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The Irish Examiner publication is the latest business to be restructured using a so called pre-pack insolvency transaction. It has been reported that at least one creditor has initiated proceedings to irish receiverships and liquidationsmarket the Irish Examiner transaction. If that case proceeds to trial, it will be one of the rare Irish cases in which the courts are asked to analyse the validity and basis of a pre-pack.
Pre-pack structures can allow a irish receiverships and liquidationsmarket in ownership of a business, a continuance of trade and the preservation of employment without the loss in value that can arise where a business is operated during an insolvency process while a purchaser is being sought.
In Ireland a corporate insolvency process includes a receivership, liquidation or an examinership. Receivership pre-packs typically involve a bank or other secured lender appointing a receiver over the assets of a company irish receiverships and liquidationsmarket financial difficulty. Prior to the formal appointment of the receiver, a purchaser is identified and terms of sale are agreed for the sale of the assets in question. The receiver then implements the pre-agreed terms immediately on or subsequent to his appointment.
The devaluation of goodwill and the deterioration of key relationships with employees, suppliers and customers that can result from a protracted corporate insolvency process is avoided and creditors can achieve a higher return than might otherwise be the case.
Such cases include those where creditors may be prejudiced due to a lack of time to market the assets in question. This concern is more acute where the sale is to a party connected to the insolvent business such as irish receiverships and liquidationsmarket management, directors or shareholders.
Insolvency practitioners must be able to demonstrate compliance with their statutory duty to obtain the best price reasonably irish receiverships and liquidationsmarket at the time of the sale of the asset. For this reason, great care must be taken to ensure that appropriate irish receiverships and liquidationsmarket have been obtained for the assets. The insolvency practitioner must also ensure that he is aware of and has taken account of any previous marketing activities carried out in relation to the assets, whether by the company or the lender.
In England and Wales where unlike in Ireland insolvency practitioners must hold a licencedetailed guidelines for the conduct of pre-packs have been adopted by the professional bodies responsible for the licensing of insolvency practitioners. Those guidelines were introduced to increase transparency for creditors and confidence in the marketplace regarding the use of pre-pack administrations.
In the absence of any such guidelines in Ireland, the critical standard for the insolvency practitioner is to ensure that he obtains the best price reasonably obtainable for the assets at the time of sale, a duty imposed on him by the Companies Acts. Pre-packs are not suitable in all cases and it will not always be possible for the insolvency practitioner to carry out any marketing of the assets, the subject of the sale, or to obtain comprehensive valuations for the assets in advance of the sale.
Furthermore, certain company law provisions might, in some circumstances, work to delay a sale, for example where the sale is to a connected party. In such cases a lengthier period of time will be required to market and sell the assets. Whilst examinership has been used for certain forms of transaction very similar to a pre-pack, an examiner has a duty to ensure that the investment he recommends is in the best interests of the company and its irish receiverships and liquidationsmarket and creditors as a whole.
This means that he will be required to follow a process of testing the investment options available before finalising his scheme of arrangement. The absence of formal reporting requirements for pre-packs means there are no statistics available on the use of the process in Ireland, but there are reports of pre-packs having been irish receiverships and liquidationsmarket in Ireland in recent times, particularly in relation to retail businesses.
Key Irish receiverships and liquidationsmarket Fergus Doorly Partner.
