Welcome Irish High Court Ruling in Corporate Rescue Case: Clarification on Import and Effect of Undertakings to Discharge Current Revenue Liabilities During Period of Protection Afforded by Examinership
It has become a frequent feature for Irish companies seeking court protection through examinership to provide a written undertaking at the petition stage that it will discharge in full post-petition taxes to the Irish Revenue Commissioners (the 'Revenue') that accrue and fall due during the period of protection. A recent written judgment of the Irish High Court (Ms Justice Baker) in Harley Mechanical Services Ltd & the Companies Act 20141 (the 'Proceedings') has provided welcome clarity on the import and effect of such undertakings.
Walkers' Dublin office acted on behalf of the examiner/ liquidator in the Proceedings and was successful in challenging an order which had the effect of deeming unpaid Revenue liabilities as costs in the examinership and thus given special status such that these monies would be unavailable to the liquidator to discharge his own fees and the claims of other creditors.
Ireland boasts a powerful, flexible, corporate restructuring process, which international corporates will recognise as similar to the Chapter 11 of the US Bankruptcy Code. Examinership is a court supervised statutory process2 available to an insolvent company which has a reasonable prospect of survival as a going concern. The procedure is commenced by way of presentation of a petition to the Irish High Court (the 'Court') seeking the appointment of an independent office holder called an examiner (invariably an insolvency practitioner) to the company and, if appropriate, related companies.3 Upon the presentation of the petition, the company is placed under the protection of the Court which affords it extensive protection from enforcement or execution action by its creditors. Usually the petitioner is the company itself. However, other stakeholders, such as directors, creditors and shareholders holding at least 10% of the issued share capital of the company, also have standing to present an examinership petition.
From an EU law perspective, examinership, is recognised as a main insolvency proceeding for the purposes of the Recast European Insolvency Regulation ('EIR Recast'). The company which is the primary subject of the petition must have its centre of main interests4 ('COMI') in Ireland. Companies which are incorporated or registered elsewhere in the EU but have their COMI in Ireland can be the subject of the petition. It is also possible to apply for the appointment of an examiner to a foreign (i.e. non-EU) company, as a related company, if that company may be wound up by the courts of Ireland.5
Like Chapter 11, examinership is a debtor-in-possession process whereby (save in exceptional circumstances) the directors retain control and executive power of the...