Chris Symes here, writing from Limerick. Its late summer in Europe, and you might expect the insolvency business to be slow, but there appears to be a certain ‘scurrying’ – perhaps its an early preparation for winter. I’ve been in the Czech Republic, Slovak Republic and Spain talking to lawyers about the euro debt crisis and the reforms that could follow but now I’ve temporarily ‘settled’ in Ireland. Ireland has a draft Companies Bill 2011 and interestingly it is structured so that the private company limited by shares is the default company type and forms ‘Pillar 1’ which has been released for comment. The second part of the legislation dealing with all other types of companies will be released later. For the insolvency reform, the Bill aligns the court winding up provisions with the creditors’ voluntary winding up provisions, it moves some of the existing court supervisory roles to liquidators and as a consequence introduces liquidator qualifications for the first time, and generally modernises the existing law.
Insolvency is all around me in Ireland. Figures released here last week show 4 companies have gone bust every day since the New Year, 26% of all insolvencies are in the construction industry, and receiverships for the month of July rose 102% over June! Two insolvency cases have been making news in Ireland over the last few weeks. A large supermarket company Superquinn has been in receivership since the day I arrived. On the next day the receivers from KPMG, who were appointed by a syndicate of banks, were able to arrange a buyer, the opposition retailing group, Musgrave! Two days later the directors of Superquinn made application to the High Court of Ireland to appoint an examiner [close to what in Australia would be administration, but court-appointed process- it is interesting to note that in this case and the one set out below, application to court for an examiner happened after the receiver/liquidators were appointed. In other words, examinership is not seen as the first resort to try to rescue a business, as in Australia]. The company had been in existence for over 50 years and concentrated on the ‘upper segment of the market’ and this and its move into property seems to have caused problems when Irish property values dropped [by up to 60% suggested by some commentators] and customers falling on hard times moved to purchase from cheaper competitors. The company has debts estimated at 450million euros and 3,500 workers.
The second newsworthy insolvency in Ireland was last Friday’s announcement that Home Payments Ltd was in liquidation with provisional liquidators appointed from KPMG with the approval of the High Court. The company, again in operation for a long period (1962), collected payments from customers and then paid their household debts, they provided a household budgeting service that consolidated its customers bills into fixed weekly or monthly payments. It also provided loans. Again, the company during the Celtic tiger boom bought 12 properties as investments. The company had 2,300 customers and most are in credit with the company for less than 3000 euros with only 23 owed more 10000 euros. By closing their doors without notice last week they prevented a ‘run’ of customers withdrawing their ‘deposits’. This is something of an unusual business for us Australians and will be interesting to watch as it proceeds in the court with the company, banks and depositors having different positions.
Slan (thats Goodbye in Irish!)