Summer 2013 by publications

SUMMER 2013 EDITION

IS YOUR BUSINESS PROTECTED? POSITIVE COSTS GREG CANTY

IN THE SPOTLIGHT Mick O'Driscoll

PERSONAL INSOLVENCY BILL TOM POWER

Upcoming CPD Events

A RANGE RANGEOF OFSERVICES SERVICES THAT HELP YOU PROTECT, THAT HELP YOU PROTECT, CREATE, MANAGE YOUR WEALTH CREATE, MANAGEAND ANDPRESERVE PRESERVE YOUR WEALTH

Table of contents Business Protection .............................................. P3 Gallery ...................................................................... P6 Positive Costs .......................................................... P7 Future is Getting Brigter ..................................... P8 Positivity Corner .................................................... P10 In The Spotlight .................................................... P11 Personal Insolvency ............................................ P12 CPD Events ............................................................ P13

WELCOME Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Nam liber tempor cum soluta nobis eleifend option congue nihil imperdiet doming id quod mazim placerat facer possim assum. Typi non habent claritatem! Regards, Your sign here

Business Protection According to recent survey from an Irish Insurance Company the majority of business directors and partnerships leave their business vulnerable to the financial consequences of the death of key person in the business, by not having provisions in place to deal with this situation. The Protection experts say that one of the most critical risks to a small business namely, the death of a key member of staff, is being overlooked by many – until it’s too late. The survey of directors indicated that almost 50% of business leaders haven’t considered putting business assurance in place because they are simply unaware of its existence, while 40% of those that don’t have it in place, considered it unnecessary. Few business directors or partners may consider or are aware that the family of the deceased would probably inherit the deceased’s share in the business. As such, they will expect to be bought-out or participate and profit from the business on an immediate and on-going basis. With the current restricted access to credit, a buy-out of their share would seem an unlikely outcome – while the alternative could be that the deceased spouse would become engaged in the day to day running of the business – which is often very challenging or indeed, sometimes actually unworkable. We at Manning Financial feel that business advisors such as solicitors and accountants are well placed to promote this integral insurance to their clients.

Why Business Protection makes sense? • On death the shares of a deceased director/partner form part of their estate. • Those who inherit the shares may not want to get involved in the business or conversely the surviving directors/partners may not want the next of kin to come into the business. • The most feasible option is to sell shares back to the surviving directors/partners'. • This would require the directors/partner to produce a substantial lump sum. • The solution is business protection - an arrangement can be put in place whereby on the death of a director/partner, funds become available to buy shares back from the next of kin.

How would your business survive if one of the business owners became seriously ill or died? If your business partner died what would happen to their share of the business?

It won’t happen to our company The odds of one shareholder dying or becoming seriously ill before retirement are probably higher than you think.

Age

Sole

2 shareholders

3 shareholders

13%

23%

32%

12%

22%

32%

12%

21%

30%

11%

19%

28%

How would you feel about a shareholder’s family joining your business if he/she died suddenly? If you died what would happen to your share of the business? Are your spouse or children in a position to take your place in the business? How will your family survive financially?

(Odds of one dying before age 65) Source: mortality tables (AM92) published by the Institute of Actuaries (UK)

How It Works • With Business Protection, the company/partners enters into a legal agreement with each of its directors/partners to buy back shares from their personal representatives in the event of death. • The directors/partners takes out a life assurance policy on each shareholder, to provide funds to enable the directors/partners to fulfill its obligation under the agreement. • In the event of death, the proceeds of the life assurance policy are payable to the directors/partners to be used to buy back shares from the deceased’s next of kin.

Case Study • Shane and Mary have 2 children. • Shane part-owns a business with Tom valued at €500,000. • Shane met with Manning Financial and identified the exposure to both his surviving business partner Tom and his next of kin Mary, in the event of his untimely death.

The Solution • Manning Financial helped Shane and Tom formalise what would happen if either of them died. They agreed that on death, the survivor will buy the deceased partner’s share of the business from his family. • Shane and Tom took out a Business Protection plan that pays €250,000 to the surviving business partner - If Shane dies, Tom receives €250,000 and vice versa.

The Result If Shane dies: • Tom receives €250,000 and uses it to buy Mary out of the business. He retains control of the business. • Mary receives €250,000 from Tom. If Tom dies: • Shane receives €250,000 and uses it to buy Aidan’s share of the business from his next of kin. As a result, Tom retains control of the business.

Testimonials

” ” ”

Manning Financial recently advised us on partnership insurance. This is a specialist area of financial services requiring particular knowledge and expertise, and Manning Financial did not disappoint. They were fully on top of their brief and a pleasure to deal with. - O’Donovan Baker Solicitors

Partnership insurance is important - it gives peace of mind to know that your family members will be looked after financially in the event of death or serious illness. However, Partnership Insurance is not straightforward with many pitfalls and unintended consequences if the policy is not set up properly. Breon had all the specialist knowledge required to guide me and to put in place a policy to protect both my partner and my family. - HD Keane & Co (Waterford)

We recently met Manning Financial as we needed advice on business protection/partnership insurance for our practice. We were not aware of the punitive tax implications if business protection insurance was not effected correctly. Breon met with us, assessed our practices requirements, and set out his recommendation in a thorough 25 page report. He also advised us on the certain tax and legal documentation that supports business protection arrangements. We feel that business protection is of paramount importance to the future safeguarding of our practice and compensating our next of kin in the event of either partners’ untimely death. We believe that business protection/partnership is an essential insurance for our practice and our clients. - Fitzgerald & Associates Acccountants

There are two categories of Business Protection 1. Company Insurance- for limited companies. 2. Partnership Insurance- suitable for businesses such as solicitors’ practices or any other partnerships where the partners are assessable for income tax under Schedule D Case 1 or 2.

Supporting Documentation Depending on which category is chosen, there are legal and tax requirements to be fulfilled. This is to ensure, amongst others, that the policy proceeds receive favourable tax treatment.

Legal Agreements Share Buy Back Agreements- this needs to be put in place to ensure that surviving directors/partners ‘buy back’ the shareholding from the next of kin and that the next of kin agree to ‘sell back’ the deceased shareholding to the surviving directors/partners.

Declaration of Trust In most business protection arrangements, each policy is arranged under trust so that on death, the proceeds are payable directly to the trustees for the benefit of the surviving directors/partners.

Business Protection is cheaper than you think! Value of Shareholding

Age € 300 000

€ 350 000

€ 400 000

€ 450 000

€ 500 000

€ 34,75

€ 39,99

€ 44,93

€ 50,11

€ 54,59

€ 46,71

€ 53,89

€ 59,45

€ 66,44

€ 73,43

€ 66,1

€ 76,43

€ 83,49

€ 93,49

€ 103,49

All premiums quoted are the most competitive quotes from all life companies operating in the Irish Market.

ECB Leave Rates on Hold

ECB keeps interest rate at 0.5pc

The European Central Bank has, as expected, left interest rates on hold at its recent meeting. The move means that those on tracker mortgages will continue to pay record low interest rates. Most economists expected the governing council of the ECB to leave rates at their record low level of 0.5pc. Economists feel there is a chance of a new rate cut in the autumn, especially if the global economy continues to weaken. But there has been a pick-up in the US economy and Germany is powering ahead. And evidence is mounting that the eurozone economy is pulling out of its longest-ever recession. The ECB had responded last month to the market turmoil by breaking with precedent and declaring it would keep interest rates at record lows for an extended period and that it may yet cut further. Earlier, the Bank of England also kept its benchmark interest rate at 0.5pc. The bank left its bond-buying programme on hold as Governor Mark Carney trains officials’ focus on providing forward guidance on policy to cement the economic recovery. Mr Draghi reiterated recently that the ECB's future interest rates will remain at their present level or lower for an "extended period" of time, suggesting that will be at least into next year. He said inflation expectations remained anchored and there were some signs of tentative growth. "(Policy) thereby provides support to a gradual recovery in economic activity in the remaining part of the year and in 2014," he said in a news conference. Earlier, the ECB held its main interest rate at a record low of 0.5pc. It also left the rate on its deposit facility at zero and held its marginal lending facility - or emergency borrowing rate - at 1pc.

Positive Costs There could be an element of positive costs to most people overhead in the business – the porter who does “meet and greet” at the door of the hotel, the credit controller who carefully spends time with customers who are experiencing difficulty, the accountant who spends time with customers to understand the business better, the staff party to reward a hard working team and a deliberate initiative to improve morale.

In my accounting days (yes, I know most of you won’t believe it – I was!!) we had a few different ways of looking at the costs of a business. The most popular of these was a very simple analysis – Fixed Costs, which were those costs that would not vary with volume and

I’m sure with a little effort you will think of thousands of other unexpected examples – all of these elements contribute to bringing in more business and create a “positive effect” on the business.

Variable Costs, which were the costs which did vary according to volume. This was quite a simplistic model, which didn’t always hold up!

Of course Positive Costs will include items such as advertising, marketing, graphic design, web marketing, social media activity and even PR!

We then had other methods of looking at costs such as Zero Base Costing and Activity Based Costing .. interesting stuff indeed! Since the recession has kicked in I have witnessed first hand clients being advised to cut back on expenses by the accounting fraternity and often they just do it themselves automatically – the types of costs that get chopped first are those that are deemed to be “unnecessary”, which will typically include marketing & advertising spend, sales reps, items like training, corporate entertainment, Christmas gifts, staff entertainment and other “extras”.

Positive costs are absolutely essential for generating business for any company – cutting these out may be viewed as a necessary step but it will eventually choke the oxygen of the business. Recession (or any time for that matter) Using our new cost model I would suggest the following approach:

On the surface it is easy to figure out why companies would cut back in such a way but you could ask the question: Why spend this money when sales were easier to come by and when it is harder to win business you just abandon them?

Analyse your costs into the different cost categories and work towards –

Could reduced sales be a self fulfilling prophecy when you cut out certain overheads?

2. Improving efficiencies and work practices so that maintenance costs are as little as possible.

The New Cost Model

3. Spending as much of your overhead budget as possible on positive costs .

1. Reducing the negative costs as much as possible.

Taking the knowledge of my old profession and combining this with what I am witnessing with clients every day I am now proposing a new way of analysing costs.

I am not for one minute suggesting naive spending – always look for the best value in your positive costs and don’t waste money, making sure they are actually positive costs – that the spend results in increases in business.

Here goes .. There are actually three types of costs:

Are you spending enough on Positive Costs in your business?

Negative Costs – these are the costs that a business is “stuck” with, regardless of volume. It would include Rent and Rates (but not necessarily 100% of these – I will explain that later), Insurance, ESB, etc. Maintenance Costs – these are the costs of servicing the business that you have brought in. It would such items as staff costs, raw materials, power and delivery costs. Positive Costs – these are the costs that are all about bringing new business in, effectively the costs, which should have a “positive effect” on the business. Positive costs are the most important costs of the whole business, they are the elements that are designed to start the engine, the elements that can make things happen, that “trigger” customers to actually place an order. Positive costs are far reaching and could include surprise elements that you would not expect: the premium you pay to have a premises in a location that will bring in more customers, the cost of washing the car after it has been serviced, the cost of polishing the shoes that have been repaired, the cost of having a receptionist who answers calls promptly and deals with customer queries swiftly.

Greg is a partner with Fuzion, a full service Marketing & PR firm with offices in Cork and Dublin. He can be contact on 021 427 1234 and greg@fuzion.ie

The Future is Getting Brighter It is a well-known fact that a long spell of hot weather in an extremely poor country means that that country is about to enjoy the biggest economic boom in its entire history – or at least since the last really big one. Celebrity economists – is there any other kind? – point out that hot weather leads to an increase in spending on ice-cream, cider, splash pools and convertibles. And if people are buying those things, then they will also start buying houses by the bucketload. In turn, people buying lots of property while the sun is shining is a sure sign that an economy is healthy and robust. Once we start buying houses, other people will start building them. And the rest will be history. Of course, this economic theory really only applies to extremely poor countries that never ever have long spells of hot weather. So Ireland is definitely a candidate, while most other nations on the planet are not. And don’t forget that the Celtic Tiger itself may have been preceded by a long spell of good weather. The fact that Ireland is the only economy to which this theory applies shouldn’t take away from the fundamental principles that underlie it. Put simply, Ireland looks as if it is about to go through the mother and father of all economic booms. With Tiger Two almost upon us and with fine weather that makes us more or less a Mediterranean country, there really will be no stopping the Irish. The only thing we will have to worry about is that we don’t lose the run of ourselves and let this boom get out of control. We must remember the lessons of the past and always be aware that bust follows boom and that a property bubble could explode, leaving us all in deep trouble. Or maybe not. Some celebrity economists – though they may be just celebrities at this stage – argue that perhaps we should just go mental. After all, we deserve a bit of a break after the austerity of the past few years. And in the unlikely event of anything going wrong, we’ll probably be able to find a few million Irish suckers who can pay for the whole sorry mess. Then, once they’ve taken the pain, we can start building towards the next boom. Indeed, economists have already come up with the rather catchy ‘Tiger Three’ to describe the property-based economic miracle that will beset Ireland from 2028 to 2035. However, as the country continues to suffer under the glare of a foreign sun, there are plenty of things Irish people can do to enjoy the weather, while also keeping an eye on our future economic prosperity.

Nip out for a drink As a nation, we have pretty much perfected the art of getting drunk indoors. In order to avoid the driving rain, punishing wind and constant stream of invaders, we simply went inside somewhere and had a few pints, a couple of whiskies and a massive brawl. It was just the best way to forget that we lived on an uninhabitable, godforsaken rock in the middle of the ocean. Of course, when it became ungodforsaken, we had to wait until after Mass to go inside and get drunk, but we still managed it. Now, with the sun looking as if it might never leave us alone, we can do all of the above outdoors. No longer need we huddle together by the fire listening to a very old man tell fascinating stories about the past, though with one eye on Sky Sports over his left shoulder. Now we can stand outside pubs and get hammered. We can get sloshed in people’s gardens and even in our own garden if we happen to have one. We can get legless in parks or just on the side of the road. We can get trollied on public beaches in the middle of the day and shout stuff at sober people and kids. We can drink anywhere we want just to forget how nice the weather is and how bright the present and the future are.

Pretend to be foreign When it’s hot and sunny, we can also pretend that we’re not really Irish. We can act like sophisticated Europeans and walk around wearing exotic clothing like shorts, T-shirts and flip-flops. We can sip outlandish foreign drinks like Malibu, iced tea and rose wine, which is probably what European people drink all summer long. We can have dinner on the pavement beside some parked cars, fire up the barbecue for breakfast and smoke cigarettes as if we were extras in a French film. Dammit, if the weather keeps up, we would probably be within our rights to put on foreign accents, say ‘Ciao’ instead of ‘See you later, bud’ and buy very expensive convertibles.

Spend money In a completely unforeseen twist to economic theory, imposing austerity on people hasn’t actually caused us to spend more money. It had always been accepted that stagnating growth would stimulate growth, but bizarrely this hasn’t happened over the past five years. No one can figure out this anomaly. However, a new opportunity now presents itself, as the troika tries to stimulate economic growth through fine weather. It’s a radical approach, but some think it may be just crazy enough to work. If we all get out there and buy stuff, such as 99s, suncream with an SPF of about 200 and second and third properties, we could just spend our way out of this recession. And let’s face it if it doesn’t work, what’s the worst that can happen?

Stockpile water As we all know, they are going to start charging us for the water we use in the next year or so, with air charges potentially on the cards for 2015. In order to save money, we should all start stocking up on water now while it’s still given to us for ‘free’ by our most generous government. It’s also worth bearing in mind that if the weather keeps up, it is estimated that we will run out of water by August 5. So get every vessel you can find, including cups, plastic bags and bathtubs, and fill them with water. Also, have a really long shower tomorrow morning, one that will last you for a few months. If you do all this, you should be able to avoid paying for water until the rains come. Then just put all your vessels outside and survive on rainwater.

Dump your rubbish Like avoiding water charges, you can avoid having to pay for waste removal by dumping your rubbish on a local beach. When you go to the seaside, have lots of fun all day long and then when you’re about to leave, head up to the car, get your black plastic bags and empty them out onto the sand. (Remember: you can reuse that black bag!) Then, next day, when you come to the beach, someone will probably have tidied up your mess. If not, just go to another beach and repeat the above.

Give out but don’t give up Let’s be honest: we Irish people like the rain. Dammit, we love the stuff. It’s cold and wet and hurts if you stand out in it for too long, so what’s not to love? We also love to complain about it. With no rain, we actually have very little to moan about – unless we start giving out about this interminable and frankly unbearable hot weather. It was grand for a few days, but seriously … it’s beyond a joke now. Actually, when you think about it, we may be better off heading indoors somewhere to avoid the weather and complain about how bloody hot it is. While there, we could also slip in a few pints, a couple of whiskies and a massive brawl. Then, just before we pass out, we could sing a few verses of You’ll Never Beat The Irish. When we wake up, let’s hope it’s raining. Author- Luther Profane (from the desk of Garvan Grant)

'Garvan Grant is a columnist with The Sunday Business Post. This article first appeared in The Sunday Business Post on July 21, 2013'

Business and Legal Briefs Lorem ipsum dolor sit amet, consectetuer.

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Finance heads get bullish about prospects for new year as business improves. Two thirds of chief financial officers (CFOs) responding to a survey say they will hire new employees in 2015, on the back of improving business performance. According to a survey by RSM Farrell Grant Sparks, 91 per cent of CFOs across Ireland said that their business is in a good position to capitalise on the expected economic up-turn in Q4 and on into 2015. “CFOs are typically the more cautious business leaders, but our survey showed that they were almost bullish in their level of optimism for the Irish business environment with 73 per cent saying that they see an improvement in their business due to the upturn in the economy. This is obviously a hugely positive endorsement,” said David McGarry, director with RSM Farrell Grant Sparks. Moreover, more than half (54%) of finance professionals surveyed currently have opportunities for employment in their companies, and 66 per cent say that they expect to hire new employees in 2015. While just over half of the RSM Farrell Grant Sparks survey respondents believe that the recent budget delivered will support Irish businesses, a sizeable 82% of finance professionals believe that the Strategic Banking Corporation of Ireland will be “invaluable” to Irish SMEs. The survey also found that 66 per cent of finance professionals do not believe that the introduction of Ireland’s new financial reporting framework, which includes FRS 102, will significantly impact their business.

Some 45 per cent of firms in Republic and North reporting growth. The economic recovery is spreading to smaller business across Ireland according to the latest InterTradeIreland quarterly business monitor. It found 45 per cent of firms in the Republic and Northern Ireland reporting growth. It was the most positive most positive set of results since 2008 and showed firms of all sizes and across all sectors are experiencing recovery. Almost nine out of 10 businesses are either stable (43 per cent) or growing (45 per cent). This is the highest percentage of firms reporting growth since the recession began and is almost double the number in growth mode compared with this time last year (26 per cent). “Up until now the recovery has been driven by exporters and larger firms but, significantly, we are beginning to see an upturn in domestic demand, which is now benefiting businesses that rely on the local market,” said Aidan Gough, strategy and policy director at InterTradeIreland. Meanwhile, more than half of Irish companies that responded to a EY study cited raising fresh capital as their key management issue. EY’s capital confidence barometer, which surveys business leaders in 60 countries, found 53 per cent of Irish respondents are focused on capital raising. Half of these said equity would be their main source of funding. It found Irish companies were seeking growth EY described as “low growth and close to core”.

Lorem ipsum dolor sit amet, consectetuer adipiscing. Nine out of 10 businesses are either stable or growing, across the island of Ireland and it is no longer just exporters and multinationals feeling the benefits of economic recovery. Smaller business and companies focused purely on the home market are showing signs of recovery, according to a new report from north/south focused Inter Trade Ireland. According to the InterTrade Ireland Business Monitor for the third quarter of 2014 45pc of firms in Ireland reporting growth in the three months to the end of September . It found that companies of all sizes, and across all sectors are now experiencing recovery. In the same period 12pc of firms reporting an increase in staffing levels, up slightly from the previous period. Profitability is also improving. Having been the worst hit by the crisis the construction sector is now the most optimistic, with 35pc of construction firms indicating that they are less cautious about undertaking investment than they were a year ago.

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Lorem ipsum dolor sit amet, consectetuer adipiscing. Some 45 per cent of firms in Republic and North reporting growth. The economic recovery is spreading to smaller business across Ireland according to the latest InterTradeIreland quarterly business monitor. It found 45 per cent of firms in the Republic and Northern Ireland reporting growth. It was the most positive most positive set of results since 2008 and showed firms of all sizes and across all sectors are experiencing recovery. Almost nine out of 10 businesses are either stable (43 per cent) or growing (45 per cent). This is the highest percentage of firms reporting growth since the recession began and is almost double the number in growth mode compared with this time last year (26 per cent). “Up until now the recovery has been driven by exporters and larger firms but, significantly, we are beginning to see an upturn in domestic demand, which is now benefiting businesses that rely on the local market,” said Aidan Gough, strategy and policy director at InterTradeIreland. Meanwhile, more than half of Irish companies that responded to a EY study cited raising fresh capital as their key management issue. EY’s capital confidence barometer, which surveys business leaders in 60 countries, found 53 per cent of Irish respondents are focused on capital raising. Half of these said equity would be their main source of funding. It found Irish companies were seeking growth EY described as “low growth and close to core”.\ “Up until now the recovery has been driven by exporters and larger firms but, significantly, we are beginning to see an upturn in domestic demand, which is now benefiting businesses that rely on the local market,” said Aidan Gough, strategy and policy director at InterTradeIreland. Meanwhile, more than half of Irish companies that responded to a EY study cited raising fresh capital as their key management issue.

In The Spotlight Mick Oâ&#x20AC;&#x2122;Driscoll, the former Munster and Ireland rugby star, recently hung up his boots and is owner and Managing Director of Home Instead Senior Care Cork North. Home Instead Senior Care provides a wide range of home care services to seniors living in both North Cork City and County. Mick is responsible for providing seniors in this region with a home care plan tailored to meet their individual needs.

What are the main responsibilities of your job? I manage the day-to-day operations which involves meeting clients, discussing their individual needs and ensuring that we fulfil their requirements to the highest of standards. I am also responsible for raising the profile of the business which involves meeting people in the healthcare industry and explaining what Home Instead Senior Care can do for their patients. I also run family and community education workshops on a regular basis. As an example in September we are running a number of Alzheimer/Dementia Care workshops, the focus of which will be The Family Caregiver. (For information on these events please contact us or visit our website). What motivates you in your job? One of the key aspects of our service is to ensure that the client and caregiver are compatible and knowing that we have a team of fantastic caregivers who give 100% to the job and to their individual client. It is great to see clients who are happy and have renewed independence because of the support Home Instead Senior Care can give them. I enjoy meeting clients and their families and finding ways to help them and support their families. How would you describe your work style? I would describe my work style as diligent and considerate. I believe in a straight talking approach. What is the most valuable professional lesson you have learned so far? You can never be too prepared. In Ireland, whose career do you most admire and why? Padraig O Ceidigh . I was fortunate enough to be chosen to participate in the Entrepreneur Experience 2013 run by CorkBic which was a great opportunity to access advice and knowledge from seasoned business leaders. Padraig spoke at the event about highs and lows in business and the ability to be adaptable and flexible to meet the needs of your customers/clients. I admire his drive and never say die attitude to business. Based on your experience, what is the most valuable career advice you can offer others? Work hard and be realistic about your goals. It is a tough economic climate so offer top service for a reasonable fee. In terms of doing business in Ireland, what do you think is the biggest challenge? At the moment the biggest challenge is the negativity and uncertainty about what is happening in the Economy. People are slow to make decisions which will affect their financial stability. What is your ultimate professional goal at this point? To continue to offer excellent and professional services to people in times of need. Cork North office details: Atrium Business Centre, Blackpool Business Park, Blackpool, Cork. Contact : Phone : Fax : Email :

Mick Oâ&#x20AC;&#x2122;Driscoll 021 4217310 021 4217403 corknorth@hisc.ie or mick.odriscoll@hisc.ie

PERSONAL INSOLVENCY ACT 2012

Introduction

debtor approaches an “Approved Intermediary” (“MABS”) or a “Personal Insolvency Practitioner” (“PIP”).

Up until now when a person became insolvent, options were limited: a) b) c) d)

MABS or the PIP will advise the debtor on his options; DRN, DSA or a PIA or Bankruptcy.

struggle on to juggle debt payments strive for some arrangement with creditors ignore the mounting debt or consider opting for bankruptcy (voluntary or otherwise)

In the case of a DRN (debts less than €20,000) MABS will process through the Insolvency Service. In the case of a DSA or PIA the PIP will advise, seek the relevant paper work and income and asset details from the debtor to ascertain whether the debtor meets the eligibility criteria.

However, creditors ultimately may pursue the debt leading to judgements and execution orders . The process of bankruptcy (a solution for debtor and creditor) resulted in total loss of control over income and assets for a period of up to 12 years or more and was unpalatable. A genuine debtor struggling to meet debt had very limited choices and had little incentive to take action.

The PIP then proceeds to make an application through the Insolvency Service. If the Insolvency Service is satisfied with the documentation it will issue a Certificate2 .

The Personal Insolvency Act 2012 (the “Act”) now allows a range of new options. The Act provides mechanisms potentially allowing a debtor to resolve his personal debt and get on with his life while putting creditors of a more level playing field. The new arrangements may involve an element of “restructuring” (e.g. write off).

If the Court is satisfied with the documentation (and there is no dispute by creditors) a Protective certificate3 is granted by the Court. The PIP will then engage with creditors. The arrangements discussed may include certain write downs of debt (including secured debt).

The Act includes three new processes for debt resolution and also amends the rules relating to bankruptcy law. The new processes are:

The engagement with creditors culminates in a meeting where creditors vote for/against the arrangement. Typically the attitude of the creditors is likely to be known before the time the meeting is to take place.

Debt Relief Notice (“DRN”) - This allows for certain unsecured debts to be written off (up to €20,000) subject to a three-year supervision period.

If it is approved then the arrangement proceeds through its normal course (subject to variation).

Debt Settlement Arrangement (“DSA”) – This allows for an agreement to be reached for settlements relating to unsecured debt with no upper limit. This is anticipated to be a five-year process.

The PIP will collect income and assets and arrange for regular payments to creditors (subject to a reasonable standard of living for the debtor being maintained).

Personal Insolvency Arrangement (“PIA”) – This allows for the settlement of secured and unsecured debt. The secured debt that can be dealt with under a PIA is limited to €3,000,000 (without consent from secured creditors). It is envisaged to be a six year process.

At the end of the process (assuming full disclosure and co-operation) the debtor in the case of a DRN is discharged from all of his debt. In the case of a DSA the debtor is discharged from all his debts. In the case of a PIA the Debtor is discharged from his unsecured debt wand secured debt remains in place to extent not written down4 .

Bankruptcy - The Bankruptcy period is reduced from 12 to 3 years. The debt threshold to enter the Bankruptcy process is increased up to €20,000. Certain procedural steps have been included to discourage the use of Bankruptcy and to encourage the new processes instead. In order to facilitate the processes a new body called the Insolvency Service has been established. Unfortunately it is still not fully operational.

Tom Power is a practicing barrister since 2003 and is an Associate of the Irish Taxation Institute. Prior to practicing at the Bar, Tom practiced as a Registered Tax Consultant for over 12 years.

Because of the severity and duration of the downturn, it is likely that there will be considerable demand for the new procedures/Bankruptcy process. The official estimated demand in the first year is estimated to be:

Tom can be contacted on 021-487 7237 and tompowerbl@gmail.com.

4,000 DRNs 15,000 DSAs and PIAs. 3,000 Bankruptcy applications (compared to 30 during 2011) The new processes are anticipated to operate largely outside of the Court but will have a Court element even in a non-contentious matter. A number of new judges have been appointed. Typically the new processes will involve the following steps:

² If debt is €2.5m or less it can proceed through the Circuit Court. 3 Providing protection for an initial period of 70 days - can be extended for 40 days. 4 Certain provisions allow the amount written down on secured debt to be recovered if property is sold within 20 years for in excess of value it was written down to.

Range of Services Protection

Savings & Investment

• • • • • • •

• • • •

Mortgage Protection Term Insurance Serious illness Income Protection Life Cover with tax relief (Section 785) Group Income Protection Group Death in Service

Pensions • • • • • •

Personal Pensions (for the Self Employed) PRSA’s Executive Pensions (for company directors) Self-Administered Pensions Self-Directed Pensions Group Occupational Pension Schemes

Visit us at

www.manning-financial.ie

11 Pembroke Street, Cork.

Lump Sum Investments Bonds Structured Products Savings Plans

Specialist Advice • • • • • • •

Business Protection Partnership Insurance Inheritance Tax Relief and Estate Planning GMS Scheme for GP’s Financial Services for Cohabiting Couples Pension Adjustment Orders Employee Benefit Schemes

www.cpd.ie

Tel: 021 2428185 | 087 8315054

info@manning-financial.ie

Breon Manning Financial Ltd. trading as Manning Financial is regulated by the Central Bank of Ireland