High Court: Irish courts place MAC Interiors into examinership despite company being registered in Northern Ireland

About this case:

• Citation:
  [2023] IEHC 395
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Mr Justice Michael Quinn

Delivering judgment in the case, Mr Justice Quinn noted that Irish law had not conclusively determined whether an examiner could be appointed to non-Irish company within the meaning of section 2(1) of the Companies Act 2014. It was held that the EU Insolvency Regulation Recast granted jurisdiction to the Irish courts to take the company into examinership as it had its “centre of main interests” within the State.

Background

In May 2023, MAC-Interiors Limited presented a petition for the appointment of an examiner on the basis inter alia that it was badly affected by the pandemic and had sustained significant losses from a project in Liverpool. The company had a projected deficit of about €9 million.

An interim examiner, Mr Kieran Wallace, was appointed over the company. When the matter came on for hearing in June 2023, no creditor objected to the appointment of Mr Wallace as examiner. However, a discrete issue arose in the proceedings as to whether the court had jurisdiction to make the appointment.

The company was registered in Northern Ireland and, accordingly, was not a company that was registered within the State. Additionally, since the company was not registered in Ireland under the Companies Act 2014, it was unclear as to whether it was possible for the company to enter the examinership process in Ireland.

The specific issue related to the fact that, as a foreign company, MAC Interiors was not incorporated under the Companies Act 2014 and was therefore not a “company” within the meaning of the Act. Since the 2014 Act only applied to Irish companies, MAC Interiors addressed the issue of entering the domestic examinership process as a foreign company.
Section 509 of the 2014 provided that it was subject to the EU Insolvency Regulation Recast 2015/848. Article 3 of the Regulation provided that the courts of a Member State “of which the centre of the debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings.” Article 4 provided that a court should examine whether it had jurisdiction to open the proceedings.

Further, Article 7 of the Regulation provided that the “the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened.” The definition of “insolvency proceedings” included examinership under the Regulation.

There were also certain recitals contained in the Regulation which identified inter alia that the Regulation enabled main insolvency proceedings to be opened in the Member State where the debtor had the centre of its main interests.

High Court

In dealing with the matter, Mr Justice Quinn noted that the jurisdiction point was an undecided issue in Irish law and considered that it was appropriate to deliver an authoritative decision. The court outlined the principle of direct effect of EU Regulations and held that the Regulation was therefore a part of Irish law (see Re BRAC Rent-a-car International Inc [2003] EWHC 128 (Ch); Re Harley Medical Group (Ireland) Limited & the Companies Act 1963-2012 [2013] IEHC 219).

The court accepted that Article 3 established a harmonised rule conferring jurisdiction by reference to the centre of main interests of a company and did not permit the distinguishing of companies based on place of incorporation. As such, the court stated that it would be “strangely anomalous if the limited definition of a company in s. 2(1) of the Act could be invoked to exclude a company having its centre of main interests in the State but registered outside the State.”

The court went on to consider whether the COMI of the company was the Republic of Ireland. It was noted that, ordinarily, the place of a registered office could be the presumed COMI for a company. However, the company argued that this presumption was rebutted in the present case.

The principal activity of the company since inception was to provide for interior fit-out of commercial facilities in Ireland. It had also expanded to the general constructions sector in Ireland and the UK. The administrative and marketing headquarters were based in Dundrum, Dublin 16, while nearly all board and management meetings took place in the Dublin office.

The company was tax resident in Ireland and had a substantial business in the State for 20 years. Historically, all trade occurred in Ireland. Further, two-thirds of its creditor base by value were based in Ireland. All employees were resident in Ireland and worked in the State. There were also several other factors which pointed to the COMI being Ireland, including Irish bank accounts and administrative equipment being in the Dublin office.

The company also pointed to leases of its Dublin office, extracts of board meetings and correspondence with Revenue to confirm the COMI being Ireland. The court was satisfied from the evidence that the presumption that Northern Ireland was the COMI was rebutted. Accordingly, it was held that the Irish courts had jurisdiction to allow MAC Interiors to open the insolvency proceedings in the State.

The court then turned to consider whether the company should be placed into examinership. Mr Justice Quinn conducted a straightforward assessment of the jurisdiction under section 509 to appoint an examiner. It was clear that the company was in financial difficulty having regard to the company’s creditors and balance sheets.

Attempts had been made to resolve the financial difficulties which included seeking to renegotiate payment terms with suppliers, reducing staff and raising funds. However, these actions had not resolved the issues.

Having regard to the independent expert report in the matter, the court was satisfied that the company had a reasonable prospect of survival if it entered the examinership process. This was conditional upon several factors, including the company attracting new investment to strengthen its financial position. The independent expert outlined that he believed the conditions would be met.

The court also considered the interim examiner’s report which outlined a positive outlook in respect of the company’s survival based on engagements and inquiries conducted by the interim examiner. The interim examiner agreed with the independent expert that the conditions for the survival of the company were achievable.

Conclusion

The court exercised its discretion to appoint an examiner to MAC Interiors.

In the Matter of MAC-Interiors Limited [2023] IEHC 395