Irish Bank Resolution Corporation liquidation
12 Feb 2013
The Irish Government enacted the Irish Bank Resolution Corporation Act 2013 (the "IBRC Act") in the early hours of 7 February 2013 in order to secure and stabilise the assets of the Irish Bank Resolution Corporation ("IBRC") (formerly known as Anglo Irish Bank).
IBRC Act: Purpose
The IBRC Act is designed to help address "the continuing serious disturbance in the economy of the State" and to "protect the interests of taxpayers". It provides for the winding up of IBRC to bring to an end the financial exposure of the State and the Irish Central Bank to IBRC. It is stated that it is hoped that it will "help restore the financial position of the State" and restore confidence in the banking sector by "furthering the reorganisation of the Irish banking system".
The IBRC Act provides for the appointment by the Minister for Finance of one or more special liquidators to wind up IBRC. Joint special liquidators have now been appointed who have full custody and power over all IBRC assets.
All borrowers' loans will initially be managed by the special liquidators and all debts due to IBRC will remain due and enforceable.
Loan Sales to Third Parties
Portfolios of assets including the mortgage book of IBRC will be identified by the special liquidators who will oversee an independent valuation and sales process of such assets to third party bidders. The bidding process will be conducted in an open and transparent manner. If acceptable bids equal to or in excess of the independent valuation are obtained then they will be sold to third parties. Otherwise, the relevant portfolio will be sold into the National Asset Management Agency ("NAMA") at their valuation price.
The proceeds of these sales will be used to repay creditors in accordance with normal Irish Companies Acts priorities, with preferred creditors paid first, and then NAMA in respect of the IBRC debt. To the extent that there are proceeds available after repayment in full of the NAMA debt, these proceeds will be applied to remaining unsecured creditors who have not been paid under the guarantee schemes (the statutory Deposit Guarantee Scheme which cover retail deposits up to €100,000 with all Irish authorised credit institutions and the Eligible Liabilities Guarantee which applies to deposits over €100,000 with certain credit institutions including IBRC). These remaining unsecured creditors will include the Minister for Finance to the extent that he has paid out under the guarantee schemes. Similarly, if the proceeds are not sufficient to pay IBRC’s debt to NAMA, the shortfall to NAMA will be met by the existing Ministerial guarantee under the Credit Institutions (Financial Support) Act 2008. There are also provisions in the IBRC Act enabling the varying of priorities for certain creditors.
Special Liquidation Order: Effect
The Special Liquidation Order (the "Order") made by the Minister for Finance provides:
(a) for an immediate stay on all proceedings against IBRC;
(b) that no further actions or proceedings can be issued against IBRC without High Court consent;
(c) that no action or proceedings for the winding up of IBRC, or the appointment of a liquidator or an examiner can be taken, issued, continued or commenced;
(d) for the removal of any liquidator or examiner appointed prior to the Order; and
(e) that it constitutes notice of termination of employment for each employee with immediate effect.
The appointment of a receiver pursuant to a debenture or charge created by IBRC does not constitute proceedings for the purposes of the Order.
The special liquidators will have the same duties and powers as a normal liquidator except that they are appointed by the Minister for Finance and are obliged to comply with the instructions given to them by the Minister for Finance and act in the interests of the taxpayer.
The Order shall for the purposes of any contract, deed or agreement have the same effect as the making of a winding up by court order or appointment of an official liquidator.
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