THE singer Kenny Rogers once sang “you’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run”. While Rogers was singing about a gambler, he could just as easily have been singing about the Irish people’s attitude to their bankruptcy regime. Increasingly the people of Ireland have been folding and running for the shelter of the more relaxed rules in the UK.
This has spawned a “bankruptcy tourism” industry and there are now a host of companies set up on both sides of the Irish Sea to advise Irish people on the intricacies of declaring bankruptcy in the UK. The industry owes its birth to the current period of bankruptcy in Ireland, which is 12 years, during which time you cannot act as a director of a company, operate a bank account or obtain credit over €635 without declaring your bankruptcy status. In contrast, the UK period is 12 months.
However, yesterday the Irish justice and finance ministers unveiled a new Personal Insolvency Bill which will allow debtors to emerge from bankruptcy after three years rather than the current 12. There will be much discussion on the proposed legislation within the Irish national parliament, and it may be many months before the bill becomes law.
Central to a foreign national presenting a bankruptcy petition in the UK is the establishment of a centre of main interests (COMI). It is generally sufficient for you to be conducting business and or living in the jurisdiction. Examples of how a person can establish their COMI in the UK are: taking up employment, having a national insurance number, opening a bank account and having a tenancy agreement. Obviously this list is not exhaustive but is indicative of how a COMI can be created.
Bankruptcy tourism has been much discussed in the Irish press during the Irish recession and returned to the front pages last week with the bankruptcy of Ireland’s former richest man, Sean Quinn. Quinn, who as recently as 2008 had a net worth of £3.73bn according to the Sunday Times Rich List, was declared bankrupt at the High Court in Dublin.
Quinn had previously been declared bankrupt in November 2011 in Northern Ireland but this was subsequently challenged by a creditor, Irish Bank Resolution Corporation, who claimed his COMI was in the Republic of Ireland. Quinn vehemently denied this, stating “I’m 65 years of age and I’ve never worked a day of my life outside Northern Ireland.”
Unfortunately for Quinn, on 10 January Justice Donnell Deeny in the High Court in Belfast found his centre of main interests to be in the Republic. Among other factors, Quinn had his home and offices in County Cavan and his advisers’ offices in Dublin. Deeny annulled the Northern Irish bankruptcy order, leaving Quinn open to proceedings in the Republic – which were swiftly issued.
This case may prove to be an anomaly, but it will be interesting to see how future bankruptcy proceedings deal with jurisdictional issues. These issues together with the new Personal Insolvency Bill could see a slow down in the bankruptcy tourism trade. It remains to be seen whether prospective Irish bankrupts will continue to flee to the UK or stay at home to face the music, Kenny Rogers or otherwise.
David Russell is a specialist in insolvency for Bracewell Law.