Definition of Insolvency

Newaglish

Does anyone know what act in Ireland defines insolvency of a company? I've done some searching but can't quite seem to pin it down.

Thanks

johnfás

A company is considered insolvent when it cannot pay its debts as they fall due.

Most of Irish company law doesn't actually refer to the word insolvent. For example, s213 of the Companies Act 1963 provides that a company may be wound up when it is "unable to pay its debts", rather than using the words when it is insolvent.

Newaglish

I suppose the angle I'm getting at is for directors' disqualifications - how would you go about proving they continued trading while knowing the company was insolvent? I'm effectively trying to determine the actual date that the company was insolvent but it's not really an exact science!

Tom Young

Newaglish wrote: »

I suppose the angle I'm getting at is for directors' disqualifications - how would you go about proving they continued trading while knowing the company was insolvent? I'm effectively trying to determine the actual date that the company was insolvent but it's not really an exact science!

You never asked that question in the original post.

It's fairly easy. A solicitor would be able to advise you on that.

A company is insolvent if it is unable to pay its debts.

S.214 of the Companies Act 1963 is a deeming section in that regard.

http://www.irishstatutebook.ie/1963/en/act/pub/0033/sec0214.html#sec214

Determining when that was the case in the past is trickier and, within the ambit of a winding up, is the prerogative of the Liquidator to determine.

Newaglish

Tom Young wrote: »

It's fairly easy. A solicitor would be able to advise you on that.

I don't follow - is it easy or is it a question for a solicitor?!

Tom Young

http://en.wikipedia.org/wiki/Insolvency - This is not too far off.

A report is generally written when a company is liquidated. This report makes certain recommendations usually from the liquidator in terms of the directors, that can lead to various sanctions and applications. Section 150 and Section 160 applications for restriction and disqualification, etc.

Newaglish

Tom Young wrote: »

http://en.wikipedia.org/wiki/Insolvency - This is not too far off.

A report is generally written when a company is liquidated. This report makes certain recommendations usually from the liquidator in terms of the directors, that can lead to various sanctions and applications. Section 150 and Section 160 applications for restriction and disqualification, etc.

Yes, the liquidator writes a Section 56 Report to the ODCE, and one of the things he identifies is the date of insolvency. I'm wondering how this is determined by the liquidator.

Kosseegan

Insolvency is a question of fact which can be determined at any time and which can continue for a period of time. The question the o/p is asking is related to reckless trading. This is the main issue in Section 150 and Section 160 proceedings. The company is naturally insolvent. It wouldn't be wound up otherwise. The real question is were the directors guilty of keeping the company going for too long, when it was obvious that it was insolvent. The usual way of identifying when this happened is to look at the accounts and see what the directors knew or ought to have known at various times. There is no need to identify precisely when the insolvency started. It is enough to identify that at a particular time the company was obviously insolvent. If after that point the directors did not commence a wind up the likelihood is that they are guilty of reckless trading.

Wile E. Coyote

Sorry for bringing up an old thread but I didn't see a point in starting a new one for a similar query.

Can a claim of reckless trading be taken against the Receiver of a company who was found to be trading for an extended period of time when he knew/believed the company was insolvent?

valleyoftheunos

Wile E. Coyote wrote: »

Sorry for bringing up an old thread but I didn't see a point in starting a new one for a similar query.

Can a claim of reckless trading be taken against the Receiver of a company who was found to be trading for an extended period of time when he knew/believed the company was insolvent?

I think you might be a bit confused here, Receivers are only called in when a Company is insolvent and facing winding up so by definition they will know that the company is not able to pay its debts.

Receivers are different to Directors and have different duties which they must fulfill, if they don't do those duties properly it might be possible to bring a claim against them.