merrion street

President (Tom Murray)

Distinguished Guests

Ladies and gentlemen

I am very honoured to be invited as guest speaker at your Annual

President’s Dinner this evening. This is a rather special occasion as the

Association of Certified Chartered Accountants Ireland, or ACCA, is this

year celebrating its 40th anniversary as a separate entity from the UK

organisation. During those forty years the Association has gone from

strength to strength and now has some 20,000 members and students in

Ireland, north and south. I would like to congratulate you on this

achievement and to wish you and your many members continued success.

I also believe that another important milestone is being celebrated here

tonight as your President, Tom Murray, has also reached the grand old age

of forty! I would like to congratulate him on his special birthday and

wish him the very best.

It is somewhat fitting that I am addressing ACCA Ireland this evening as

today also marks the formal establishment of the Insolvency Service of

Ireland. I am also pleased to be joined by the Director of the Service,

Lorcan O’Connor, this evening.

As indeed most of you may already be aware, the Personal Insolvency Act

2012 was signed into law by the President on 26 December, 2012. The Act

will be fully commenced as soon as all of the necessary preparations for

administration of its provisions are finalised.

The Act represents the most comprehensive reform of our insolvency and

bankruptcy law and practice since the foundation of the State and is a key

element of the Government’s strategy to return this country to stability

and economic growth. Given the extent of the reform involved, the Act is an

extensive and legally complex piece of legislation. It introduces new

concepts to Irish law. Indeed, the new Personal Insolvency Arrangement

introduces a concept which I understand to be unique in international

insolvency law in providing for the negotiated resolution of secured debt

in a court sanctioned process that provides certainty for creditors and, if

I may say so, hope for debtors.

It is difficult to ascertain the likely demand in regard to the new debt

resolution processes. However, in our planning for the first full year of

operation of the Insolvency Service, we have used the tentative estimate of

applications for the two main debt resolution processes - the Debt

Settlement Arrangement and Personal Insolvency Arrangement – of roughly

15,000 applications. There could be a further 3,000 to 4,000 applications

for Debt Relief Notices. We would also have to expect about 3,000

bankruptcy applications during this time. This would be very significant

bearing in mind that there were approximately 33 bankruptcy adjudications

in 2011 and 35 in 2012.

The Personal Insolvency Act fulfils both a key commitment in the Programme

for Government and also a requirement of the EU-IMF-ECB Programme of

Financial Support for Ireland. The Act provides for the introduction of

three new debt resolution processes, which though requiring approval by the

court, are essentially non-judicial in nature:

· The Debt Relief Notice (DRN) will allow for the full write-off of

qualifying unsecured debt up to €20,000, subject to a three year

supervision period.

· The Debt Settlement Arrangement (DSA) provides for the agreed

settlement of unsecured debt, with no limit involved, normally over

five years.

· The Personal Insolvency Arrangement (PIA) will enable the agreed

settlement of secured debt up to €3 million, although this cap may be

increased with the consent of all secured creditors, and unsecured

debt without limit, normally over six years.

The Act also provides for reform of the Bankruptcy Act 1988. The critical

change here is to provide for the automatic discharge from bankruptcy,

subject to certain conditions, after 3 years. While it has been much noted

in recent times that this is shorter than the 1 year discharge period in

our neighbouring jurisdiction, it is in line with the European norm in

regard to insolvency proceedings. I am of the view that a 3 year period

represents, at this point, a reasonable balance of the legitimate interests

and expectations of both debtors and creditors.

And, as I mentioned earlier, the Act also provides for the establishment of

a new Insolvency Service to operate the new non-judicial insolvency

arrangements. It is my intention to transfer the functions of the Official

Assignee in Bankruptcy to the Service to provide for the maximum

administrative coherence. The Director of the Insolvency Service of Ireland

Lorcan O’Connor commenced in his role on 22 October, 2012.

The Director is working with all possible speed to ensure that the full

operation of the provisions of the Personal Insolvency Act 2012 can begin

as soon as possible. This work includes: the fitting out of office

accommodation on Conyngham Road in preparation for a move-in date in early

April; the producing of guidebooks for the public; developing the

Regulatory Framework for insolvency practitioners; developing a suitable IT

system and recruiting the necessary staff for the Insolvency Service.

The Insolvency Service will launch an information campaign later this month

which will include launching its website, the issuing of publications and

relevant guidelines, the opening of an information line for people to call

and the announcement of the regulatory framework for personal insolvency

practitioners.

The Personal Insolvency Act makes provision for the Insolvency Service to

draw up guidelines in regard to reasonable living expenses that would be

allowed to a debtor in one of the new insolvency processes. In doing this,

the Service will have regard to poverty indicators as set out in Government

publications on poverty and social inclusion and statistical information

collated by the Central Statistics Office on household income and

expenditure. The Service will take into consideration individual

circumstances such as differences in the size and composition of

households, and the differing needs of persons, having regard to matters

such as their age, health and whether they have a physical, sensory, mental

health or intellectual disability. These guidelines will be published

later this month.

It is worth noting, especially for the accountants and other insolvency

practitioners present who may be concerned with the new insolvency

processes that the Personal Insolvency Act provides for:

· certain excluded debts - primarily relating to Court orders - which

cannot be proposed for resolution,

· certain excludable debts - primarily owed to the State - which can be

proposed for resolution only with the explicit consent of the creditor,

· the regulation of personal insolvency practitioners (PIPs) by the

Insolvency Service.

· the exemption to pension "pots" in all insolvency processes (not of

pension contributions or income).

In order to protect the constitutional rights of all concerned, and to

prevent potential actions for judicial review, the Act makes provision for

enhanced oversight by the Circuit Court of the three new debt resolution

procedures, or by the High Court where the debts concerned are in excess of

€2.5 million. The Circuit Court will receive the debtor’s case file from

the Insolvency Service with an application for a Debt Relief Notice or a

Protective Certificate in respect of a Debt Settlement Arrangement or

Personal Insolvency Arrangement.

Effectively, the court’s hearing of the application will take place on an

ex-parte basis, neither debtor nor creditor will be required to be present

and thus no time delays or costs are incurred.

This efficient procedural approach is repeated at the conclusion of the

three year supervision period for the Debt Relief Notice or on the

conclusion by the parties concerned of a successful Debt Settlement

Arrangement or Personal Insolvency Arrangement proposal prior to its formal

registration. A court hearing would only subsequently be necessary where a

creditor objects on one of the grounds specified in the legislation. This

is consistent with the approach recommended by the Law Reform Commission.

In order to deal with this anticipated volume of work and to facilitate the

speedy consideration of insolvency applications, a new cadre of Specialist

Judges of the Circuit Court will be introduced. The Act makes provision for

a maximum of eight such specialist judges. The recruitment process is now

underway with the Judicial Appointments Advisory Board.

This enhancement of court involvement has the very significant benefit to

the debtor of providing protection from enforcement actions by creditors,

either during the negotiation period or during the lifetime of the

arrangement. In addition, the involvement of the court also ensures that

our new processes will be capable of meeting the criteria in regard to the

EU Insolvency Regulation’s recognition of cross-border insolvency

procedures.

The new Debt Settlement Arrangement and Personal Insolvency Arrangement

processes provided for in the Act facilitate a voluntary deal between a

debtor and a specified majority of his or her creditors.

We should not forget that there are a range of different creditors who may

be potentially involved in the new processes. Many persons or companies may

be both debtors and creditors. While I can understand the feelings towards

financial institutions and their contribution to our current economic

difficulties, we must not lose sight of our objective which is to introduce

reformed, workable and balanced insolvency legislation. Such legislation is

a required feature of any properly functioning economy.

Many debtors and creditors are likely to be concerned by this reform. For

their sakes and for the sake of the wider economy, all must be treated

fairly. It is sometimes the case that individuals are currently in personal

financial difficulty because of the failure of other individuals to pay for

work properly completed or goods or services supplied to them.

The Government has engaged with the financial institutions in the lead-in

to the enactment of this legislation. They understand exactly where the

Government is coming from, what our concerns are and what they should do in

the context of operating the legislation constructively and sensibly,

engaging with personal insolvency practitioners and the circumstances of

their customers and ensuring appropriate and sensible arrangements are

made.

I say this in response to the concerns that have been raised about the

balance of power between banks and debtors. There is talk of what has been

commonly referred to as a “bank veto”. The reality is that it is in the

best interests of both debtors and creditors to seek to conclude an

acceptable and workable arrangement under the Act, be it a Debt Settlement

Arrangement or Personal Insolvency Arrangement. The latter such Arrangement

will be of particular use for those persons experiencing difficulty with

repayment of their mortgages and will have to provide, as appropriate, for

debt forgiveness.

The insolvent debtor will, with the assistance of a personal insolvency

practitioner, put forward a realistic offer to his creditors that will

restore the debtor to solvency within a reasonable period, thus giving

creditors a better financial outcome than the alternative bankruptcy. The

creditors will need to consider carefully the debtor's offer, conscious

that if they refuse, the debtor can avail of bankruptcy. Bankruptcy is the

ultimate appeal mechanism of the debtor.

The role of the personal insolvency practitioner, or PIP, in the context of

Debt Settlement Arrangements and Personal Insolvency Arrangements is

vitally important to the success of these schemes. I would imagine that

this is a matter of particular interest to your association’s members.

Following the passing of the Personal Insolvency Act by the Oireachtas, I

said that, while the Insolvency Service would not impose any particular

restrictions as to the type of professionals who would be authorised to act

as personal insolvency practitioners, the entry requirements would be set

at a high level to ensure their competence and to promote public confidence

in the new framework. Looking at the experience in other countries,

insolvency practitioners very often tend to be accountants. Draft

Regulations covering the qualifying criteria, authorisation and ongoing

regulation of Personal Insolvency Practitioners are being drawn up and are

nearing completion. These regulations will set out the qualifications for

individuals to act as personal insolvency practitioners and I am aware that

these will include qualifications and experience in business, law or

finance, together with demonstrable knowledge of debt relief solutions and

the Personal Insolvency Act. Suitable persons meeting the normal fitness to

practice and competence criteria, having indemnity insurance, and who meet

the other requirements of the legislation, will be able to apply for

registration on an individual, not corporate, basis. It is my objective

that the qualifying criteria and robust assessment by the Insolvency

Service of applications for authorisation will ensure that all personal

insolvency practitioners will be capable and knowledgeable.

The Insolvency Service will be responsible for the direct regulation of

PIPs. It will make regulations to provide for matters such as procedures

governing the authorisation of persons to carry on practice as PIPs, the

standards to be observed by PIPs, qualifications and requirements as to

competence, information to be provided to the Insolvency Service by PIPs

and the circumstances and purposes for which a PIP may charge fees or

costs.

As we are all aware, business activity is not without risk and this is true

not just where it takes place in one country, but across borders. In the EU

Internal Market, it is important, where cross-border insolvency proceedings

are concerned, that we have the most effective procedures in place. Not

only should such procedures be effective, but they should, where

appropriate, assist in the rescue of viable businesses and honest

entrepreneurs and to alleviate crushing debt burdens on persons arising

from mortgage, trade or personal debt.

It is in that regard, that I particularly welcome the proposal last

December from the European Commission for a modernised Regulation on

cross-border insolvency proceedings. The proposal emphasises the need to

move away, where possible and appropriate, from a liquidation approach to

insolvency to that of rescue and restructuring.

The modernisation of cross-border insolvency procedures will assist in

putting economic growth at the heart of our civil justice agenda and in

strengthening the Internal Market. The proposal in regard to the EU

Insolvency Regulation is a priority of the Irish Presidency and we will

seek to make real progress. I was heartened by the very positive response

to it of my EU Justice Ministerial colleagues at the informal JHA Council

in Dublin in January.

Of course, one particular aspect of the insolvency Regulation that has

become well known and commented on over the past few years is that of the

location of the centre of main interest of the debtor. In determining an

application for the opening of an insolvency proceeding, of a company or of

a natural person, the Regulation requires that the court concerned should

determine the centre of main interest of the applicant.

It is a matter for the court to satisfy itself that the provisions in its

national law in this regard have been observed. For example, the UK Courts

can and have refused or revoked insolvency proceedings where an abuse has

been detected. Indeed, this has occurred with certain individuals, who were

subsequently subject to insolvency proceedings in this jurisdiction.

I very much support the development of a more uniform approach across the

EU in regard to the establishment of the centre of main interest so as to

combat potential abuses in this regard. The proposed revised Regulation

makes certain proposals in that regard. However, we must remember, that a

company or natural person is entitled to change a centre of main interest.

This entitlement arises under the broad rubric of freedom of movement in

the Internal Market and such freedom has been enforced by decisions of the

European Court of Justice.

The members of this Association will appreciate more than most that we must

allow the new legislation and the various debt resolution processes some

months at least to work. One point which has struck me during the debate in

this area is the frequency of requests to me to predict, in exact terms,

all of the possible outcomes in all possible cases. That, I think you will

realise, I cannot do. Each case is individual in its own particular context

and as I reiterate, must be approached for resolution in negotiation

between the concerned debtor and creditors.

It is also not for me to speculate as to the future conduct of any of the

participants in an insolvency process. However, I remain convinced that the

new personal insolvency laws, including the bankruptcy law reform, should

provide a significant incentive for financial institutions to develop and

implement realistic agreements to manage or settle debt with their

customers.

It is important that financial institutions constructively engage under

this new personal insolvency legislation in the public interest, the

interest of those in financial difficulties and the interest of their own

institutions and credibility.

It is vital that creditors, provided with a full and honest picture of a

debtor’s financial resources and income, assets and liabilities apply a

degree of common sense and realism to the situation. I believe that there

is evidence now emerging of that new realism on the part of financial

institutions. That is positive, but it is an unnecessarily long delayed

start to truly and fully addressing the extent of the problem of

unsustainable debt.

I made it clear on a number of occasions during the debates on the

insolvency legislation in the Oireachtas and since its enactment that if I

find, within a short period during the operation of this legislation, that

all or some of the financial institutions are intent on not engaging

constructively with the personal insolvency arrangement provisions for

whatever reason, I will not be slow to bring proposals to Government to

amend the legislation.

An issue which has gained some public attention in recent months is the

commitment contained in the latest agreement with the Troika in regard to

the introduction of legislation remedying the issues identified by case law

in the 2009 Land and Conveyancing Law Reform Act, so as to remove

unintended constraints on banks to realise the value of loan collateral

under certain circumstances. Essentially this concerns repossession

applications to the courts.

The issue of framing an appropriate legislative response has been the

subject of ongoing consultation between my Department and the Office of the

Attorney General. I would be anxious that such a response would also

include any necessary additional safeguards for the debtor who is facing

repossession of his or her home. For example, this might require a court,

when considering any application for repossession of a principal private

residence, whether it would be appropriate given the debtor’s circumstances

to consider whether a Personal Insolvency Arrangement under the Personal

Insolvency Act 2012 would be a more appropriate and better course of action

in all of the circumstances.

The court, where it was of such opinion, might adjourn the hearing to see

if the debtor and the financial institution could attempt to conclude a

Personal Insolvency Arrangement. To require such a consideration of the

court in this instance would be no different to that already required in a

court consideration of a bankruptcy petition under the Act. Its success

would, of course, depend on the financial circumstances of the individual

debtor and his or her capacity to discharge all or a portion of outstanding

debt over time out of income or realisable assets.

The new Personal Insolvency Act is of substantial importance in the current

economic climate where so many citizens find themselves in serious

financial difficulty, many through no fault of their own. The new debt

resolution mechanisms provided for in the Bill give rise to a possibility

of people working through their debt issues with real hope for the future.

I look forward to and hope the objectives of the Bill will be fulfilled and

that it will facilitate individuals who genuinely cannot pay their debts

and are in major financial difficulty entering into constructive and

appropriate arrangements with creditors, including financial institutions.

We must achieve fair and certain outcomes in dealing with indebtedness. At

this stage we are past the finger pointing and blame, it is time for

solutions. If we can achieve this, we achieve great progress. If we do not,

we will gain only bitter stagnation which will be of no use to our

citizens, financial institutions or to the State.

In conclusion, if I might move away from my main topic of personal

insolvency reform, to briefly address the issue of the State’s finances.

Significant progress has been made and continues to be made, since this

Government came into office, in regard to putting Ireland’s finances on a

sustainable footing. This progress has been acknowledged and rewarded by

the international investment community.

Only two years ago Ireland was locked out of the capital markets. However

in 2012 Ireland issued conventional bonds, Irish Amortising Bonds,

short-term treasury bills and bond switches. Evidence of returning

confidence in the Irish economy is not limited to sovereign debt issuance,

with investors returning to purchase Irish semi-state and domestic bank

issuance. There has been a dramatic reduction in Irish sovereign yields.

The yield on Ireland’s benchmark 2020 bond fell from over 8% to 4.4% in

2012 and has continued this trend to 3.6% as of last week, back to

pre-crisis levels.

The State’s successful disposal of our ownership of Irish Life is further

evidence of investors’ confidence in Ireland and demonstrates that there is

a market appetite for Irish assets. These transactions are a very positive

outcome for the State on a number of levels. They will enable us to reduce

our indebtedness, they have had a positive impact on investor sentiment and

they also help to underpin the value of our remaining banks investments.

The Government has reached agreement with the European Central Bank on the

IBRC promissory notes. This represents another important step in progress

to restore public finances and instil confidence in the solidity and future

of the Irish Economy. The promissory notes are now replaced with long term,

low interest Government bonds.

This outcome means that:

· IBRC (formerly Anglo Irish Bank & Irish Nationwide) is currently

being liquidated,

· €3.1 billion will not be paid as due this March,

· A cash-flow benefit of €20 billion over next 10 years will arise to

the Exchequer,

· The deficit will be reduced by €1 billion per annum over the coming

years,

· There will be significant efficiency benefits from moving assets to

NAMA, and

· It marks a key milestone on Ireland’s road to recovery and

significantly enhances our debt sustainability.

Exit by the State over time from its investments in the financial sector is

Government policy and the eventual separation of the State from its banks

is an objective for which there is strong support political and otherwise.

This month will see the end of the State’s guarantee of bank deposits and

liabilities which dates back to that famous or infamous – depending on your

perspective – night in late September 2008.

This week has also marked the successful outcome of talks under the aegis

of the Labour Relations Commission to bring about an extension of Croke

Park and achieve crucial reductions in the public sector wages and

expenditure. While we should be under no illusion as to the difficulties

ahead and the need in particular, for real and substantial sustainable

growth in our domestic economy and a major reduction in the numbers

unemployed we have, I believe, in our first two years in office taken

substantial strides towards recovering our economic sovereignty and getting

the State back on the road to recovery. There remain difficult hurdles to

jump but the Government is resolute in its determination to get things

right and, in the national interest, to make and implement the decisions

required. We are also determined during the course of our six month

presidency of the European Union to leaving a lasting positive footprint of

real value across a broad range of issues and in particular with regard to

growth, fiscal stability, banking reform and unemployment. We are committed

to leaving a lasting and visible legacy of real benefit to our own citizens

and citizens of all member states across the European Union.

Thank you.