Fianna Fáil Spokesperson on Finance Michael McGrath TD has called for an urgent review of the insolvency regime in Ireland to address the inevitable economic fallout from the COVID-19 crisis.
Deputy McGrath stated, “There is little doubt that there will be a significant increase in the number of individuals entering the insolvency process in the coming months and even years.
“Many have had their financial wellbeing turned upside down as a result of the economic fallout from COVID-19. For many people, their economic future is uncertain and it is unclear when they will return to work. It is inevitable that many people will need to turn to the insolvency process for assistance in the period ahead.
“We need to look at ways to increase the number of Personal Insolvency Practitioners or PIPs. PIPs are crucial in the whole process because they take an independent view and are charged with arriving at a resolution that is fair to both the borrower and the lender. Without a sufficient number of PIPs, the system will simply grind to a halt. Some PIPs are leaving the system because of the flaws in the insolvency process.
“The process by which Protective Certificates (PCs) are granted needs to be assessed. PCs are designed to give the borrower 70 days protection so that an arrangement with lenders can be arrived at. Currently these are issued by the Courts which can take a significant amount of time. If these could be issued by the Insolvency Service of Ireland, it would speed up the resolution in a lot of cases.
“Many lenders are accepting moratoriums on insolvency arrangements because of the COVID-19 outbreak. This is of course welcome but it is not clear what the knock-on effects are in these cases and whether the current legislation is adequately designed to deal with them. Will, for example, these moratoriums need to be authorised by the Courts as variations to the original arrangement. The legislation seems to suggest so.
“Where a person seeks an insolvency arrangement but a proposal from the PIP is rejected by the creditors, a Section 115A appeal can only be submitted to the Courts where the person was in arrears on their home mortgage at 1 January 2015. However, we know that many thousands of people who were never in arrears are now seeking payment breaks on their loans. They will have no recourse to the Courts if an insolvency proposal is rejected by their creditors.
“The exclusion parameters for bankruptcies also needs to be reviewed. Currently, there is a 12-month exclusion period where a person cannot hold a directorship in a company. If a business fails simply because of the COVID-19 outbreak then I believe this exclusion period should be reviewed. When Ireland starts the long road to recovery, we will need entrepreneurs to go back into business as soon as possible.
“Over the coming months and perhaps years as the economic fallout from the COVID-19 crisis materialises there is likely to be a significant increase in the number of insolvency cases. We need to prepare now so that the insolvency system does not grind to a halt when this happens. Such a move will, I believe, save a lot of pain and suffering later on.
“In addition, the Minister for Justice has still not moved to implement the recommendations in the Section 141 review of the Insolvency Acts”, concluded McGrath.