Insolvency review

An ODCE perspective

Kevin Prendergast

Corporate Compliance Manager, ODCE.

Presentation Overview

• Insolvency and the restriction process

• How ODCE interacts with liquidators

• Current ODCE experience

Insolvency and the restriction process

• ODCE receives reports on every liquidation

• Liquidator must take restriction proceedings (Section 150 CA1990) unless relieved by ODCE

• Liquidator can choose not to seek relief

• Liquidator can choose to pursue disqualification action

Insolvency and the restriction process

• Restriction typically lasts for five year period

• Name recorded on register at CRO

• Any company of which they are a director must be adequately capitalised

– Private company €63,487, plc €317,435

– Company limited by guarantee, must resign

Insolvency and the restriction process

• ODCE acts as filter to relieve Court of duty to examine all insolvencies

• Not relieving liquidator is not a finding of culpability

• Ultimately only the High Court can impose a restriction order

ODCE and Liquidators

• A joint process– Liquidators must report within 6 months

• Liquidators may be given more time to reach conclusions– Relief at this time

• Open communications

ODCE and Liquidators• Vast majority of cases we are guided by

liquidators– since 2003, ODCE has accepted recommendations to

grant relief in over 95% of cases

• in the small number of cases where we refused relief when sought, the High Court restricted in 60% of these cases

• since 2003, we have also granted relief in another 2% of cases where the liquidator did not seek relief

ODCE and Liquidators

• With regard to the conduct of directors in general– we relieve liquidators in respect of 3 out of

every 4 directors– In 2008 91% of cases involved relief from

restriction proceedings– of the 1 in 4 who go to Court, 80% are

restricted or disqualified– in 2007, restricted in 96% of cases heard

ODCE and Liquidators

• Reasons for not granting relief

• Decision Notice D/2002/3– 5.7 Criteria for Consideration of Reports

• Irresponsibility rather than Dishonesty

ODCE and Liquidators

– Evidence of trading while insolvent– Level of debts/Revenue– Payment of non-preferential creditors (e.g.

directors)– Failure to keep proper books being a

contributory cause to insolvency– Accumulation of issues

ODCE and Liquidators

• The successful role of the Office– the 240 cases or so kept out of Court annually

and – the close alignment between ODCE and Court

decision-making

ODCE and Liquidators

• Law since 2001 has regularised matters for all liquidations

• Some 650 persons now restricted

• Liquidators aware of their obligations

• Dishonest and irresponsible directors sanctioned

Current ODCE experience

• Reports received from liquidators– Historic low of 273 in 2007– Rose to over 400 in 2008– By end of 2008 running at over 70 a month– Looking at in excess of 700 for 2009

Current ODCE experience

• Of the notified liquidator appointments in 2008 (596)– Almost 50% were in construction/property– This is broadly in line with 2007 proportions– Notified appointments up 85%

Current ODCE experience

• Unliquidated insolvent companies– Struck off register for failing to file returns and

owing debts– Office monitors such strike-offs– Directors of such companies can face

disqualification unless they can prove no debts owing

Current ODCE experience

• Companies have three options– Show evidence of no debts/debts paid off– Re-register companies with CRO, obtaining

audit reports where necessary and paying all fees and penalties (may involve High Court)

– Face disqualification proceedings– 12 directors disqualified, one restricted in 2008

Further information

• Decision Notice D/2002/3

• Information Notice I/2009/1– Removal of need for subsequent reports after

primary decision

• www.odce.ie

THANK YOU