Debt Collection in Ireland

• In Ireland, the DSO remains around 50 days. Small and medium-sized enterprises in Ireland have a 60-day increase in DSO, with 24 percent waiting a penalty 120 days before they see funds.

• Legal action can be lengthy and time-consuming, and often with no benefit. Amicable debt collection agency negotiations are a good way of identifying non-payers.

1. Summary

1.1. General financial information

1.1.1. There is little financial information on Irish companies and although registered entities may file with the House of Companies, it may be very difficult in practice to track debtors. Professional networks that help gain reputational knowledge, but it is highly recommended to have a specialist provider.

1.2. Key legal structures

1.2.1. Corporate debt responsibility is defined by legal structures that can be summarized as follows:

• Businesses that do not need a corporate entity may be run by a private individual known as a sole trader. Two or more persons may also decide to share liability and liabilities by Partnerships (as defined by the Partnership Act of 1890), in which case the partners may be collectively and separately responsible for the other partners' acts (while enhancing fundraising capacity). Additionally, joint partnerships (as provided for in the 1907 Partnership Act) that offer limited responsibility to the participants.

• They may also depend on incorporated companies. Private Limited Companies are common, because owners (up to 99) are only responsible for the company's obligations in relation to their individual capital investment and there is no minimum requirement for capital. Larger enterprises would rather be set up by Public Limited Companies which require a minimum capital of EUR 38,092. The securities are tradable in this type of company, and the owners are only responsible for the interest of their share(s), while losses can only be repaid from the properties of the corporation.

• Foreign investors also decide to settle in Ireland through a Regional organization that is separate of the parent company and willing to do business in Ireland.

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1.3. Regulatory framework

1.3.1. Ireland has a Common Law structure where the judgments of the judiciary have an impact-creating law and connect the lower courts. The country is divided into 23 District Courts (competent in dealing with minor cases of up to EUR 15,000), eight Circuit Courts (competent in hearing disputes of up to EUR 75,000 and in hearing appeals brought against decisions of District Courts), and a High Court (competent in hearing cases of more than EUR 75,000 and in the second instance in deciding against decisions of the Circuit Co first instance).

1.3.2. The Commercial Court was established in 2004 as a High Court division which deals specifically with intellectual property and commercial disputes with a monetary value exceeding EUR 1 million. The Supreme Court is the last appellate court.

2. Receiving payments

2.1. DSO - Days Sales Outstanding

2.1.1. Payments normally take place in Ireland within 50 days on average (2016 figures) and domestic companies ' payment behavior is poor as debtors are not in a state of emergency when the time comes to settle the owed money. Moreover, debtors are aware of how to play the system and the high cost of legal action can also provide an edge in terms of delaying payments.

2.2. Late interests

2.2.1. Recast EU Directive 2011/7/EU, which stipulates that payments must be made in the EU within 60 days, was transposed into Irish law by means of the 2012 Statutory Instrument No. 580, which entered into force on 16 March 2013. Nevertheless, the regulations in Ireland are more strict than the EU requirements: business-to-business transactions will, as a general rule, be completed within 30 calendar days, however contractual agreements that stretch that date to 60 days, assuming that the contracts are not grossly unfair.

2.2.2. Early interest in reimbursement may be asserted beyond the due date. Tariffs can be decided to contractually, but the law provides the measure will, as a general rule, be based on the refinancing rate of the European Central Bank, raised by at least 8 percentage points (10.25 per cent). Usually interest would be added to the debt and asserted during the collection process.

2.3. Costs of debt collection

2.3.1. In turn, the statute entitles the borrower to obtain a flat payment charge (EUR 40 for debts below EUR 1000; EUR 70 for debts below EUR 10 000; EUR 100 for debts above that level) and may also demand other fair restitution costs incurred as a result of the inability of the debtor to settle in due time.

2.4. Protecting ownership

2.4.1. Title preservation (RoT) arrangements aimed at retaining possession of products before full payment of the relevant invoice is allowed in Ireland (under Section 91 of the Sale of Goods Act), but are primarily used in insolvency proceedings. In addition to these' fast' RoT clauses, RoT ' all monies' which seek to retain possession of products until all payable invoices have been paid in full are also admissible. For a RoT to become enforceable, specific conditions have to be followed. In particular, it is important that the products be clearly traceable, recovered and marked.

2.4.2. This assumes the extended aspects of RoT that tend to maintain possession of assets through a process of transformation would not be admitted in court. Likewise, if the seller sold the product to a consumer who made the deal in good faith, RoT provisions would most definitely be inapplicable. Having said that, during the pre-legal stage RoT agreements can be used as a negotiating tool as a means of obtaining returns of goods that are still unpaid.

2.5. Payments

2.5.1. Payments The most common methods of payment are as follows:

• Swift bank transfers are most widely used in Ireland, as they are quick, safe and sponsored internationally and domestically by an increasingly integrated banking network. Transfers should be guaranteed for export transactions through an Export Credit Insurance policy, which helps minimize the risk of sudden or unexpected insolvency of the customers. Furthermore, Standby Letters of Credit (a bank guarantees the credit worthiness of the applicant and the ability to repay) are valid assurances.

• Irrevocable and verified Documentary Letters of Credit (the debtor promises that a certain amount of money is made available to the recipient through a bank once certain provisions specifically agreed upon by the parties have been fulfilled) may also be regarded.

• Reports tend to give no certainty, since they do not indicate any responsibility if they stay unpaid. So it is popular to rely on bank loans and ask for down payments.

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3. Collecting payments

3.1. Amicable action

3.1.1. While Irish courts are fairly effective, amicable mediation arrangements should always be seen as a strong alternative to formal proceedings. Until launching legal proceedings against a debtor, asset appraisal is important as it requires assurance of whether the debtor is still alive and whether the chances of recovery are highest. Therefore, it is important to be mindful of the solvency position of the debtor: after insolvency proceedings have been started, debt management often becomes difficult.

3.2. Legal proceedings

3.2.1. Ordinary proceedings.  In fact, ordinary prosecution ends because nice collection efforts have collapsed. A petition is lodged with the appropriate court (depending on the amount involved), and a warrant must be sent to the debtor within 21 days. If the liability is more than EUR 1,270, the claimant has 21 days to pay, offer a settlement or present a defence. Beyond that time limit, the statute will find the debtor to be insolvent (as modified, Section 214 of the Companies Act 1963/2009), in which case the option of launching insolvency proceedings that prove to be successful. In fact, failing to do so would allow the claimant to sue the court for a default judgment.

3.2.2. If the argument is undisputed, a quick-track summary judgment (Summary summons) may be sought from the appropriate court as an option. A European Payment Order mechanism enabling the restitution of undisputed debts (under Regulation EC No 1896/2006) may also be activated where the delinquent business has properties in other EU Member States. In this situation, the claimant party may order a domestic court to issue an Order to Pay which will then be enforceable without exequatur proceedings in all European Union countries (except Denmark).

3.2.3. In contrast, if the claim is disputed, a discovery phase will take place in order to allow the parties to explain and prove their respective arguments before the court renders a decision, but judges in the commercial courts may also suspend the proceedings for up to 28 days to allow mediation or arbitration to resolve the dispute. Usually, judges grant relief in the form of compensatory and punitive damages, actual results, orders, injunctions, etc.

3.2.4. Required documents:

• Copies of invoices
• Updated statements
• Terms and Conditions for Clients
• Initial attorney's authority

3.2.5. Time limits. Legal cases will usually be taken before the court within six years of the date on which the cause of action occurred (i.e. when the payment fell due or the violation of contract). Legal action will be prohibited beyond that time-limit.

3.2.6. Precautionary measures. Pending a final decision, precautionary measures can help to protect the interests of the debtor. The courts may in effect require temporary steps aimed at protecting properties (attachment orders) or facts (but search warrants are rare). The defendant will prove that it has a strong case, that imposing such interventions would deter irreparable harm from happening, and that penalties alone would not be adequate to account for such harm. For emergency situations, the same-day judgments may be issued if the courts agree to make ex parte rulings (without warning and in the absence of the debtor), but the applicant would be required to provide protection of expenses to shield the defendant against reckless intervention. Alternatively, interlocutory injunctions would be issued until trials are conducted.

3.2.7. Appeal lodging. As stated above, first instance rulings may be taken on appeal on legal and factual grounds. Decisions made in the second instance may also be placed before the Supreme Court within 21 days of submission, but the latter would only concentrate on matters relating to legal interpretation.

3.2.8. Enforcing court decisions. A verdict can be followed as long as it becomes definitive (i.e. when all the areas to appeal have been exhausted), but compliance is the most critical part of the collection process very often. If the debtor fails to satisfy the judgment, the sheriff may order that the District Court sanction execution by attachment and sale of the debtor's estate. This may take quite some time and the judgement will be restored in many instances, since the claimant has no property to recover. Nevertheless, the sheriff can enter into an instalment agreement with the debtor, which might be better for a reasonable period of time. Similarly, Garnishee Orders requiring a loan to be settled through a third party owes the debtor's money is probable. If the borrower gives evidence that the claimant would actually not pay the debt owed, a Committal Order may be issued by the judge too.

3.2.9. The prospect of liquidation proceedings also tends to increase the execution ratios but recording the verdict for publishing in the Trade Gazettes is also an efficient way to secure payment, particularly if the debtor is selling. There is then extensive promotion of the verdict at low cost, but there is also a danger of bringing the claimant out of business by alerting his other creditors, as well as a risk of being sued for false claims if release happens after settlement of the debt.

3.2.10. Duration of legal action. It may take a year to achieve a verdict, but if mandatory compliance is needed that period may be increased. Claims put before the Supreme Court for review could take a further three years. Apart from postal affairs, conflicts concerning international parties would not be treated differently from those affecting domestic parties alone. Therefore no complications are to be anticipated from this point of view.

3.2.11. Costs of legal procedure.  As a general rule, the successful party may get limited liability against the losing party for its expenses (60 to 70 percent on average), but legal fees would not usually be recoverable. However, the courts will usually take into account the conduct of the plaintiffs when granting penalties, so acts taken before the incorrect tribunal will result in financial sanctions. Court fees may rise to EUR 650 (claims of up to EUR 15 000) to EUR 2 700 (claims of more than EUR 75 000).

3.3. Alternatives to legal action

3.3.1. Alternative Dispute Resolution Procedures (ADR). Mediation and arbitration (as laid down in the 2010 Arbitration Act) are standard in Ireland and, in addition, the High Court and the Commercial Court frequently appear to postpone court proceedings in order to enable the case to be resolved more rapidly by ADR procedures.

3.3.2. Mediation requires naming a mediator who is in control of having the sides reach a compromise. In other terms, the mediator has no decision-making powers on behalf of the parties and they can not commit the parties to a judgment. The arbitration is only final where a settlement agreement is reached at the conclusion of the negotiations between the parties. The mediator serves as mediation facilitator and the attorney will tend to act as such in debt-related conflicts.

3.3.3. Arbitration requires the parties agreeing to rely on an independent and impartial arbitrator from a third party who has the power to resolve a disagreement on their behalf. Decision of the arbitrators will be binding upon the parties.

3.3.4. For an out-of-court mediation method, ADR may be cost-effective, usually eliminates delays, requires anonymity to be maintained and offers a legal judgment that can then be applied in the courts if necessary. The legal tribunal may also be regarded when including international transactions.

3.3.5. Foreign forums. In Ireland it is rather unusual to use global mechanisms to settle disputes, since domestic courts are fairly efficient in reaching prompt judgments. Nevertheless, the nation is a signatory to the Rome I Regulation on the law applicable to contractual obligations, which specifies that the parties to a contract may, by mutual agreement, select the law applicable to the contract and select the court which will have jurisdiction over conflicts.

3.3.6. Foreign awards enforcement. As previously mentioned, it is rather unusual to use foreign fora to obtain enforceable decisions against domestic debtors. Nevertheless, international rulings against foreign debtors may be imposed in Ireland while different circumstances might occur.

3.3.7. On the one side, decisions made in an EU country will profit from the especially favorable requirements for compliance. In comparison to EU enforcement judgments which are usually enforceable immediately in domestic courts, the two key ways of applying the EU judgment in Ireland are the use of a European Compliance Order (EEO, as provided for in Regulation EC No 805/2004) where the allegation is uncontested or the declaration of the judgment under the terms of Brussels I Regulation (44/2001).

3.3.8. If the judgment applies as an uncontested assertion, it can be freely implemented (i.e. without registration) through the use of an EEO given the debtor has established properties in the region. Similarly, a European Small Claims Process (as provided for in Regulation EC 861/2007) aimed at removing intermediate steps can be counted on while applying judgments of up to EUR 2000.

3.3.9. The procedure for registering an EU judgment with domestic courts is relatively simple, if the claim is disputed. To order for the judgment to be recognized, the judgment holder will appeal to the court involved and provide the court with, among other records, an approved copy of the judgment, a validated transcript and, if interest is asserted, a letter stating the amount and interest rate at the time of the application and forwards. Once the judgment has been registered, it can be enforced as if it were issued by domestic courts (according to Recast Regulation EC 1215/2012, such an exequatur proceeding is no longer required as of January 2015).

3.3.10. On the other hand, decisions made in foreign countries outside the EU would be recognised and applied on a mutual basis, providing that the originating country is a party to a bilateral or multilateral arrangement with Ireland negotiated for this reason. Exequatur prosecutions will take place in domestic courts, in the absence of equitable agreements. As a general rule, foreign judgments can not be reviewed on the merits of the case, but courts would deny admissibility where the foreign decision in the issuing country is neither final nor enforceable, deemed incompatible with Irish public policy or with decisions rendered by Irish courts, unless the defendant has benefited from due process of law, etc.

4. Managing insolvent debtors

4.1. Insolvency in Ireland

4.1.1. In Ireland, a debtor is deemed insolvent if its net worth becomes unable to surpass the accrued losses (balance sheet test) when meeting its financial obligations within a reasonable period of time (cash flow test).

4.1.2. The primary legislation governing corporate insolvency law is contained in the Companies Acts from 1963 to 2006 and the Conveyancing and Law of Property Act 1881 in the case of receivership. Insolvency cases are ongoing before the High Court of Ireland.

4.2. Insolvency procedures

4.2.1. Out-of-Court proceedings. Informal out-of-court talks which take place but a unanimous agreement of all shareholders is then needed.

4.2.2. Debt restructuring. At the request of the debtor or creditors, it is the responsibility of an examiner to oversee the company and make proposals for its survival while the company managers remain in control of the company. In the meantime, ongoing enforcement proceedings against the firm remain for up to 100 days. The agreements must then be approved by each creditor party (by a vote of number and value) and verified by the court (which would guarantee that no creditor earns less from the settlement than it would normally receive from the liquidation proceedings) in order to connect the parties. The statute does not provide a cap on write-offs, which implies there are no clear requirements as to how much of the liability could be retrieved.

4.2.3. Schemes of arrangements are also allowed under the Companies Act (Section 201), but consent must be received from a vote of 75 per cent of the interest of each creditor class. Therefore this criterion is arbitrary, and the schemes are seldom used

4.2.4. Winding up proceedings. Liquidation is the final procedure that involves the delinquent company's assets being sold directly by the defendant, the receiver, or the judge upon appeal. Once the court has accepted the motion for liquidation, a liquidator issues a winding-up notice to the Registration Office of the Companies and tells investors to lodge their cases with the trial.

4.2.5. The liquidator may submit arrangement schemes during the liquidation phase, in order to avoid liquidating a viable business. In order to become successful, the different groups of investors and owners must accept the resolutions that must be approved by the court. Receiving is a less stringent type of litigation insofar as it only seeks to satisfy a particular part of the debt on the grounds of a Debenture Deed.

4.2.6. A receiver is named by either a debenture holder or the court to take control of a company's assets with a view to ensuring that the debt owed to the debenture holder is repaid. Unlike a liquidator, there would be no requirement on a trustee to recognize adequate assets to pay all unsecured creditors. Also, once a trustee is named and funds have been recognized to reclaim the debt owed to their investor, nothing remains and the company usually falls through liquidation.

4.2.7. Priority rules. Generally, priority rules apply when transferring the profits to the creditors. Secured loans (procedural payments and costs, debt holders, mortgage and debenture holders) will usually be returned to creditors in lieu to preferred creditors (social insurance obligations, royalties, job claimants and floating debt holders) and unsecured creditors who might therefore never recover their debt. Nevertheless, very little (if anything) remains generally to be exchanged by unsecured creditors in relation to their debts.

4.2.8. Duration of insolvency procedure. Insolvency proceedings could take a maximum of five years in Ireland.

4.2.9. Required documents.

Rights to dividends, copies of invoices, copies of resolutions.