‘Bankruptcy laws are costly and outdated’

IRELAND’S bankruptcy laws are costly, outdated and compare unfavourably with other European countries. This is according to a report by Beauchamps Solicitors, which said the bankruptcy laws in Ireland must be revised.

Head of restructuring and insolvency at Beauchamps Gabriel Daly said: “The existing bankruptcy laws are anti-entrepreneurial, outdated and unwieldy. Business leaders take risks on new ideas and without these people, to stimulate business and provide employment, our economy could suffocate. The freedom to fail in business is essential.”

The report points to a failure to update legislation and said distressed debt has become an important issue.

“The Irish approach to bankruptcy is penal. If you are declared a bankrupt, the restrictions applied become a millstone around your neck for the next 12 years; however, in England and Wales you may only face being in bankruptcy for 12 months. If Alan Sugar or Donald Trump had gone bankrupt in Ireland, they would not have been in a position to create new businesses, take new risks and succeed on a larger scale,” said Mr Daly.

The report said that revising Irish laws could “encourage the entrepreneurship that could lead the economy out of recession”.

“Reform is needed to ensure these people are not kept in limbo for the rest of their business lives,” said Mr Daly.

The report said banks are aware that Ireland’s existing bankruptcy law is costly, so businesspeople are likely to consider other options and avenues before proceeding down the bankruptcy route.

In September, the Law Reform Commission recommended the creation of a new system of personal insolvency law in Ireland. In particular, it recommended a statutory, non-court-based debt settlement scheme to supplement the court-based scheme in the Bankruptcy Act 1988.

The report also said that in most EU states, it is possible to enter into arrangements with creditors and obtain the sanction of the court for such arrangements.