Mac – Interiors Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Michael Quinn
• Judgment Date: 11 July 2023
• Neutral Citation: [2023] IEHC 395
• Court: High Court
• Docket Number: Record No. 2023 90 COS

In the Matter of Mac – Interiors Limited

and

In the Matter of Part 10 of the Companies Act 2014

[2023] IEHC 395

Record No. 2023 90 COS

THE HIGH COURT

Judgment of Mr. Justice Michael Quinn delivered the 11 ^th day of July 2023

1 . On 30 May 2023, Mac Interiors Limited (“the Company” or “the petitioner”) which has its registered office in Newry, Co. Down, Northern Ireland, presented a petition for the appointment of an examiner to itself pursuant to s. 509 (1) of the Companies Act 2014 (“the Act”) in main proceedings in accordance with Article 3.1 of the EU Insolvency Regulation Recast, EU 2015/848 (“the Regulation”).

2 . On the same day the Company applied to court, as required by O. 74A of the Rules of the Superior Courts, for certain directions and for the appointment of an examiner on an interim basis pending the hearing of the petition.

3 . Dignam J. appointed as interim examiner Mr. Kieran Wallace of Interpath (Ireland) Limited, trading as Interpath Advisory, Fitzwilliam Square, Dublin 2, and made directions for the service and advertisement of the petition and listed the petition for hearing before the court on 14 June 2023.

4 . The petitioner duly complied with the directions of the court made on 30 May 2023 and this Court heard the petition on 14 June 2023.

5 . No party opposed the petition.

6 . The Revenue Commissioners, whose debt at the time of the presentation of the petition was estimated at €12,302,306 stated that they had no objection to the appointment of an examiner.

7 . A solicitor appeared on behalf of Joseph Chamberlain College and Staffordshire County Council, both of whom are contract employers of the Company. The court was informed that these parties may be regarded as a contingent creditor. They adopted a neutral position on the petition.

8 . After hearing the evidence of the petitioner and other parties and submissions of counsel, I made the order appointing Mr. Wallace examiner.

9 . There was brought to my attention a significant and previously undecided point regarding the jurisdiction of the court to make the appointment. I therefore indicated that I would deliver this judgment stating the reasons why the court was satisfied as to its jurisdiction and that on the evidence submitted this was an appropriate case in which to exercise the discretion to appoint an examiner.

10 . The Company is incorporated and has its registered office in Northern Ireland, which of course is outside the State and outside the EU. It is not a “company” within the meaning of that term as defined in s. 2(1) of the Act. The Company submitted that it has its centre of main interests (“COMI”) in the State, within the meaning of that term for the purpose of the Regulation, and that this Court has jurisdiction by virtue of Article 3.1 of the Regulation to open these proceedings and appoint the examiner.

11 . Article 4.1 of the Regulation provides that a court seised of a request to open insolvency proceedings “shall of its own motion examine whether it has jurisdiction pursuant to Article 3”. Therefore, notwithstanding the absence of any objection to the petition, it was necessary to examine the evidence supporting the assertion of jurisdiction pursuant to Article 3.1.

12 . In this judgment I have considered the following matters:

• i. the jurisdiction to open main insolvency proceedings conferred by Article 3.1 of the Regulation.

• ii. The evidence establishing that the Company has its centre of main interests in the State.

• iii. The eligibility of the Company for the appointment of an examiner.

• iv. The evidence supporting the assertion that there is a reasonable prospect of the survival of the Company and all or part of its undertaking as a going concern.

• v. Discretionary considerations.

The Companies Act 2014

13 . Part 10 of the Act (section 508–558) contains the framework by which a company which is or is unlikely to pay its debts and in respect of which it can be shown that there is a reasonable prospect of the survival of the company and all or part of its undertaking may on certain conditions avail of the protection of the court, commonly referred to as a moratorium, whilst a court–appointed officer, the examiner, formulates proposals for a compromise or a scheme of arrangement to facilitate the survival of the company. If the conditions for such an appointment are fulfilled, and the court is satisfied to exercise its discretion to make the appointment, the examiner formulates proposals for a scheme of arrangement which is then put to votes at meetings of members and creditors. If the proposals are approved by at least one class of creditors, and subject to other conditions identified in the Act, the proposals may be submitted to the court for confirmation. Certain conditions must be fulfilled before the court will consider confirmation. They include requirements that the proposals be fair and equitable in relation to any class of members or creditors which has not accepted the proposals, the proposals must not be unfairly prejudicial to any interested party and they must satisfy the “best interests of creditors test” as defined in Directive EU 2019/1023, the Preventive Restructuring Directive.

14 . Where the necessary preconditions are fulfilled the court has discretion to confirm the proposals. A confirmation order renders the scheme binding on all classes of members and creditors including dissenting classes. This is referred to as the “cross-class cram down” effect.

15 . Section 508 is the interpretation section of this part of the Act and provides at subs. 2 as follows:- “(2) This Part is subject to the Insolvency Regulation”.

16 . Section 509 contains the power to appoint an examiner and provides as follows:-

“509. (1) Subject to subsection (2), where it appears to the court that—

(a) a company is, or is likely to be, unable to pay its debts,

(b) no resolution subsists for the winding up of the company, and

(c) no order has been made for the winding up of the company,

the court may, on application by petition presented, appoint an examiner to the company for the purpose of examining the state of the company's affairs and performing such functions in relation to the company as may be conferred by or under this Part.

(2) The court shall not make an order under this section unless

(a) it is satisfied that there is a reasonable prospect of the survival of the company and the whole or any part of its undertaking as a going concern.

(b) the individual to be appointed as examiner has, in cases including cross – border elements, in addition to meeting the requirements of s. 519 (General provisions regarding the qualification of a person to be appointed examiner) sufficient experience and expertise to perform the role, having due consideration to the examiner's experience and to the specific features of the case.

(3) For the purposes of this section, a company is unable to pay its debts if—

(a) it is unable to pay its debts as they fall due,

(b) the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities, or

(c) the circumstances set out in section 570 (other circumstances in which a company is deemed unable to pay its debts) are applicable to the company”.

17 . Section 510 identifies the parties who may present a petition, which includes the company, as in this case.

18 . Section 511 provides that a petition must be accompanied by a report of an independent expert, and stipulates in detail the information which must be contained in such a report. Such a report is before the court on this application, and I shall return later to its contents.

The jurisdiction

19 . The term “company” is defined in s. 2(1) of the Act to mean “a company formed and registered under this Act, or an existing company”. An “existing company” means a company formed and registered under previous Companies Acts.

20 . The Petitioner does not fall within this definition. Therefore, prima facie, the court has no jurisdiction under s. 509.

21 . By contrast, for the purpose of section 517, which provides that where the court appoints an examiner to a company, it may extend his appointment to a related company, the term “related company” includes a company “liable to be wound up” under the Act, which includes certain companies incorporated and registered outside the State provided certain conditions are met (see s. 2(10), 2(11) and Part 22 of the Act).

22 . There are a number of precedents, notably Re: Arctic Aviation Assets DAC [2020] IEHC 664, for the appointment of an examiner to a related company, incorporated outside the state, pursuant to s. 517 of the Act, in reliance on the extended definition of a “related company” to be found in s. 2(10) and s. 2(11) of the Act. However, there is no reported precedent for a petition pursuant to s. 509 of the Act for the appointment of an examiner to a company which is not formed and registered under the Act or an existing company incorporated in the State. It is in these circumstances that the petitioner invokes the direct application of Article 3.1 of the Regulation.

Insolvency Regulation

23 . Article 3 of the Regulation provides as follows:-

“3.1. The courts of the Member State within the territory of which the centre of the debtor's main interests is situated shall have jurisdiction to open insolvency proceedings (‘main insolvency proceedings’). The centre of main interests shall be the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.

In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary. That presumption shall only apply if the registered office has not been moved to another Member...