Ireland collection profile

Ireland
       

Ireland

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Complexity of collecting debt:

grading
notable High Very High Severe


Executive summary

  • Despite domestic rules on payment terms being in line with the latest EU standards, Irish debtors are not in a state of emergency when the time comes to settle monies owed and the average DSO is excessive at 50 days on average.
  • Domestic courts are fairly efficient in dealing with disputes in a timely manner, however once the debtor is declared insolvent it becomes difficult to recover debts because renegotiation mechanisms provide no limitation as to how much of the debt may be written off, whilst priority rules in liquidation proceedings make it unlikely for unsecured creditors to receive any part of the proceeds.
 
General Information GENERAL INFORMATION arrow-transparent
 
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
 
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
 
General Information 

GENERAL INFORMATION

Days Sales Outstanding (DSO)

Payments in Ireland normally take place within 50 days on average and the payment behavior of domestic companies is poor as debtors are not in a state of emergency when the time comes to settle monies owed. In addition, debtors are aware of how to play the system whilst the high cost of legal action can furthermore give an edge in regards to delaying payments.

 

Late payment interest

The Recast EU Directive 2011/7/EU which stipulates that payments in the EU must be made within 60 days was transposed into Irish Law through the Statutory Instrument No. 580 of 2012, which took effect from 16 March 2013. The rules in Ireland are however stricter than the EU requirements: as a general rule, business-to-business transactions must be paid within 30 calendar days, but contractual agreements may extend this deadline up to 60 days provided that the arrangements are not grossly unfair. Late payment interest may be claimed past the due date. Rates may be agreed contractually but the law provides that, as a general rule, calculation must be based on the European Central Bank's refinancing rate, increased by at least 8 percentage points (10,25% that is). Interest would normally be added to the debt and claimed during the collection proceedings.

In addition, the law entitles the creditor to receive a flat collection fee (EUR 40 for debts below EUR 1000; EUR 70 for debts below EUR 10,000; EUR 100 for debts above this level) and may also be able to claim any reasonable recovery costs incurred as a result of the debtor's failure to pay on time.

 
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collection practice 

COLLECTIONS PRACTICES

Orchestrated negotiation first

Although Irish courts are fairly efficient, amicable settlement opportunities should always be considered as a strong alternative to formal proceedings. Before starting legal proceedings against a debtor, assessment of assets is essential as it allows verification as to whether the latter is still active and whether recovery chances are good. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed often becomes impossible to enforce a debt.

 
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Court Proceeding 

COURT PROCEEDINGS

Ireland has a Common Law system in which the courts’ decisions have a law-creating impact and bind the lower courts. The country divides into twenty-three District Courts (competent to deal with minor cases up to EUR 15,000), eight Circuit Courts (competent to hear disputes up to EUR 75,000 and to hear Appeal claims brought against decisions rendered by District Courts), and a High Court (competent to hear cases over EUR 75,000 and to decide in second instance against decisions rendered in first instance by the Circuit Courts). The Commercial Court was created in 2004 as a division of the High Court dealing specifically with intellectual property and commercial disputes with a monetary value in excess of EUR 1 million. The Supreme Court is the court of final appeal.

Ordinary legal action generally commences when amicable collection efforts have failed. A claim is filed with the competent court (depending on the amount at stake) and the debtor must be served with Summons within twenty one days. If the debt is above EUR 1,270, the debtor must be given twenty one days to pay, propose an arrangement or bring a defence. Beyond this time limitation, the law would consider the debtor as being insolvent (Section 214 of the Companies Act 1963/2009 as amended), in which case the threat of commencing insolvency proceedings may prove efficient. Failure to do so would furthermore entitle the creditor to request a default judgment from the court. If the claim is certain and undisputed, it is alternatively possible to request a fast-track summary judgment (Summary Summons) from the competent court. When the debtor company has assets in other EU Member States, a European Payment Order procedure facilitating the recovery of undisputed debts (under Regulation EC No 1896/2006) may furthermore be triggered. In this case, the demanding party may request a domestic court to issue an Order to Pay which will then be enforceable in all European Union countries (except Denmark) without exequatur proceedings. If the claim is disputed, by contrast, a discovery phase takes place to allow the parties to explain and prove their respective arguments before the court renders a decision, but judges in the Commercial Courts may also suspend the proceedings for up to twenty eight days to allow resolution of the dispute through mediation or arbitration (see below). The courts typically award remedies in the form of compensatory and punitive damages, specific performance, declarations, injunctions, etc.

 
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insolvency Proceeding 

INSOLVENCY PROCEEDINGS


In Ireland, a debtor is deemed insolvent if it is unlikely to make its net worth exceed the accumulated losses (balance sheet test) whilst meeting its financial obligations within a reasonable period of time (cash flow test). The primary legislation governing the law of corporate insolvency is contained in the Companies Acts, 1963 to 2006 (the 'Companies Acts') and, in the case of receivership, the Conveyancing and Law of Property Act 1881. Insolvency proceedings in Ireland take place before the High Court.

 
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