisions of the Insolvency Regulation giving jurisdiction to open the proceedings.

Certificate of Irish Insolvency

Where a liquidator is appointed in a creditors’ voluntary winding up, and the centre of the company’s main interests under the Insolvency Regulation is in the State, the Master of the High Court may, on application of the liquidator in the prescribed form and on payment of the prescribed fee, confirm the creditors’ voluntary winding up for the purposes of the Insolvency Regulation.  The Master is to provide a certificate of such confirmation.

On the making of a winding-up order or the issue of a certificate of the Master of the High Court above, the Central Office must on request and payment of the prescribed fees and subject to any prescribed conditions, give to the liquidator or examiner concerned a true copy of the order or certificate and the prescribed particulars. This gives formal proof of the status of the insolvency proceedings in the State.

Requesting Claims

It is the duty of the court of the state in which insolvency proceedings are taken, to take steps to inform known creditors with residence, domicile or registered office in the other states in the EU.  The information to be provided to creditors must include

• details of time limits, penalties, and consequences for failure of compliance;
• required proof of debt;
• the body to whom claims must be made; and
• notification regarding whether claims are preferential or secured and what proofs must be lodged.

The notice must be provided in one of the languages of the state in which the proceedings are commenced.  The form of notification must bear a heading, “Invitation to Lodge Claims,” and the time limits to be observed in all official languages of the EU.  There is no specific obligation to provide a full translation.

The creditor may lodge his claim in a language which is an official language of the state in which it is based.  It must bear heading, “Lodgement of Claim” in an official language of the state of the opening of the proceedings.  The liquidator may require the document retranslated into one of the official languages of the state in which the insolvency proceedings are taken.  The creditor bears the cost.

EU Creditors

Any creditor who has his habitual residence, domicile or registered office in a state, other than the state in which the proceedings are opened, may lodge claims in the insolvency proceedings.  All creditors are to be treated equally. A liquidator may require a creditor who has recovered his debt in enforcement proceedings against assets of the debtor in another state, to surrender the same.

Foreign tax and social insurance authorities may claim in liquidations and proceedings in other EU states.  This reverses the traditional common law principle, against enforcing foreign revenue debts.

A creditor who after the commencement of insolvency proceedings recovers any part or the whole of his claim by any means, through assets belonging to the debtor situated in any other state may be required to return the same to the liquidator. He is obliged to share receipts with other creditors of the same ranking or category so that each class obtains an equivalent or rateable dividend.

Where a payment or obligation is made or rendered to a debtor, instead of to the liquidator after the proceedings have commenced in another state, the person concerned is deemed to have discharged the payment or other obligation, if he was not aware of the commencement of proceedings in the other State.  Where the payment is made after publication of the notice of appointment, the person is presumed to be aware of the commencement of the insolvency proceedings.

Secondary Proceedings

Secondary proceedings may take place concurrently with the main proceedings.  They arise where the main proceedings have already been opened in another EU state.In such proceedings, there is no requirement to re-examine the debtor’s insolvency.

The debtor must have an establishment in the state concerned.  The proceedings are limited to the assets situate in the state in which the secondary proceedings are taken. The secondary proceedings must be for winding up and the realisation of assets, rather than for reconstruction or recovery.

The secondary proceedings are to be recognised in the same way as the main proceedings, in other EU states.  The liquidator may exercise rights to recover assets throughout the EU.  The law applicable to the secondary proceedings is the law of the state in which they are taken.

Relationship to Main Proceedings

The liquidator in the main proceedings or another person with the power to commence such proceedings under the law of the state concerned, may take secondary proceedings. The liquidator in the main proceedings can intervene in certain circumstances.  However, for the most part, the jurisdiction of the secondary proceedings takes priority in respect of assets within the state concerned.

The liquidator in the main proceedings and in secondary proceedings have obligations to communicate and cooperate. The liquidator in the main or secondary proceedings may participate in proceedings in the other state, on the same basis as a creditor in those proceedings, and may attend creditors meeting.

A creditor may lodge his claim in the main proceedings or secondary proceedings.  The assets collected in the secondary proceedings are not limited to domestic claims. If all claims in the secondary proceedings are met, the liquidator in those proceedings must transfer assets remaining to the liquidator of the main proceedings.

References and Sources

Primary References

Companies Act 2014 S. 710-  714 (Irish Statute Book)

European Communities (Corporate Insolvency) Regulations 2002

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

Shorter Guides

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

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10^th Ed. (2016) P. and S. Worthington

Company Law in Context 2^nd 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