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BP SURVEY ACCOUNTANTS Do you think the new Personal Insolvency Act will give indebted entrepreneurs a second chance Jim Stafford (Friel Stafford): The new Act is a step in the right direction. However, the law fails to rehabilitate financially distressed entrepreneurs back into business, as some banks may exercise their right of veto to block schemes, particularly if they are the only creditor. The government’s insistence on only allowing arrangements for secured debt of less than €3m is particularly unhelpful. We will continue to see more and more business people move over to the UK to either avail of Individual Voluntary Arrangements or bankruptcy, as the UK procedures are tried and tested. As a bankrupt businessman may not act as director for three years under Irish legislation, he may be better off going to the UK and being discharged after just one year. Borrowers who owe several banks have a greater chance of successfully using the personal insolvency arrangements, particularly if they can persuade one large lender to vote in favour of a scheme. As matters stand, the banks have started to do debt forgiveness-type deals in advance of the legislation coming into force. Jim Mulqueen (RSM Farrell Grant Sparks): While the state-owned banks should engage in the right spirit to make the new insolvency arrangements work, there is the potential for other banks to refuse to agree to any propositions that write-off bank debt to an extent greater than the provisions they have already made. This factor is fundamentally what will make this scheme a success or not. Mike McKerr (Ernst Young): The current regime is punitive, but this new insolvency regime looks to give a level of rehabilitation. In this country, we sometimes put our head in the sand and hope these things will go away. This personal insolvency problem is not going away. It needs to be addressed. John Glennon (Baker Tilly Ryan Glennon): It is very difficult to predict the banks’ stance in relation to personal insolvency arrangements. They will effectively have the power to veto and force formal bankruptcy and it is likely, therefore, that these non-judicial arrangements will not apply to many of our entrepreneurs. Payments orders postbankruptcy are likely to be a feature under the Irish regime, similar to the UK. Gerry McInerney (McInerney Saunders): The new regime should provide entrepreneurs with certainty in situations where uncertainty abounds around unsustainable debt. However, credit providers and suppliers will be aware of the risks they With a full range of compliance and practice management software already in use in over 3,000 firms in Ireland and the UK, the CCH ProSystem Suite is the first choice for professional accountants. The CCH ProSystem Suite includes: ● CCH Central - a client and contact practice database ● Accounts Production ● CCH i XBRL Review & Tag ● Audit Automation ● Practice Management ● Document Management ● Tax - Personal & Corporation ● Strategic Planning Whether you’re looking to build client relationships, improve your firm’s profitability, develop new revenue streams or reinvigorate your business processes, CCH Software can help visit www.cchsoftware.ie or call us on 044-933 4631
BP SURVEY ACCOUNTANTS face in dealing with someone who has availed of a remedy under the new regime. Mark Kennedy (Mazars): It will take a while for entrepreneurs to gain confidence in the new personal insolvency regime. If the entrepreneur has enough time left in their career to recover from their financial problems when they emerge from the process, then they may very well consider engaging in the personal insolvency regime. Brendan Jennings (Deloitte): We are focused on ensuring that we have the capacity to support agreements reached under the new rules, but also to provide advice on the full range of potential solutions which banks and borrowers will need to consider. The personal insolvency arrangements, which will concern secured debt up to a limit of €3m, envisage some form of debt write-off. There is definitely an appetite for PIAs among people who are insolvent. Brian Conroy (Crowe Horwath): We expect the new regime will facilitate direct Mark Kennedy: “It will take a while for entrepreneurs to gain confidence in the new insolvency regime” negotiation between the borrower and banks. The banks want to have the full picture before they will engage in restructuring discussions and borrowers need to be mindful of this. Paul Leonard (Cooney Carey): The question is how long it will take for the banks to embrace the Personal Insolvency Act, rather than fear it. At the moment, most banks only allow debt forgiveness in exceptional cases. So some borrowers can get stuck in “limbo”, i.e. if they can’t repay all of the debt, why should they repay any of it This legislation will allow banks to develop solutions to ensure their borrowers are motivated to repay as much as possible. Tadhg O’Sullivan (OSK): The new law finally clarifies the previous uncertainty brought about by the absence of nonjudicial debt settlement arrangements, the lack of which was a barrier to both borrowers and lenders. However, I would have reservations about how the regime will operate in practice. Andy Quinn (Moore Stephens Nathans): The personal insolvency legislation will work in giving beleaguered entrepreneurs a second chance if the banks act promptly and realistically in putting debt settlement and personal insolvency arrangements in place. I also think that the future profits of the banks will benefit from allowing debt write-downs now. Survey continued on page 76
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