Ireland

Introduction

The pre-pack approach has emerged as an innovative corporate rescue tool that incorporates the benefits of both informal and formal insolvency proceedings. The expression ‘pre-pack’ in an Irish context has typically referred to the sale of a distressed business where the sale arrangements are negotiated, agreed and documented before the onset of a formal insolvency procedure and are effected on or shortly after the appointment of the insolvency practitioner.

A key facet of the pre-pack mechanism has traditionally been that, in deciding whether to effect the sale, the insolvency practitioner does not have to involve the court nor consult with junior creditors who are often left with little or no value following the sale.

While pre-pack transactions have been a feature of the insolvency landscape of other jurisdictions for some years, pre-packs, or at least transactions with pre-pack aspects, have not featured significantly in this jurisdiction until the past decade.

While liquidations and, to an extent, examinerships and schemes of arrangement are processes that can broadly be used to implement a pre-pack transaction in Ireland, pre-packs sale transactions in their traditional sense are typically implemented through receivership.

Overview of key restructuring tools

Pre-insolvency processes

‘Pre-insolvency’ is not a term of art and when used in this jurisdiction refers to events that occur before a company becomes insolvent.

In contrast, pre-insolvency as a concept tends to be more widely used and attracts a plethora of varying definitions across the European Union. This has occurred against the backdrop of what some would describe as ‘an almost feverish sense among most of the European states to outdo the others in amending their [insolvency] laws’.^[2]

In general terms, pre-insolvency is the financial situation in which a debtor is often able to meet its current obligations as they fall due, but where it is expected that this will no longer be the case at a point in the future and insolvency is inevitable. Those involved in a pre-insolvency process typically want to intervene to avoid asset value diminution or creating personal liability exposure for directors. In an Irish context, a pre-insolvency process will typically include elements of refinancing, contractual-debt resizing or restructuring.

The purpose of pre-insolvency procedures is typically to provide creditors with a better return outside the framework of formal insolvency proceedings. As in the United Kingdom, a scheme of arrangement is available in Ireland as an effective formal restructuring tool that is not an insolvency process. A successful scheme of arrangement should obviate the need for an insolvency process. A scheme of arrangement can be pre-agreed among a sufficient number of creditors (typically through a lock-up agreement) to ensure the statutory creditor approval threshold is met, but ultimately it is the decision of the court whether to sanction the scheme.

In the context of pre-insolvency proceedings, on 27 July 2022 the European Union (Preventive Restructuring) Regulations 2022 (the Regulations) were signed into law in Ireland.^[3] The Regulations introduce some minimum standards for preventive insolvency proceedings and seek to align Ireland with the rest of the European Union by enabling debtors in financial distress to address their debt problems at an early stage and avoid formal insolvency proceedings. The Regulations, which appear to be influenced to a degree by Chapter 11 of the US Bankruptcy Code, allow Member States flexibility as to the most appropriate means to implement the key principles, such as the availability of early warning tools for insolvency. The Regulations introduce facilities for negotiation on preventive restructuring plans, as well as additional criteria for the implementation of these plans (a description of the economic situation, the affected parties, etc.).

Ireland’s preventive restructuring processes (i.e., examinership, schemes of arrangement, pre-pack receiverships and the new rescue process for small and micro companies) already complied with many of the key aspects of the Regulations; therefore, minimal legislative changes were required to implement the Regulations.

Irish restructuring and insolvency processes

The four key Irish restructuring and insolvency processes are: liquidation, receivership, examinership and schemes of arrangement.

Liquidation

Liquidation is a terminal process that ultimately results in the final dissolution of a company, and is governed by Part 11 of the Companies Act 2014. Liquidation can take the form of either a court-ordered liquidation or a (solvent or insolvent) voluntary liquidation.

The function of the liquidator is to take control of all the assets of the company and to realise them to satisfy, in whole or in part, the debts due to the company’s creditors. Any surplus will be remitted to the company’s shareholders. The liquidator has broad power to take all measures as deemed necessary for winding up the affairs of the company and distributing its assets.

A court-ordered liquidation occurs where the court is petitioned to have a company compulsorily wound up. A provisional liquidator may be appointed by the court in the interim period between the petition issuing and the subsequent making of the winding-up order. The effect of a winding-up order is to appoint the official liquidator and to place the company into liquidation.

Companies may also be wound up voluntarily, through a creditors’ voluntary (insolvent) liquidation and a members’ voluntary (solvent) liquidation, respectively. The effect of the company entering into a creditors’ or members’ voluntary liquidation is similar to the court granting a winding-up order.

A creditors’ voluntary liquidation may occur where a company is insolvent. The company’s directors resolve in a meeting to wind up the company and to appoint a liquidator. A shareholders’ meeting and a creditors’ meeting are then called. The shareholders must agree to pass a resolution resolving to wind up the company and to appoint a liquidator. At the creditors’ meeting, the directors must inform the creditors of the winding-up resolution passed by the shareholders. The company must nominate a liquidator, who may be approved by the creditors. Alternatively, the creditors may nominate their own liquidator.

A members’ voluntary liquidation is a solvent liquidation, and essentially entails the preparation and signing of a declaration of solvency by a majority of directors and the passing of resolutions resolving to wind up the company and appoint a liquidator.

In addition to the Companies Act liquidation regime, the Irish legislature has seen fit, in particular circumstances, to develop bespoke resolution regimes on an ad hoc basis. Examples of this include the Insurance (No. 2) Act 1983, developed to address the insolvency of insurance undertakings, and more recently, the creation of the ‘special liquidation’ regime for Irish Bank Resolution Corporation Limited (the successor to Anglo Irish Bank Corporation Limited and Irish Nationwide Building Society) in February 2013.

Receivership

Strictly speaking, receivership is not an insolvency process but rather an enforcement mechanism for a secured creditor. The process is primarily governed by the security documentation and Part 8 of the Companies Act 2014 (where the security provider is a corporate entity).

Receivership is a distinct enforcement remedy available to secured creditors only and does not involve the commencement of insolvency proceedings. The effect of the appointment of a receiver is to suspend the company’s powers in respect of the secured assets over which the receiver has been appointed.

Section 437 of the Companies Act grants extensive statutory powers to receivers, in addition to those conferred by the relevant security document. Once the receiver has realised the secured assets over which they have been appointed, and remitted the proceeds to the secured lender, the receiver will be discharged pursuant to the relevant security document.

Under Section 439 of the Companies Act, a receiver of a company’s property shall, in selling that property, exercise all reasonable care to obtain the best price reasonably obtainable for the property as at the time of sale. This is an important point, as the qualifications contained in this Section enable a receiver to act expeditiously in selling company property. However, in circumstances where there is unlikely to be a marketing process by a receiver in the context of a pre-pack, this statutory duty underscores the importance of obtaining an independent valuation that will stand up to scrutiny.

As noted under ‘Liquidation’, the Irish legislature has shown innovation over the years. In this regard, Ireland took extraordinary measures to control contagion within the domestic banking industry in 2008, in the wake of the global financial crisis. One of the measures taken included the establishment of the National Asset Management Agency (NAMA). NAMA is essentially a government-backed bank, developed to take receipt of, and manage, non-performing eligible assets belonging to Ireland’s participating financial institutions. To work out the assets within its custody, once valued at around €77 billion, NAMA has extensive legislative powers, including the ability to appoint statutory receivers with powers conferred on them by the NAMA Act 2009.

Examinership

The Irish examinership regime was introduced in 1990 as a response to the imminent collapse of the beef exporting Goodman Group of companies. This followed the United Nations’ imposition of sanctions on Iraq, an economy that was important to the Irish beef industry at the time. From these beginnings, examinership has developed into Ireland’s premier vehicle for corporate rescue and is the European Union’s closest equivalent to Chapter 11. Examinership has been used very effectively for its intended purposes of restructuring companies and saving businesses. As an example, in the Norwegian Air Shuttle ASA case^[4] in 2021, Irish examinership was used contemporaneously with the Norwegian ‘reconstruction’ process to reduce the group’s total debt by approximately 65 billion Norwegian kroner to approximately 20 billion kroner, and to raise 6 billion kroner in new capital through share and hybrid debt offerings.

Examinership is a process whereby a company in financial difficulties is placed under the protection of the court. Examinership is governed by Part 10 of the Companies Act 2014.

The aim of examinership is to provide a structured arrangement with all creditors to preserve jobs and allow companies with a potentially sound business model (but which has become burdened with an unsustainable level of debt) to continue to trade rather than be liquidated. The court will only appoint an examiner to a company where the judge determines that the company has a reasonable prospect of survival as a going concern.

While a company is in examinership, there is a moratorium on proceedings being brought or advanced against the company (except for those brought by employees), for the duration of the examinership. This essentially prevents any creditor from attempting to wind up or appoint a receiver to the company in question. If the court approves the appointment of the examiner, the company will be under court protection for 70 days from the date of the presentation of the petition, which may be extended by the court by up to 30 additional days.

A petition to the court for the appointment of an examiner may be presented by the company, its directors, a creditor, a prospective creditor or the members holding not less than one-tenth of the paid-up capital.

The function of the examiner is to conduct an examination of the company’s affairs, with a view to determining whether the company is capable of surviving, and to formulate proposals for a restructuring of the company that would facilitate that survival. The examiner then reports to the court.

The examiner’s proposals are put to the various classes of creditors and shareholders for approval. Where approved, the proposals may then be considered by the court. If the court confirms the proposals, they are binding on all the company’s creditors and shareholders. The protection afforded to the company by the examinership process will cease upon the approved compromise coming into effect. Where the court refuses to confirm the examiner’s proposals, it may make an order for the company to be placed into liquidation if it considers it just and equitable to do so.

In 2012, Irish telecommunications company Eircom^[5] was successfully restructured through the examinership process. This was the largest successful restructuring through examinership to date, both in terms of debt quantum and company size.^[6] In all, €1.4 billion out of the total debt of €4 billion was written off the balance sheets of the Eircom operating companies.

The Eircom examinership, which resulted in the senior lenders becoming the new owners of the business, shows the speed with which a significant restructuring can be implemented where there is significant pre-process negotiation between the company and its lenders.

For the right candidate, pre-planning should limit the degree of damage to the business that might otherwise be incurred. In those cases, scheme proposals can be formulated by the company and its key creditors before the examinership commences. Thus, the examiner can come to the role with at least one potential restructuring proposal available offering some level of creditor support, a smoother path to implementation and a reduced risk of significant challenge at the confirmation hearing.

However, because the examiner is an independent court-appointed officer, they are obliged to consider all reasonable offers of prospective investment and restructuring proposals for the company. A proposal that has buy-in from a number of the company’s creditor groups almost inevitably becomes the ‘stalking horse’: the deal to beat.

In September 2019, when Weatherford International plc issued a petition in Ireland for the appointment of an examiner, the application was accompanied by fully formed draft proposals for a scheme of arrangement. As the scheme that was presented at the petition hearing was ultimately adopted by the examiner and sanctioned by the court (with only minor immaterial modifications), it was one of the closest examples we have seen in this jurisdiction to a pre-pack examinership. Prior to the examinership, the Weatherford Group had commenced a Chapter 11 case in the US to restructure more than US$8 billion of secured and unsecured debt, which ultimately led to a Chapter 11 plan that was approved, subject to implementation, through an examinership process for Weatherford International plc in Ireland and a Bermudan scheme of arrangement for another group company.

Since Weatherford, we have seen many examples of the effectiveness of examinership and the scheme of arrangement as a means of implementing complex and, at times, pre-arranged, multi-jurisdictional restructuring plans.

In 2022, Mallinckrodt Pharmaceuticals, a US–Ireland domiciled manufacturer of specialty pharmaceuticals, generic drugs and imaging agents, utilised examinership as part of its wider US Chapter 11 plan to restructure US$5.3 billion in long-term debt and included significant prepackaged features, with creditors committed to supporting the restructuring prior to the launch of the scheme.^[7]

Schemes of arrangement

A scheme of arrangement is a very flexible company law procedure whereby claims against a company can be compromised or arrangements can be made by the company with its members or creditors.

As long as a scheme is approved at a meeting of the creditors or, in separate meetings of different classes of creditors, by at least 75 per cent in value and a majority in number of those registered to vote on the scheme, and the court sanctions it, the scheme will be binding on all creditors, including those within each class voting against the scheme.

A key feature of a scheme is that it is not an insolvency process, which may make its use more appealing to directors and sponsors wishing to avoid any perceived insolvency-related stigma. Another key feature is that the Irish High Court has the discretion to stay all proceedings and restrain further proceedings against a company.

Schemes of arrangement have been less frequently used in Ireland than in the United Kingdom because examinership tends to be a more effective restructuring tool for debtors insofar as it is a one-stop shop for change of ownership together with a mechanism to compromise creditor claims. In the United Kingdom, one would need to use administration plus a scheme of arrangement to implement the same steps.

In the 2019 Re Ballantyne Re plc case,^[8] a scheme of arrangement to restructure US$1.6 billion of New York law-governed notes issued by Ballantyne Re plc, an Irish incorporated reinsurance vehicle, was approved by the Irish High Court.

The decision, which consolidates the law and creates helpful legal precedent in this jurisdiction on creditor schemes of arrangement, further establishes Ireland as a strong jurisdiction for complex financial restructurings.

In Ballantyne, the Court relied on a number of key decisions of the courts of England and Wales relating to creditor schemes as authority to approve certain aspects of the Ballantyne scheme. In doing so, the Irish court has demonstrated a willingness to incorporate into this jurisdiction the significant body of scheme jurisprudence from England and Wales, as well as other commonwealth jurisdictions. The decision in Ballantyne smooths the way for further debt restructurings of this type in Ireland. In all, the High Court (Commercial) oversaw a process in Ireland that lasted just over five weeks.

The Ballantyne case was transformative in the sense that it paved the way for other complex international debt restructurings that followed, managed out of Ireland, many involving corporate groups with companies in multiple jurisdictions and complex capital structures, in a multitude of sectors (e.g., aviation leasing, manufacturing, infrastructure and banking).

In the 2020 Nordic Aviation case,^[9] the Irish High Court approved a scheme of arrangement for the world’s largest regional aircraft lessor. The scheme was the initial phase in Nordic Aviation Group’s international restructuring and was part of a US Chapter 11 plan to eliminate debt and enhance liquidity. The Irish scheme, which included a 12-month standstill deferral of approximately US$5 billion of secured and unsecured debt, was a market-first for the aircraft leasing industry and had a number of innovative features, which involved the Irish court following the approach adopted by the English courts (in Rodenstock,^[10] Magyar Telecom^[11] and Van Gansewinkel )^[12] on matters of jurisdiction. The scheme was implemented using the scheme company as a common guarantor and single point of entry across the complex financings of the group.

In 2021, Voyager Aviation Holdings, LLC included an Irish scheme of arrangement as a second fall-back plan as part of its operational restructuring. An Irish scheme of arrangement proved an attractive contingency option for stakeholders because of the potential for a shorter timeline and lower costs, as well as an effective and predictable restructuring method.

Implementing restructurings on a prepackaged basis

Which processes can be implemented in this way?

The examinership process can involve a large degree of pre-process preparation, and in some instances, the debtor company may in fact be in a position to present a fully developed restructuring plan or draft proposals for a scheme of arrangement to the examiner. Notwithstanding this, the traditional view has been that one cannot entirely ‘pre-pack’ a transaction in an examinership. This is for two reasons. First, the scheme to put to creditors is ultimately one that must be adopted by the examiner, who is an independent court-appointed officer who must consider all scheme-related issues on appointment. Second, the examiner’s scheme requires creditor approval (albeit at a relatively low threshold) and court sanction.

Liquidation can also be used as a pre-pack tool, depending on the debtor candidate, the capital structure and the creditor profile. Accordingly, while liquidation (and, to a certain extent, examinership and schemes of arrangement) can be used to implement a pre-pack in Ireland, overwhelmingly pre-pack sales are implemented through receiverships. For this reason, this chapter focuses on pre-pack receivership in an Irish context, the main factors to consider in a pre-pack deal and the perception of pre-packs in Ireland.

Pre-pack receivership in an Irish context

Receiverships are a means of enforcing security whereby a secured creditor appoints a receiver over secured assets. A receiver is appointed as agent of the debtor or mortgagor rather than the holder of the secured debt.

There is no statutory or industry guidance or regulation available in Ireland regarding the steps that a receiver should engage in to be satisfied that they have achieved the best price in circumstances where the assets are being sold through a pre-pack model (although there is guidance in the United Kingdom in the form of statement of insolvency practice (SIP) 16, which may be of assistance).

Factors to consider in a pre-pack deal

While unlike other jurisdictions, there is limited guidance in Ireland regarding best practice on pre-pack deal implementation, the following are some of the main factors that may have to be considered in a pre-pack deal, depending on deal structure and factual matrix.

Due diligence

Accelerated due diligence should be conducted in advance. Although this process may be truncated when the sale is to a connected party, generally it should include reviewing the validity of the security, the position of key creditors in an enforcement scenario and the impact of enforcement on contractual terms.

There is a risk that difficulties may arise for the new acquiring company in relation to liabilities that may not have been adequately addressed. These liabilities (for example, regarding assets, guarantees or particular types of creditors) may only become apparent at a future date. It is important that the receiver who takes charge of the company’s assets, liabilities and business, addresses in detail potential risks in this context. The importance of effective due diligence is, therefore, paramount.

Risk of litigation and junior creditor attack

Unlike in the United Kingdom, where pre-packs are more regulated (e.g., SIP 16), junior creditors have little leverage when it comes to challenging a pre-pack. This is often because the difference between the market value of the secured asset and the level of the secured debt makes a challenge on valuation (and, by extension, process) pointless. That said, junior creditors or preferential creditors (the tax authority, redundant staff claims, etc.) may establish a basis for challenges if, for instance, the receiver sale was to a connected party and the receiver did not give all creditors the statutory 14 days’ notification prior to sale.

While there have been a number of financially significant pre-pack receivership sales in recent times, a receiver may nonetheless request an indemnity from the secured lender to deal with any litigation or other risks that may arise as a result of the pre-pack sale.

Employee rights

A key part of preparing for a pre-pack transaction involves assessing employee liabilities. This will involve considering the application of the Transfer of Undertakings (TUPE) Regulations,^[13] and the pension and other rights of employees. In both a general and pre-pack receivership context, TUPE Regulations typically apply. Where the TUPE Regulations apply, employment rights and obligations of those staff connected with the business or assets being sold will transfer to the new owner. This includes all pre-existing liabilities, including breaches of the TUPE Regulations by the transferor. The TUPE Regulations trigger information and consultation obligations for both the transferor and the transferee, potentially requiring the new owner to take on the terms of a collective agreement negotiated with a trade union, while restructurings that involve dismissals by either the transferor or the transferee are prohibited except in limited circumstances.

Contracts

Typically, except where there are specific contractual provisions to the contrary, the appointment of a receiver should not have a significant impact on contracts to which the company is a party. However, there are exceptions, and the company’s material and business-critical contracts must, therefore, be reviewed to determine the operation of their termination provisions and how ongoing obligations are to be managed. It is possible that valuable contracts may need to be novated or that the transaction may have to be structured so that particularly onerous contracts can be left behind in the shell company.

Examinership risk

A trading company over which a receiver is appointed has three days to present a petition to the High Court seeking the appointment of an examiner. If this application succeeds, the receiver must stand aside, at least until the examinership concludes.^[14] This is a genuine risk to a pre-pack receivership when a sponsor or a board of directors is not aware of, or supportive of, the proposed pre-pack.

Valuation

The receiver is afforded considerable discretion in determining the timing of a sale of assets. They are not, for example, obliged to postpone a sale in the hope that the market improves. Nevertheless, the receiver has a statutory duty to get the best price reasonably obtainable at the time of sale. Worth noting in this regard is that if the value of the secured assets breaks in the senior debt, it will be very difficult for junior creditors to challenge a transaction irrespective of sale price.

Because the business will typically not be exposed to market testing before the sale, it is difficult for a receiver to be sure that the price to be paid is the true market value. To enable a receiver to satisfy their duties in this regard, they should obtain at least one independent, professional valuation of the business or assets. The receiver will often seek a letter from the valuer confirming that the buyer’s offer represents the best price reasonably obtainable at that time. This will also be important if any party tries to challenge the sale by the receiver.

Consent

Consideration will have to be given to whether any regulatory notifications need to be made and the time frame that may elapse between notifications being made and approvals or consent being provided. For example, an acquirer of substance, operating within the target’s sector, may be required to make a notification to the Competition and Consumer Protection Commission. Where this is the case, obtaining competition clearance will typically be made a condition precedent to completing the transaction. Equally, a pre-pack transaction that involves the acquisition of a food processing business may need to consider whether a notification must be made to the Food Safety Authority of Ireland.

Sale to a connected party

Irish company law prevents a receiver from selling an asset of the company to an officer of the company unless the receiver has given at least 14 days’ notice of their intention to do so to all known creditors of the company.^[15] For the purpose of the relevant provision, ‘officer’ includes a director or shadow director as well as a ‘connected person’. The definition of a person connected with a director of a company is extensive and extends to natural persons and legal persons. A body corporate will be deemed to be connected with a director of a company if it is controlled by that director.

How are pre-packs perceived?

In the United Kingdom, it was the growing public discontent in respect of the perceived unfairness of pre-pack administrations that led to the 2014 Graham Review. Following that review, voluntary industry measures were introduced that sought, in particular, to regulate pre-pack sales involving connected parties. Under the Small Business, Enterprise and Employment Act 2015, the UK government has the power (not yet invoked) to make regulations to impose conditions on property sales to connected parties in administration; however, this legislative power expired in May 2020.^[16]

By contrast, in an Irish context, there has been limited public commentary about the impact of pre-packs on unsecured creditors and the lack of transparency around the process. There has been no statutory or industry guidance issued on the subject and, in fact, there has also been little judicial guidance.

One notable Irish decision in relation to pre-packs is that of Ms Justice Finlay Geoghegan in Webprint Concepts Ltd v. Thomas Crosbie Printers Ltd and others in 2013.^[17] In that case, in the context of Thomas Crosbie Holdings’ pre-pack deal (see below), Webprint claimed that a point of law of public importance should be determined by the court, namely that the receivership process, being used in a prepackaged manner, gave rise to an abuse of process and deprived creditors impacted by the restructuring of their procedural rights and protections.

On this point, Judge Finlay Geoghegan, when considering Webprint’s submissions, made the following general observation in relation to the Irish pre-pack process:

In my judgment, Webprint has not identified a point of law in this case of such gravity and importance as to transcend the interests of the parties actually before the Court which could be considered in the interests of the common good to require clarification.
Whilst pre-pack receiverships may be relatively novel, the term is not a definition of any one type of transaction. It covers many different potential factual situations.
In any so called pre-pack receivership the obligations on the participants will depend upon the facts and nature of the transactions. The determination of what were or were not the obligations of the Receiver herein will fall to be determined by applying well-established principles or provisions in the Companies Act (about the construction of which no uncertainty was identified) to the particular facts of this case.
There may well be points of importance which, if determined in this case, might affect subsequent transactions.
However, that is the position in many cases which come before the courts and in my judgment, falls short of the necessary characteristics to constitute a question of law of public importance.

Case study

Our selected case study represents an example of one of the many high-profile receiverships to have taken place in the Irish market, this one on a pre-pack basis. The case highlights the intricacies and complexities of pre-pack transactions and demonstrates the adaptability of the process to high-value, large-scale transactions involving key commercial stakeholders.

We have separately mentioned in this chapter examples of examinerships that indubitably have material ‘pre-pack’ traits, much like those one would see in a US Chapter 11 context. This is equally the case for schemes of arrangements that, while not offering cross-class cramdown, can be substantially pre-agreed prior to the commencement of the formal court process.

Superquinn

Superquinn was an Irish supermarket chain founded in 1960 by Fergal Quinn that operated over 20 high-end supermarkets across the country and was one of the most recognisable brands in Ireland.

Quinn sold the supermarket chain to a consortium of Irish property developers in January 2005 for €450 million. A combination of falling sales and declining market share subsequently proved fatal to Superquinn. By 2011, Superquinn had amassed debts of more than €400 million, of which €275 million was property-related.

On 18 July 2011, joint receivers were appointed to Superquinn and its parent company, Tokad Company. The Superquinn grocery chain was sold to the Musgrave Group, an Irish public company active in grocery and food wholesale distribution, for approximately €230 million, by the joint receivers.^[18]

The transaction involved the acquisition by Musgraves, through wholly owned subsidiaries, of 24 Superquinn stores and certain associated properties,^[19] and all former Superquinn stores were subsequently rebranded under SuperValu (another Supermarket chain owned by Musgrave) in February 2014.^[20]

A notable aspect of this transaction was the involvement of the Competition Authority of Ireland (now the Competition and Consumer Protection Commission) owing to the proposed merger of two large domestic supermarket businesses (Superquinn and SuperValu). The Competition Authority had questions about certain arrangements that had been put in place between the parties under which Musgrave was to provide consultancy services to the joint receivers. The Authority’s initial view was that these arrangements might amount to prior implementation of the merger, in breach of the Competition Act 2002.^[21] However, it ultimately became clear, to the satisfaction of the Authority, that the objective of those arrangements was to maintain the value of the target business pending a determination by the Authority.

Conclusion

In Ireland, examinership is viewed as more business-friendly than receivership in terms of preserving a trading undertaking. However, receivership (and pre-packs in particular) can also be hugely effective in preserving enterprise. If implemented speedily through a pre-pack, receivership can prove to be a very effective way to maintain the viability of a business in terms of employment, customer base and relationships with key suppliers. While receiverships are certainly the most popular form of ‘pre-pack’ undertaken in the traditional common law sense of the term, there is a growing trend among large corporates in financial distress to opt for examinerships or schemes of arrangement, significant elements of which can be pre-arranged before the onset of a formal court filing. The continued growth in popularity of these processes will only enhance the already diverse and comprehensive Irish restructuring toolkit.

Despite some criticism levelled at the pre-pack concept, there will always be circumstances in which the reasons for using a pre-pack are commercially compelling. In addition, so long as the insolvency practitioner can stand over the price for the sale of assets, then unsecured creditor opposition (without legislative intervention) is unlikely to come to much. In circumstances in which the business in question is suffering from falling asset values and has a level of distress, creditors challenging a pre-pack process that preserves enterprise will likely face an uphill battle.

Notes