Transfer and Reorganisation

Courts may make a special management order appointing a special manager to a credit institution meeting certain criteria.  The intervention conditions must be fulfilled, and a special management order must be necessary in the circumstances.

Before making a special management order proposal, the Central Bank has to give written notice to the institution, subsidiary or holding company concerned describing the terms of the proposed order together with a summary of the reasons why the intervention conditions are fulfilled.

The credit institution is to be given a period of 48 hours or shorter in which to make submissions.  These are to be considered.  The provision does not apply if the bankers consult the institution regarding the terms of the proposed order and the institution has consented or if exceptional circumstances exist.  The exceptional circumstances are those relating to an imminent threat to the financial stability of the credit institution on the financial system of the state or prejudice to confidentiality.

Special Management Order

The special management order is to set out the period to which it applies.  There are n provisions in relation to the special manager’s power, details of subsidiaries to which it is to apply, notification of the right to make representations.

The Central Bank may apply on a one-sided application for confirmation of the order.  If the court is satisfied that the statutory requirements have been complied with and that the decision is reasonable and not vitiated by an error of law may make a special management order in terms of or as varied having considered the submission.

The order is to be published once made and served on the institution.

The Central Bank may apply on notice or in urgent circumstances ex-parte to vary the special management order.  The credit institution may apply within 14 days of publication of notices to set it aside.  The courts are to give priority in relation to the hearing.  Instead of setting aside the court may vary the order.

The special management order is to specify the names of the manager, details of the institution and subsidiaries, period of holding the business or part of the business to be taken over.  It shall specify the basis of costs and remuneration.  It shall specify matters reserved for decision by the Central Bank directions in relation to taking a particular action.

Special Manager

The special manager takes over the management of the business or the relevant part of the business to the extent specified.  The manager manages the business with a view to preserving and restoring the financial position of the credit institution, subsidiary etc.  They wind down the business with a view to liquidation or implement resolution or a  recovery plan in accordance with a special management order.

The special manager is to have all the powers necessary for the purpose of its functions.  It is obliged to take steps as he considers appropriate to remedy the matters that led to the making of the special management order.  It may substitute his own decision for any decision which would otherwise have been made by the members or the management.

The appointment of a special manager does not relieve the institution of its legal and regulatory obligations. The special manager is to provide reports to the Central Bank as the Bank requires. The special manager may apply to the court for the determination of any matter in the course of his management.

Effect of Order

The effect of the appointment is to vest the direction and control or powers of the directors in the special manager.  Proceedings for winding up may not be taken without the consent of the Central Bank.  The examination may not be sought.  No inspector may be appointed.  No receiver may be appointed without the consent of the bank.  No enforcement against the bank’s assets may be had.

Any claim against the institution subject to security may not be realised until 90 days’ notice has been given to the bank.  If the special manager so elects, the powers of the institution exercisable by the general meeting of the credit institution may be exercised, but only with the prior consent of the Central Bank. The special manager must not exercise the powers in a way that conflicts with European Union law.

Subject as provided, the business of the institution is to continue without interruption as a going concern.  No agreements, bank accounts, mandates, rights, claims or proceedings are avoided by reason only of the appointment of the special manager.

During special management, the rights of shareholders are suspended.  Proceedings which might otherwise be taken by shareholders are prohibited. The special manager may remove officers, employees, and others.  Notice need not be given.  The power covers consultants, officers and employees.

The special manager may determine the role of the directors and officers if any together with their remuneration.  The directors and officers may be bound to continue to discharge their duties and obligations under the law.  The special manager is not to be a director or shadow director.

The special management order may end after the period specified or may be set aside or if the Bank specifies.

Liquidation

The legislation provides that in relation to the liquidation of an authorised credit institution, the Companies Act applies as varied.  The Central Bank may petition to wind up a credit institution on the basis that its winding up would be in the public interest, it is unable to meet its financial obligations, it has failed to comply with regulatory obligations, its licence has been revoked or it is in the interests of the deposit holders that it be wound up.

Another entity shall not present a petition or initiate a winding up unless it has given at least 10 days’ notice to the Central Bank and the bank has confirmed that it has no objection to the winding up.  If winding up is commenced the bank is entitled to be notified prior to applications and to obtain information in relation to each step.

The objective of a liquidator of an authorised credit institution is to facilitate the Central Bank in ensuring all eligible deposits holders receive the amounts required under the eligible deposits guarantee and facilitate the transfer deposits to another authorised credit institution to be held on behalf of the eligible depositors, and to wind up the affairs of the authorised credit institutions so as to achieve the best results for that institution’s creditors as a whole.

Objective one is to take precedence in the event of conflict.  The liquidator of an authorised credit institution is to begin working towards both objectives immediately.  The liquidator is to comply with obligations and requests of the Central Bank in relation to information.  The Central Bank may make money available for the purpose of deposit protection from the Deposit Protection Account or make payments and charge that account.

The bank may nominate two individuals, and the Minister may nominate one to comprise a Liquidation Committee.  A Liquidation Committee is reported to by the liquidator on any matters on request.  The Liquidation Committee must be kept informed of progress towards the above objectives.  As soon as practicable after the objectives have been achieved to resolve that they have been achieved in so far as reasonably practicable or apply to the court to determine issues are required.

A Liquidation Committee may make recommendations to the liquidator as to the appropriate ways of achieving objective one.

Recovery Plan

Having regard to the nature of the business of the institution, the Central Bank may direct it to prepare a recovery plan setting out actions that can be taken to facilitate the continuation of the business or part of the business of the credit institution in a case where it has experienced the financial instability.  The plan is not to assume financial support that may available from the State or fund.

A recovery plan is to be in accordance with the codes of practice issued by the Central Bank.  The bank may direct the authorised credit institution to implement its recovery plan or any part of it as it considers desirable or necessary.

Special Features

Proposed orders under the legislation are to be kept confidential.  Costs incurred are to be ultimately owed by the credit institutions in so far as possible.  The court may order that proceedings are held otherwise than in public and that proceedings are kept confidential.

Where orders are made under the legislation or requirements imposed which would cause any legal consequence whether contractual, proprietary or otherwise notwithstanding the available provision or agreement, the order or matters required are to be valid and interests and rights of third parties or liabilities are not to be exercisable.

If the Minister is of the view that the effect of the above is unduly onerous or causes unfairness or undue hardship he may after consultation with the Central Bank provide for the modification of this consequences.

The possibility of judicial review is curtailed by the Act.  An application must be made within 14 days.  A person may not apply if he could have applied to set aside the order but did not do so, it is stated no appeal applies to the Supreme Court let leave of the court.

The legislation is not however to affect EU obligations.

A special management order may be made even though the making of the order would have the confidence of effecting including reducing the rights ensured by subordinate creditors before the order.

Consideration may be given to the date upon which subordinated liabilities were acquired.