Liquidation Of Irish Bank Resolution Corporation And Exchange Of Promissory Notes

Author:Mr Pádraig Ó Ríordáin, Isabel Foley, Dr. Thomas B. Courtney, John Donald, Ailish Finnerty, Cormac Kissane, Maura McLaughlin, Robert Cain, Gary McSharry and Caroline Connolly
Profession:Arthur Cox

Irish Bank Resolution Corporation Act and Appointment of Special Liquidators

In the early hours of 7 February 2013, the Irish Bank Resolution Corporation Act 2013 (the "IBRC Act") was passed. The IBRC Act provides for the Minister for Finance to make a "Special Liquidation Order" ("SLO") winding up IBRC. As a result of the SLO:

Kieran Wallace and Eamonn Richardson of KPMG were appointed as joint Special Liquidators of IBRC; all proceedings against IBRC (including to appoint a receiver) were stayed and no further proceedings can be issued against IBRC without the consent of the High Court of Ireland, but IBRC's claims against third parties are unaffected; no petition may be made to wind up subsidiaries of IBRC or place them in examinership without the consent of the Special Liquidator; and the employment of IBRC's employees was terminated with immediate effect. Any investigations or proceedings already, or to be, undertaken by the Central Bank of Ireland ("CBI"), the Director of Public Prosecutions, An Garda Síochána, the Director of Corporate Enforcement or any other regulatory authority are unaffected by the SLO. The terms and conditions of mortgages, loans and other products provided to IBRC customers are unaffected by the SLO.

The IBRC Act disapplies or amends some provisions of the Companies Act, the Central Bank and Credit Institutions (Resolution) Act 2011 and other legislation in relation to IBRC.

Disposals of IBRC Assets

Under the IBRC Act, the Special Liquidators can exercise all of the powers and functions of the Board of IBRC and may dispose of the assets and liabilities of IBRC notwithstanding pre-existing statutory, equitable or contractual restrictions on such disposals.

As a result of the appointment of the Special Liquidator, the CBI became the economic owner of the promissory notes dated 22 December 2010 issued by the Minister for Finance to IBRC (€25.3 billion) and Irish Nationwide Building Society (€5.3 billion) (together, the "Promissory Notes") and the other IBRC assets held by the CBI as collateral for the Exceptional Liquidity Assistance Facility ("ELA Facility") provided by the CBI to IBRC.

The National Asset Management Agency ("NAMA") will acquire the ELA Facility and the associated floating charge over IBRC assets from the CBI in exchange for Government guaranteed NAMA bonds, and NAMA will then enforce its security. As a result, NAMA will become entitled to the proceeds of any disposal of IBRC's charged...

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