The European Union (Preventive Restructuring) Regulations 2022 (SI 380/2022) were signed by the Minister for Enterprise Trade and Employment on 27 July 2022.In the following paragraphs they are referred to as the “2022 Regulations”. The 2022 Regulations were issued for the purpose of giving effect to EU Directive 2019/1023 (the “Directive”).The meaning of certain definitions or phrases used in the 2022 Regulations can be found in the Directive.
The 2022 Regulations amend certain provisions of the Companies Act 2014.Please refer to the 2022 Regulations and the Directive for full details and we set out some of the key provisions below.
Perhaps the most noteworthy change is to voting rights of creditors. The 2022 Regulations provide that creditors or classes of creditors whose interests or claims will not be impaired by the examinership proposals will not have voting rights. This is a significant change to the position before the 2022 Regulations came into force and it means that for example an unsecured creditor which would be in line to get nothing in a liquidation is now precluded from voting rights. In the words of the Directive (Article 9 (2)), parties that are not affected by a restructuring plan shall not have voting rights in the adoption of that plan.
The 2022 Regulations provide that Directors who believe that a company is or is likely to be unable to pay its debts must have regard to the interests of creditors. This is a duty owed to the company (only).
The 2022 Regulations also impose an obligation on directors to have regard to the interests of the company’s creditors where the directors become aware of the company's insolvency.
Early warning tools. A new section is added to the Companies Act 2014 by the 2022 Regulations providing that a director may have regard to early warning tools. The new section states what an early warning tool is. Readers may also refer to the Directive for further references to early warning tools.
Section 509 of the 2014 Act is amended so that now an individual who is to be appointed as examiner in a case which includes a cross border element must show sufficient experience and expertise to perform the role.
The section in the 2014 Act which imposes a stay of proceedings by creditors is amended by the 2022 Regulations which carves out employee claims so that they may commence or advance certain actions or proceedings even though the company is under the protection of the court.
A new section is added preventing creditors withholding performance of, terminating, accelerating or otherwise modifying executory contracts on the basis of a company’s examinership and /or inability to pay monies owing.
Section 529 which protects certain liabilities as expenses properly incurred is amended. The new provision makes certain provision for those liabilities where the company is wound up within 6 months of the end of the protection period.
The 2022 Regulations clarify that the maximum time period of court protection is one year. It also makes some changes in respect of the validity of a floating charge in certain circumstances and in relation to an unfair preference.
Readers may find the following articles of interest in relation to the changes:
Department of Enterprise, Trade and Employment - European Union (Preventive Restructuring) Regulations 2022 Information Note - DETE (enterprise.gov.ie)
DLA Piper Global Law firm Examinership Modified: Ireland Transposes the Preventive Restructuring Directive into Law | Insights | DLA Piper Global Law Firm
Arthur Cox LLP. Directors’ duties: new statutory duties to have regard to the interests of creditors - Arthur Cox LLP
Addleshaw Goddard LLP Creditors’ Interests at the Forefront of New Directors’ Duties | Addleshaw Goddard LLP
Eversheds Sutherland LLP Preventive Restructuring Directive Modifies Examinership Procedure- Publications - Eversheds Sutherland (eversheds-sutherland.com)
Byrne Wallace LLP Changes to the Irish Examinership Regime: Transposition of EU (Preventive Restructuring) Directive - ByrneWallace LLP
Fieldfisher - Preventative Restructuring Regulations – Changes to the Examinership Process | Fieldfisher
Matheson LLP - Preventive Restructuring Directive Takes Effect in Ireland (matheson.com)
Please also see the International Monetary Fund technical note on insolvency and creditors rights which analyses select aspects of the system for insolvency and creditors’ rights in the context of an overall assessment of the Irish financial sector.
These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by Chartered Accountants Ireland in the preparation of these pages, we do not guarantee the accuracy or veracity of any statement, resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. Chartered Accountants Ireland is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.
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