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					                                             Information Book 6 - Creditors




Decision Notice D/2002/1
The Principal Duties and Powers of
Creditors
under the Companies Acts 1963-2001   www.odce.ie
Decision Notice D/2002/1
Information Book 6
The Principal Duties and Powers of
Creditors
under the Companies Acts 1963-2001
COPYRIGHT STATEMENT

The contents of this document are the copyright of the Director of Corporate
Enforcement. Nothing herein should be construed as a representation by, or
 on behalf of, the Director of Corporate Enforcement as to his understanding
 or interpretation of any of the provisions of the Companies Acts 1963 to
  2001 or as to the interpretation of any law.

  Independent legal advice should be sought in relation to the effects of any
   legal provision. The Director of Corporate Enforcement accepts no
    responsibility or liability howsoever arising from any errors, inaccuracies
    or omissions in the contents of this document. The Director reserves the
     right to take action, which may or may not be in accordance with the
     provisions of this document.
Contents

1.0   Introduction                                                           2
2.0   Principal Powers of Creditors                                          3

2.1   What is a Creditor                                                     3
2.2   Creditors’ Powers                                                      3
      2.2.1       Creditors’ Power to Appoint a Liquidator                   3
                  – By Order of the High Court
                  – Creditors’ Voluntary Liquidation
      2.2.2       Creditors’ Powers to Appoint a Receiver                    4
      2.2.3       Creditors’ Powers to Seek the Appointment of an Examiner   4
      2.2.4       Creditors’ Powers to Seek Court Judgements in
                  Respect of Debts Owed                                      5
      2.2.5       Creditors’ Powers where Default Exists                     5
      2.2.6       Creditors’ Powers to Seek an Investigation of a Company    5
      2.2.7       Creditors’ Powers where a Company is not in Liquidation    5
      2.2.8       Creditors’ Power to Seek the Restoration
                  of a Company to the Register of Companies                  6

3.0   Penalties Under the Companies Acts                                     6

3.1   Penalties for Criminal Offences                                        6
      Court Imposed Penalties
      Administrative Fines
3.2   Civil Penalties                                                        7




                                                                                 ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS
      Disqualification
      Restriction
      Strike Off

4.0   Useful Addresses                                                       8


Appendix A        Creditors’ Participation in a Liquidation                  8


Appendix B        Creditors’ Participation in an Examinership                9




                                                                                 1
                                                               1.0 Introduction                                 Information Book 1 – Companies
                                                                                                                Information Book 2 – Company
                                                                                                                                     Directors
                                                                   The Companies Acts 1963-2001 contain
                                                                                                                Information Book 3 – Company
                                                                   extensive provisions detailing how the
                                                                                                                                     Secretaries
                                                                   affairs of companies are to be
                                                                   conducted. These provisions describe         Information Book 4 – Members and
                                                                   how the various participants in                                   Shareholders
                                                                   companies should discharge their duties
                                                                                                                Information Book 5 – Auditors
                                                                   and obligations. In addition, partici-
                                                                   pants are accorded substantial rights        Information Book 6 – Creditors
                                                                   and powers in order to enable them to        Information Book 7 – Liquidators,
                                                                   assert their rights and, if necessary,                            Receivers and
                                                                   defend their personal and/or corporate                            Examiners
                                                                   interests.
                                                                                                                In addition to information on the
                                                                   The Director of Corporate Enforcement        relevant duties and powers, each book
                                                                   is of the view that the extensive require-   contains information on the penalties
                                                                   ments of the Companies Acts make it          for failure to comply with the require-
                                                                   difficult for many non-professional          ments of the Companies Acts and useful
                                                                   participants in company affairs to be        addresses and contact points.
                                                                   well informed of their rights and obliga-
                                                                                                                Each book has been prepared for use by
                                                                   tions under the law. This has, in part,
                                                                                                                a non-professional audience in order to
                                                                   contributed to an inadequate standard
                                                                                                                make the main requirements of
                                                                   of compliance with company law in the
                                                                                                                company law readily accessible and
                                                                   past.
                                                                                                                more easily understandable.
                                                                   Section 12(1)(b) of the Company Law
ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS




                                                                                                                The Director of Corporate Enforcement
                                                                   Enforcement Act 2001 specifies that a
                                                                                                                considers it important that individuals
                                                                   function of the Director is “to
                                                                                                                who take the benefits and privileges of
                                                                   encourage compliance with the
                                                                                                                incorporation should be aware of the
                                                                   Companies Acts”. Consistent with this
                                                                                                                corresponding duties and responsibili-
                                                                   remit, the Director issued a
                                                                                                                ties. These information books are
                                                                   Consultation Paper setting out the
                                                                                                                designed to increase the awareness of
                                                                   principal duties and powers of
                                                                                                                individuals in relation to those duties
                                                                   companies, company directors,
                                                                                                                and responsibilities.
                                                                   company secretaries, members &
                                                                   shareholders, auditors, creditors,           The Director wishes to make clear that
                                                                   liquidators, receivers and examiners         this guidance cannot be construed as a
                                                                   under the Companies Acts 1963-2001.          definitive legal interpretation of the
                                                                   The responses received in response to        relevant provisions. Moreover, it must
                                                                   the Consultation Paper were reviewed in      be acknowledged that the law is open to
                                                                   detail and, following that review, the       different interpretations. Accordingly,
                                                                   comments and suggestions made by the         readers should be aware that there are
                                                                   various contributors were, as far as is      uncertainties in how the Courts will
                                                                   practicable, taken into account.             interpret the law, particularly when the
                                                                                                                law is applied to the specific circum-
                                                                   The resulting guidance has been
                                                                                                                stances of specific companies and
                                                                   prepared in the form of a series of
                                                                                                                individuals.
                                                                   information books. There are informa-
                                                                   tion books on the following topics:



2
It is important to note that where         2.0 Principal Powers of Creditors
readers have a doubt as to their legal
obligations or rights, they should seek
independent professional legal or
accountancy advice as appropriate.         2.1   What is a Creditor

As changes are made to company law in            A creditor of a company is a person or
the future, the Director intends to keep         company to whom the company owes a
this guidance up to date. He also                debt. Broadly speaking, there are two
welcomes comment on its content, so              types of creditor, namely;
that future editions can remain as                •   Secured creditor: a secured creditor
informative as possible.                              is a person whose debt is secured
                                                      on one or more of the company’s
                                                      assets. For example, a financial
Office of the Director of Corporate                   institution which lends money to a
Enforcement                                           company to purchase premises will
November 2002                                         usually require the deeds to the
                                                      premises to be given as security for
                                                      the loan. A secured creditor may,
                                                      as part of the loan agreement, also
                                                      reserve the right to appoint a
                                                      receiver where its debt is not
                                                      repaid. A receiver’s task is to sell,
                                                      or otherwise dispose of the secured
                                                      asset(s) with a view to repaying the
                                                      debt. See Information Book 7 for
                                                      further information on Receivers.




                                                                                              ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS
                                                  •   Unsecured creditor: an unsecured
                                                      creditor’s debt is not secured on
                                                      any of the company’s assets.
                                                      Accordingly, in the event that the
                                                      company cannot pay its debts,
                                                      secured creditors will be paid
                                                      before unsecured creditors.

                                           2.2   Creditors’ Powers
                                                 The most significant power that
                                                 creditors have under the Companies
                                                 Acts is to seek to have the company
                                                 liquidated (i.e. legally dissolved). In
                                                 addition to liquidation and receivership,
                                                 creditors have various other powers to
                                                 address defaults in the operation of a
                                                 company. Details of these powers are set
                                                 out below.

                                                 2.2.1 Creditors’ Powers to Appoint a
                                                 Liquidator
                                                 A company can be wound up in two
                                                 ways which involve the creditors,



                                                                                              3
                                                                          namely; by order of the High Court and                                                                        amount of their claims. This statement
                                                                          by way of a creditors’ voluntary liquida-                                                                     must be presented to the creditors’
                                                                          tion.                                                                                                         meeting.
                                                                          By Order of the High Court                                                                                    A nominated director will preside at the
                                                                          A creditor can petition the High Court                                                                        creditors’ meeting and will generally
                                                                          for the winding up of a company where                                                                         outline reasons for the failure of the
                                                                          it is unable to pay its debts1. A company                                                                     company and answer questions. The
                                                                          is deemed to be unable to pay its debts                                                                       meeting will consider the statement of
                                                                          where:                                                                                                        affairs prepared by the directors, may
                                                                                                                                                                                        appoint a Committee of Inspection4 and
                                                                             •       a creditor has not been paid a debt
                                                                                                                                                                                        will consider the appointment of a
                                                                                     of €1,270 (£1,000) or more within
                                                                                                                                                                                        liquidator nominated at the members’
                                                                                     three weeks of a written demand,
                                                                                                                                                                                        meeting and his or her possible replace-
                                                                                     or;
                                                                                                                                                                                        ment. The members’ nominee for
                                                                             •       where a Court judgement is
                                                                                                                                                                                        liquidator will be replaced by a
                                                                                     unsatisfied, or;
                                                                                                                                                                                        creditors’ nominee, if a majority of
                                                                             •       where it is otherwise proved to the                                                                creditors by value wish to do so.
                                                                                     satisfaction of the Court that it is
                                                                                                                                                                                        Creditors participation in the liquida-
                                                                                     unable to pay its debts2.
                                                                                                                                                                                        tion process, where a company is in
                                                                          Where a company disputes in good faith
                                                                                                                                                                                        insolvent liquidation, is outlined in
                                                                          that the debt is due and owing to the
                                                                                                                                                                                        Appendix A.
                                                                          creditor, the petition will be adjourned
                                                                          pending determination of the validity of                                                                      2.2.2 Creditors’ Powers to Appoint a
                                                                          the debt. In order to have the petition                                                                       Receiver
                                                                          dismissed, the company must establish
                                                                                                                                                                                        Where a company is in default in paying
                                                                          that there is no liability in respect of the
                                                                                                                                                                                        a secured creditor, the secured creditor
ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS




                                                                          debt. The Court also has an inherent
                                                                                                                                                                                        may seek to have a receiver appointed
                                                                          jurisdiction to refuse relief where it
                                                                                                                                                                                        to the company, either pursuant to
                                                                          considers the application to be an abuse
                                                                                                                                                                                        powers contained in the debenture (loan
                                                                          of its process, such as using the petition
                                                                                                                                                                                        agreement) relating to the debt in
                                                                          as a method of debt collection.
                                                                                                                                                                                        question or by making application to
                                                                          Creditors’ Voluntary Liquidation                                                                              the High Court as appropriate. See
                                                                          Where the members of a company                                                                                Information Book 7 for further detail on
                                                                          resolve in general meeting of the                                                                             Receivers.
                                                                          company that it (i.e. the company)
                                                                          cannot by reason of its liabilities                                                                           2.2.3 Creditors’ Powers to Seek the
                                                                          continue its business and that it should                                                                      Appointment of an Examiner
                                                                          be wound up voluntarily, a liquidator
                                                                                                                                                                                        Examinership is a process whereby a
                                                                          should be appointed at a members’
                                                                                                                                                                                        company is placed under the ‘protec-
                                                                          meeting and the company should call a
                                                                                                                                                                                        tion’ of the Court. In that context,
                                                                          meeting of its creditors for the day on
                                                                                                                                                                                        protection refers to protection from the
                                                                          which or the day after the winding up
                                                                                                                                                                                        company’s creditors. The topic of
                                                                          resolution is proposed3.
                                                                                                                                                                                        examinerships is dealt with in more
                                                                          It must advertise this meeting and give                                                                       detail in Information Book 7.
                                                                          ten days notice to the creditors. The
                                                                                                                                                                                        A creditor can apply to the High Court
                                                                          directors must prepare a full statement
                                                                                                                                                                                        for the appointment of an examiner
                                                                          of the position of the company’s affairs,
                                                                                                                                                                                        where it appears that:
                                                                          a list of its creditors and the estimated


                                                               1   Section 213 Companies Act, 1963 as amended by paragraph 17 of the first schedule and the third schedule to the Companies (Amendment) Act, 1983 and section 93 Company Law Enforcement Act,
                                                                   2001
                                                               2   Section 214 Companies Act, 1963 as amended by section 123 Companies Act, 1990
4                                                              3
                                                               4
                                                                   Section 266 Companies Act, 1963 as amended by section 130 Companies Act, 1990
                                                                   A Committee of Inspection oversees the liquidator in the discharge of his or her functions. Where a Committee of Inspection is established, it also fixes the remuneration to be paid to the liquidator.
              •       a company is, or is likely to be,                                                                less than €6,350 (IR£5,000) and cannot
                      unable to pay its debts, and;                                                                    exceed €317,400 (IR£250,000).
              •       there is no winding up (i.e. liquida-                                                            Inspectors appointed under this section
                      tion) in being, and;                                                                             take their directions from, and report
                                                                                                                       to, the High Court.
              •       the Court is satisfied that there is a
                      reasonable prospect of the survival
                                                                                                                       2.2.7. Creditors’ Powers where a
                      of the company and the whole or
                                                                                                                       Company is not in Liquidation
                      any part of its undertaking as a
                      going concern5.                                                                                  Where it is proved to the High Court
                                                                                                                       that a company is unable to pay its
           Creditors’ participation in the examiner-
                                                                                                                       debts or where a creditor of the
           ship process is outlined in Appendix B.
                                                                                                                       company has obtained a judgment for a
           2.2.4 Creditors’ Powers to Seek Court                                                                       debt but has been unsuccessful in
           Judgements in Respect of Debts Owed                                                                         attempting to execute it and the
                                                                                                                       company is not in liquidation due to the
           Where a company fails to pay a debt
                                                                                                                       insufficiency of its assets, creditors can
           owing to a creditor, the creditor can
                                                                                                                       apply to the Court for the exercise of a
           seek a court judgement against the
                                                                                                                       number of powers which are normally
           company, which may thereafter be
                                                                                                                       exercised in the context of a liquidation
           enforced by a number of methods
                                                                                                                       pursuant to section 251 of the 1990
           including registration in the High Court
                                                                                                                       Act.
           and collection by the Sheriff.
                                                                                                                       Creditors can apply to the Court for
           2.2.5 Creditors’ Powers where Default                                                                       various reliefs, including:
           Exists6
                                                                                                                          (a) the inspection of the books and
           Where a company or any of its officers                                                                             papers of the company;
           is in default in complying with any                                                                            (b) the arrest of a contributory8,




                                                                                                                                                                     ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS
           provision of the Companies Acts, a                                                                                 director, shadow director, secretary
           creditor can serve a notice requiring the                                                                          or other officer of a company and
           default to be made good within fourteen                                                                            for the seizure of his books, papers
           days. If the company or officer fails to                                                                           and movable property;
           make good the default, the creditor can
                                                                                                                          (c) an order directing that a related
           apply to the High Court for an order
                                                                                                                              company contribute to the assets of
           directing the company or officer to
                                                                                                                              the insolvent company;
           make good the default.
                                                                                                                          (d) the return of assets improperly
           2.2.6. Creditors’ Powers to Seek an                                                                                disposed of;
           Investigation of a Company7                                                                                    (e) the imposition of personal liability
                                                                                                                              on a director for fraudulent or
           A creditor of the company can apply to
                                                                                                                              reckless trading;
           the High Court for the appointment of
           one or more Inspectors to investigate                                                                          (f) the assessment of damages for
           and report on the affairs of a company.                                                                             wrongdoing;
           Where the Court appoints Inspector(s),                                                                         (g) the imposition of personal liability
           it specifies the precise matters to be                                                                             on a director where the company
           enquired into. Where a creditor makes                                                                              has not maintained proper books;
           such an application, they may be                                                                               (h) the examination of the officers of
           required to give security for payment of                                                                           the company on oath in relation to
           the costs of the investigation. The                                                                                the affairs of the company.
           security required by the Court cannot be


5   Section 2 Companies (Amendment) Act, 1990
6   Section 371 Companies Act 1963
7
8
    Section 7 Companies Act, 1990
    A contributory is any person liable to contribute to the assets of a company in the event of its being wound up (section 208 Companies Act, 1963)
                                                                                                                                                                     5
                                                               2.2.8 Creditors’ Power to Seek the         3.0 Penalties Under the
                                                               Restoration of a Company to the                Companies Acts
                                                               Register of Companies
                                                               Where a company has been struck off
                                                               the register of companies for failure to
                                                                                                          3.1   Penalties for Criminal Offences
                                                               make an annual return or for failure to
                                                               make a statement of its particulars to           Court Imposed Penalties
                                                               the Revenue Commissioners, a creditor
                                                                                                                Under the Companies Acts, provision is
                                                               can apply to the Circuit Court for an
                                                                                                                made for two types of criminal offence,
                                                               order restoring the company to the
                                                                                                                namely summary and indictable
                                                               register, so that it can proceed against
                                                                                                                offences. A summary offence is
                                                               the company. Where a company is
                                                                                                                generally of a less serious nature and is
                                                               restored in this manner, the company is
                                                                                                                tried before a judge only in the District
                                                               deemed to have continued in existence
                                                                                                                Court. Indictable offences are generally
                                                               as though it had not been struck off.
                                                                                                                of a more serious nature. Indictable
                                                               Where a company has been struck off              offences can, in the same way as
                                                               the register of companies due to its not         summary offences, be tried in the
                                                               carrying on business, a creditor can             District Court before a judge only.
                                                               apply to the High Court for an order             However, the distinction between a
                                                               restoring the company to the register.           summary offence and an indictable
                                                               The Court will make such an order if it          offence is that, due to their more serious
                                                               is satisfied that it is just that the            nature, indictable offences can also be
                                                               company be restored. Where a company             tried in the Circuit Court i.e. before a
                                                               is restored in this manner, the company          judge and jury. Where this course is
                                                               is deemed to have continued in existence         taken, the indictable offence is said to
                                                               as though it had not been struck off.            be prosecuted on indictment.
ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS




                                                                                                                Where an offence is prosecuted on
                                                                                                                indictment, the penalties provided for
                                                                                                                by the law on conviction are generally
                                                                                                                considerably higher than had the
                                                                                                                offence been prosecuted summarily.
                                                                                                                In general the maximum penalty on
                                                                                                                conviction:
                                                                                                                 •   of a summary offence under the
                                                                                                                     Companies Acts is €1,900 and/or
                                                                                                                     12 months imprisonment, and;
                                                                                                                 •   of an indictable offence under the
                                                                                                                     Companies Acts is €12,700 and/or
                                                                                                                     5 years imprisonment.
                                                                                                                However, the Companies Acts also
                                                                                                                provide for considerably higher
                                                                                                                sanctions in respect of certain offences
                                                                                                                e.g. fraudulent trading (€63,000 and/or
                                                                                                                7 years imprisonment on conviction on
                                                                                                                indictment) and insider dealing
                                                                                                                (€254,000 and/or 10 years imprison-
                                                                                                                ment on conviction on indictment).



6
             Administrative Fines                                                                                            Such a restriction prevents a person
                                                                                                                             from being a director or secretary or
             Under the provisions of the Company
                                                                                                                             being involved in the formation or
             Law Enforcement Act, 2001, the
                                                                                                                             promotion of any company unless it is
             Director of Corporate Enforcement also
                                                                                                                             adequately capitalised. In the case of a
             has the discretion to impose an adminis-
                                                                                                                             private company, the capital require-
             trative fine rather than initiating a
                                                                                                                             ment is €63,487 (£50,000) in allotted
             summary prosecution. Where the
                                                                                                                             paid up share capital, and in the case of
             Director chooses this course of action,
                                                                                                                             a public company, €317,435
             provided that the fine is paid and the
                                                                                                                             (£250,000). Such a company is also
             default in question is remedied within
                                                                                                                             subject to stricter rules in relation to
             21 days, no prosecution will ensue9.
                                                                                                                             capital maintenance. The topic of
3.2          Civil Penalties                                                                                                 restriction is dealt with in detail in
                                                                                                                             Appendix B to Information Book 2.
             Disqualification
                                                                                                                             Strike Off
             In addition to fines and penalties, there
             are also provisions for other sanctions                                                                         Where a company defaults in
             under the Acts. Persons convicted on                                                                            performing certain of its legal obliga-
             indictment of an indictable offence                                                                             tions e.g. fails to file an annual return
             relating to a company or involving                                                                              with the Registrar of Companies, the
             fraud or dishonesty are automatically                                                                           Registrar can strike the company off the
             disqualified from acting as company                                                                             register of companies.
             directors/officers (see Appendix B to                                                                           If struck off the register, ownership of a
             Information Book 2 – Company                                                                                    company’s assets automatically transfers
             Directors).                                                                                                     to the State. Ownership will remain
             The Director of Corporate Enforcement                                                                           with the State until such time as the




                                                                                                                                                                                                                         ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS
             can also apply to the Courts seeking the                                                                        company is restored to the register.
             disqualification of any person:                                                                                 While struck off, the liability of every
                                                                                                                             director, officer and member of the
               •       guilty of two or more offences of
                                                                                                                             company continues and may be
                       failing to maintain proper books of
                                                                                                                             enforced as though the company had
                       account, or;
                                                                                                                             not been dissolved11.
               •       guilty of three or more defaults
                                                                                                                             The procedures required to have a
                       under the Companies Acts.
                                                                                                                             company reinstated to the register are
             Restriction                                                                                                     dealt with in Appendix A to
                                                                                                                             Information Book 1.
             The provisions relating to the restriction
             of company directors apply to insolvent
             companies i.e. companies that are
             unable to pay their debts as they fall
             due. Where a company which goes into
             liquidation or receivership10 is insolvent,
             a director of the company who fails to
             satisfy the High Court that he or she
             has acted honestly and responsibly will
             be restricted for a period of up to five
             years.




9    Section 109 Company Law Enforcement Act, 2001
10   A liquidator’s function is to collect and realise the assets of the company, to discharge the company’s debts, to distribute any remaining surplus, investigate the company’s affairs and to legally dissolve the
     company. The function of a receiver is to dispose of certain assets of the company in order to allow the repayment of a debt to a creditor e.g. a bank. See Information Book 7 for further information on

11
     liquidators and receivers.
     Section 12B(1) Companies (Amendment) Act, 1982 as inserted by section 46 Company Law Enforcement Act, 2001
                                                                                                                                                                                                                         7
                                                                4.0 Useful Addresses                                                                                 Appendix A
                                                                                                                                                                     Creditors’ Participation in a
                                                                                                                                                                     Liquidation
                                                                               Office of the Director of Corporate
                                                                               Enforcement,
                                                                               16 Parnell Square,                                                                               Where a company is in insolvent
                                                                               Dublin 1.                                                                                        liquidation, a creditor has a number of
                                                                               Tel: 01 858 5800                                                                                 powers available.
                                                                               Web: www.odce.ie
                                                                                                                                                                                   •      A creditor can apply to the High
                                                                               Companies Registration Office                                                                              Court for inspection of the books
                                                                               14, Parnell Square,                                                                                        and papers of the company12.
                                                                               Dublin 1.                                                                                           •      A creditor can apply to the High
                                                                               Tel: 01 804 5200                                                                                           Court for an examination of the
                                                                               Web: www.cro.ie                                                                                            officers of the company under oath
                                                                                                                                                                                          in relation to the affairs of the
                                                                               Department of Enterprise, Trade &                                                                          company13.
                                                                               Employment,                                                                                         •      A creditor can apply to the Court
                                                                               Kildare Street,                                                                                            for an order that a director or
                                                                               Dublin 2.                                                                                                  other officer of the company not
                                                                               Tel: 01 631 2121                                                                                           reduce his or her assets within the
                                                                               Web: www.entemp.ie                                                                                         State below an amount specified by
                                                                                                                                                                                          the Court where the creditor has a
                                                                               Company Law Review Group,                                                                                  substantive cause of action against
                                                                               Earlsfort Centre,                                                                                          the director, other officer or
                                                                               Hatch Street Lower,                                                                                        company and there are grounds for
                                                                               Dublin 2.
ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS




                                                                                                                                                                                          believing that the director or other
                                                                               Tel: 01 631 2763                                                                                           officer may remove or dispose of
                                                                               Web: www.clrg.org                                                                                          his or her or the company’s assets
                                                                                                                                                                                          with a view to evading his or her
                                                                               Basis                                                                                                      or the company’s obligations and
                                                                               Business Access to State Information &                                                                     frustrating an order of the Court14.
                                                                               Services                                                                                            •      A creditor can apply to the Court
                                                                               Web: www.basis.ie                                                                                          for the arrest of a contributory to
                                                                                                                                                                                          the assets of the company, director,
                                                                                                                                                                                          shadow director, secretary or other
                                                                                                                                                                                          officer of a company and for the
                                                                                                                                                                                          seizure of his or her books, papers
                                                                                                                                                                                          and movable property where it has
                                                                                                                                                                                          probable cause for believing that
                                                                                                                                                                                          that person is about to abscond or
                                                                                                                                                                                          to remove or conceal any of his or
                                                                                                                                                                                          her property for the purpose of
                                                                                                                                                                                          evading payment of calls or
                                                                                                                                                                                          avoiding examination about the
                                                                                                                                                                                          affairs of the company15.




                                                               12   Section   243 Companies Act, 1963 as amended by section 43 Company Law Enforcement Act, 2001 and section 282B Companies Act, 1963
                                                               13   Section   245 Companies Act, 1963 and section 282B Companies Act, 1963
8                                                              14
                                                               15
                                                                    Section
                                                                    Section
                                                                              55 Company Law Enforcement Act, 2001
                                                                              46 Company Law Enforcement Act, 2001 and section 282D Companies Act, 1963
                 •      Where there is a shortfall of                                                Appendix B
                        available assets, a creditor may                                             Creditors’ Participation in an
                        apply to the Court for an order
                                                                                                     Examinership
                        directing that a related company
                        contribute to the assets of the
                        company being wound up16.
                                                                                                                 Examinership is a process whereby a
                 •      A creditor can apply to the Court                                                        company is placed under the ‘protec-
                        for the return of property disposed                                                      tion’ of the Court. In this context,
                        of by the company if it considers                                                        protection refers to protection from the
                        that the effect of the disposal was                                                      company’s creditors. The topic of
                        to perpetrate a fraud on the                                                             examinership is dealt with in more
                        company, its creditors or members.                                                       detail in Information Book 7.
                        Where the Court is satisfied of this,
                        it may order the return of the                                                           The Court, at the hearing of the petition
                        property or the proceeds of sale on                                                      to appoint an examiner, will hear
                        such terms as it sees fit17.                                                             representations from any creditors who
                                                                                                                 wish to attend. Where an examiner has
                 •      A creditor may institute proceed-
                                                                                                                 been appointed to a company, creditors
                        ings against directors or other
                                                                                                                 participate in the examination process
                        persons for fraudulent or reckless
                                                                                                                 in a number of ways.
                        trading, seeking to have such
                        persons made personally respon-                                                          On appointment by the Court, an
                        sible for all or part of the                                                             examiner attempts to formulate
                        company’s debts18. Criminal                                                              proposals for a compromise or ‘scheme
                        liability can also be imposed on a                                                       of arrangement’. For the purpose of
                        person found guilty of fraudulent                                                        formulating such proposals, an
                        trading19.                                                                               examiner may appoint a committee of




                                                                                                                                                                ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS
                 •      Where, in the course of a winding                                                        creditors to assist him and may convene
                        up of a company, it appears that                                                         meetings of creditors.
                        any person who has taken part in                                                         Where an examiner formulates
                        the formation or promotion of the                                                        proposals, they are put to meetings of
                        company, or any past or present                                                          each class of members and creditors.
                        officer, liquidator, receiver or                                                         They are deemed to be accepted by a
                        examiner has misapplied or                                                               class of creditors when a majority in
                        wrongfully received money or is                                                          number representing a majority in
                        accountable to the company or has                                                        value of the claims represented at the
                        been guilty of negligence or misfea-                                                     meeting have voted in favour of the
                        sance (wrongdoing) for which they                                                        proposals.
                        are answerable to the company, it
                                                                                                                 The proposals are then brought before
                        is possible for a creditor to institute
                                                                                                                 the Court, which decides whether to
                        misfeasance proceedings for
                                                                                                                 confirm the proposals (with or without
                        recovery of such money20.
                                                                                                                 modifications) or reject them. The
                 •      A creditor can also apply to impose                                                      Court cannot confirm the proposals
                        personal liability on a director                                                         unless:
                        where the company has not
                                                                                                                   •      they have been accepted by at least
                        maintained proper books21.
                                                                                                                          one class of creditors whose
                                                                                                                          interests would be impaired by
                                                                                                                          their implementation;


16   Section   140 Companies Act, 1990
17   Section   139 Companies Act, 1990
18   Section   297A Companies Act, 1963 as inserted by section 138 Companies Act, 1990
19   Section   297 Companies Act, 1963 as inserted by section 137 Companies Act, 1990
20   Section   298 Companies Act, 1963 as amended by section 142 Companies Act, 1990 and section 50 Company Law Enforcement Act, 2001
21   Section   204 Companies Act, 1990                                                                                                                          9
                                                               •   they are fair and equitable in
                                                                   relation to any class of members or
                                                                   creditors who have not accepted
                                                                   them and whose interests would be
                                                                   impaired, and;
                                                               •   they are not unfairly prejudicial to
                                                                   any interested party.
ODCE DECISION NOTICE D/2002/1 INFORMATION BOOK 6 - CREDITORS




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