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The Association of Credit Professionals

Spring Challenge

Dear ACP Associates, Members and Fellows,

Spring is definitely in the air as we enjoy a welcomed increase in temperatures and it’s a great time for a spring clean!

Before 2007 a lot of companies neglected Credit still referring to us as the sales prevention unit or the ugly step-sister of accounts and still saw us as a back room function.  Who did they run to when the chips where down, the banking sector started to crumble and the economy plummeted?  I am proud of how Credit Management has been able to raise its profile and keep the cash, the lifeblood of a company, flowing.  It is up to us now as Credit Professionals to keep at the top of the list.

As we start to come out of the last 7 years of difficulty, we all need stay ahead of the curve and our competition.  Start by reviewing our processes and my challenge to you is simple, look at everything you do as a Manager or Controller and ask yourself how it impacts on the turnover and profit of your company.

  • Does your underwriting policy allow for more risk to be taken as your customers businesses stabilise?   A more profit focused approach will grease the wheels for sales; adding turnover and profit that may otherwise be lost.
  • Review how you assign credit limits?  Is there a better way?  Can you shorten terms and automate payments to control exposure and allow sales to sell more?  STOP limiting what customers can buy and give them a target to hit, call it a credit line that you can extend when they hit it.
  • Is your in-house collections strategy set to the hard times or does it allow those managing accounts the flexibility to work more with customers when this may not have been possible 6 years ago?  Are you transfixed on DSO instead of growth?
  • Are your targets purely cash driven and are your objectives aligned solely with Finance?  What can you do to restructure and realign to ensure you stay at the forefront of your company and add to the profitability of your business.
  • Is your “further action” strategy too aggressive?  Another piece of interesting feedback recently is the number of customers who don’t pay but then when pushed by a third party agency pay with ease.  Are you still issuing legal proceedings and running up costs?  Consider your options and speak to a DCA or 2 to see how much you could save.

Another thing that has struck from talking to people is the number of businesses who are investing in new IT systems and the trouble that this can bring.  While it’s great to modernise the one thing that still evades some companies is the real core of a business, the one thing that really matters, its people.  Any new or old system is only as good as the operators so we need to focus on recruiting, training and developing the best.  Anytime you are involved in system integration, never forget the people on the ground, doing the job.

Declan Flood asked a great question recently in his e-Zine, “There is a feeling out there that to promote a more positive image for the credit function we need to come up with an alternative title to "Credit Controller" that is often viewed as a negative.”.  Please get in touch with me ([email protected]) to let me know your thoughts and I will publish the results when we are back after Easter.

The ACP exists to serve you so if it’s training you are looking for or advice on selecting a Debt Collection Agency, please do get in touch with me or any member of the Board.

I hope to see many of you at the Madejski Stadium for the Reading Road Show on 29th May!

 

Paul Taylor FACP MCMI FIACP

Chairman - ACP

Managing your Policy, Process and Controls

It is increasingly important for us as Credit Professionals to constantly focus on this area of responsibility. We are an “owner” of key business processes and breaches within Credit Management can have serious and sometimes even catastrophic impacts on the business.

In general terms the three can be defined as:-

  • Policy -  communication and enforcement
  • Process -  how we clearly define processes and continually review
  • Controls -  ensuring compliance and education

Policy.  A few things to consider whether you have effective Policy:-

–      How often is it updated? Factors elsewhere in the business may need to be reflected by a Policy addition or change

–      Does it clearly show defined processes?

–      Are breaches of Policy reported formally?

–      Is it a document “lost in transit?”  - written and filed away?

–      Are authorisation matrixes reviewed in line with changes in your business?

–      Is segmentation of duties rigorously enforced?

–      How is Policy communicated to staff? eg is it on an Intranet

Process

–      Is there clear understanding where the Credit Management processes fit into the company’s overall processes?

–      Are these clearly illustrated for ease of understanding? eg flowcharts versus text

–      Do the processes cause delay elsewhere in the business that negatively impacts performance?

–      Are the processes tested and reviewed for improvement?

–      Will any change affect another part of your business?

Finally, controls and compliance.  We have our Policy and processes written and distributed but we must ensure that the controls are embedded and enforced. Some factors to consider therefore:-

–      Stringent “policing” of the Policy and Processes

–      Breaches reported and immediately acted upon

–      Compliance Self Audits

–      Incorporate Fraud Prevention checks?

–      IT security support -  eg access denials for certain users

 

Jon Swan, Executive Director

 

The importance of continuing to learn and improve

The ACP has always believed in the importance of continuing to learn and improve what we do. Striving to do things better is the only way to stay ahead of the game. Learning lets us do this both as individuals and as a group.

As we are our members, it is important that we do everything that we can to encourage, assist, support and in some instances guide our members so that they can achieve their goals – your goals are our goals after all.

2014 will be our year, where we strive to meet the needs of an ever growing membership. We will launch more road shows around the country. We know that these are worthwhile from the feedback received from previous road shows. It enables members and non members alike to meet, discuss and debate what is important to them. To form alliances and networks that they can call upon to assist their businesses. Speakers from the profession to the profession will share ideas and viewpoints. These road shows will be nationwide so look out for the dates to be advertised.

As an association, we offer our members to opportunity to obtain accreditation particular to their own abilities and ambitions. In a demanding job market, a CV needs to stand out, as an employer I want to see that applicants have a love of our profession and a desire to improve their knowledge outside of the work place. Too often candidates see credit management as a stepping stone into accounts, finance or even just into the business. They believe that once they are through the door, they can decide to chop and change direction, to the detriment of the credit management team. Credit management is a cornerstone of any business and needs to be taken seriously. I am more likely to recruit someone who has taken the initiative to demonstrate their commitment to the profession than someone with straight A’s at GCSE, A Levels or even a solid degree but who has no clear idea of the direction they wish to take.

The ultimate accolade for me is the Fellowship Award, which is given either on exam merit or extensive experience within the profession. This is why we shall be re-launching the Fellowship Awards this year. Paul Taylor, our chair, has asked me to chair the Fellowship committee and along with Rob Sands as vice chair we are committed to driving this forward. The aim of the committee will be to ensure that our fellows are the cream of the crop but that as an association we celebrate our diverse membership. We will seek to be inclusive and to offer guidance to those who may have not quite reached the standard required to attain fellowship but who have the ambition and drive to do so. We understand that different roles within our profession bring different challenges and in turn lead to different members obtaining a wide breadth of experiences; we do not want to limit our fellows to senior managers when in our diverse profession this is not always attained but by not gaining a senior management role should not preclude professionals from being admitted as fellows. Let’s sweep away the old boy networks and the feeling of elitism and view members are individuals who bring their own qualities to the profession. We will seek to celebrate our profession and open our doors to all credit professionals who wish to contribute to an association whose focus is unwaveringly on its members.

Paul Taylor was appointed chair in January 2014, and will bring fresh ideas to the association. Paul is supported by a now extensive management team and most importantly by our new president Steve Savva. What a great year it’s going to be, so goodbye 2013 it was fun, but hello 2014 because it is always onwards and upwards because together we can take on the world.

Teresa Callaghan FACP
Executive vice chair
Association of Credit Professionals

 Posted on 13th January 2014 by Lauren Piper

DETAILED NOTES ON 2012 PERSONAL INSOLVENCY LEGISLATION – ROI

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NOTES ON 2012 PERSONAL INSOLVENCY LEGISLATION
The Personal Insolvency Bill completed its passage through both Houses of the Oireachtas on 19 December 2012 and was signed into law as the Personal Insolvency Act 2012 by the President of Ireland on 26 December 2012.

The Act introduces reforms to the existing arrangements regarding Bankruptcy. It also introduces three new forms of non-judicial arrangements which allow the write-down or restructuring of both secured and unsecured debt owed by eligible individuals, subject to certain conditions.

1. Personal Insolvency Arrangements or PIAs (applicable to secured and unsecured debt)
An alternative to bankruptcy allowing the settlement of secured and unsecured debt over a six year period

2. Debt Settlement Arrangements or DSAs
A mechanism allowing the settlement of unsecured debt over a five year period

3. Debt Relief Notices or DRNs
A mechanism allowing the write off of unsecured debt to a maximum of €20,000 over a three year period

There are a number of common themes between the Arrangements as follows:-

  • They are available in respect of debt incurred either personally or in the course of running a business.
  • Debtors may only avail of Arrangements where they are insolvent (i.e. unable to pay their debts) and meet certain other eligibility criteria
  • Debtors must have no likelihood of becoming solvent within the 5 years following an application for a DSA or a PIA, or 3 years in the case of a DRN.
  • An application for DSAs and PIAs must be made through an Insolvency Practitioner who will also offer advice to the debtor
  • An application for a DRN must be made through an Approved Intermediary. (Such as Mabs).
  • DSAs and PIAs will generally not affect the obligation to pay "preferential debts" (such as rates and income tax) as defined in the Bankruptcy Act
  • Certain “excluded debts” such as those arising from maintenance orders, crime or personal injury claims, remain incapable of write down; debts such as taxes, rates, local government service charges and debts due to owner’s management companies are “excludable debts” and can be included in the new personal insolvency schemes and potentially be written down if the Creditor consents or is deemed to have consented to the inclusion of the debt in such a scheme.
  • Creditors can object to an Arrangement but, in the case of a DRN, creditor consent is not needed.
  • A debtor may only avail of each Arrangement once
  • Debtors cannot apply for any Arrangement where 25% or more of the relevant debts were incurred during the 6 months preceding the application
  • A debtor has no right of appeal against a decision taken at a creditors' meeting in respect of a DSA or a PIA
  • Debtors cannot be forced to leave a principal private residence ("PPR") under a DSA or a PIA, but may opt to do so

Key Points To Note:-

  • The inclusion of PIAs in the Act is particularly noteworthy as secured debt (including residential and buy-to-let mortgages) up to €3,000,000 can come within the scope of a PIA. While, as drafted, it is unlikely that mortgage lenders will frequently be compelled to accept a write-down of secured debt, the Act does provide debtors with a process whereby they can apply for write-downs. The process should be sufficiently robust so as to differentiate between "can't-pays" and "won't-pays", meaning that it is unlikely that there will be a flood of secured debt write-downs, but in many cases a write-down may be the only option. It is worth noting that the Act does provide certain protections for secured creditors, including a claw-back provision.
  • In the course of the drafting of the Act, one of the most contentious points was the extent to which secured creditors could block, or not block, PIAs or whether they could be squeezed-out if in a minority. While a majority of creditors representing not less than 65% in value of the total debt (secured and unsecured) who are attending and voting at the creditors' meeting must still vote in favour of a PIA as a prerequisite to it taking effect, only 50% in value of secured creditors attending and voting at that meeting, and 50% in value of unsecured creditors attending and voting at that meeting, must do so (a lower threshold than that contemplated when the Heads of Bill were drafted). Certain consumer advocacy groups still believe that this provides secured creditors with an effective veto (as persons with secured debt tend to concentrate their debt with one institution) but where an individual has an equal amount of secured debt with two institutions and also has unsecured debt, all of which is proposed to come within a PIA, it would still be possible for a secured creditor to be squeezed-out by the terms of the PIA being forced upon it if it is approved by the other creditors. Likewise, secured debt includes PPRs and other properties (such as buy-to-lets and commercial investments) and it is therefore possible that the creditor secured on a PPR could be out-voted by other secured creditors.
  • The Act provides significant protections against abuse and contains a number of features to distinguish between "won't-pays" and "can't-pays". Debtors must meet certain criteria and (in the case of a PIA) must have complied with any mortgage arrears process required by the Central Bank and operated by the relevant secured creditor for at least 6 months to be eligible to apply for an Arrangement.
  • Each Arrangement must be approved by the "appropriate court” (Up to €2.5m in the Circuit Court and over €2.5m in the High Court) and will take effect when published by the Insolvency Service on the appropriate register.
  • A review by the Ministers for Justice and Equality and for Finance of the operation of the provisions of the Act as regards Arrangements must be started within 3 years of the commencement of the part of the Act dealing with Arrangements.

Further details in relation to the Insolvency Service, Approved Intermediaries and Insolvency Practitioners are set out below.

1. Personal Insolvency Arrangements (PIAs)

  • A PIA allows for the settlement of secured debt up to €3,000,000, and unsecured debt, over a 6 year period (with a possible 1 year extension) as a possible alternative to bankruptcy. The €3,000,000 cap means that secured business debt could be the subject of a PIA, as many PPR loans will have been for less than that cap amount.
  • An insolvent debtor who meets certain criteria may propose a PIA to one or more secured and unsecured creditors, which proposal must be formulated in conjunction with an Insolvency Practitioner. There must be at least one secured creditor (which could include a judgement mortgagee) holding security over an asset or property of the debtor situated in Ireland. Notably, if all secured creditors agree, the €3,000,000 cap can be waived.
  • The Insolvency Practitioner will, following discussions with the debtor and the completion by the debtor of a prescribed-form financial statement, make the application to the Insolvency Service on the debtor's behalf accompanied by a statement that the Insolvency Practitioner is of the opinion that the information in the debtor's financial statement is correct, that the debtor satisfies the eligibility criteria, that there is no likelihood of the debtor becoming solvent within the next 5 years and that it is appropriate for the debtor to apply for a PIA. That statement will also be accompanied by a statutory declaration from the debtor. Further, where the proposed PIA relates to PPR mortgage debt, the debtor must confirm in writing that he has cooperated with the secured creditor's Mortgage Arrears Resolution Process under the Central Bank's Code of Conduct on Mortgage Arrears for at least 6 months following which an alternative repayment arrangement ("ARA") was not capable of being agreed, or that the secured creditor was not prepared to offer an ARA to the debtor.
  • The Insolvency Service will, if it is satisfied that the application is in order, issue a certificate to that effect and forward the certificate, the application and any supporting documentation to the appropriate court. The court will then decide whether or not to issue the protective certificate and may hold a hearing if it requires further information or evidence. The protective certificate will last for 70 days (with a possible 40 day extension). Once the protective certificate issues, certain enforcement proceedings and other actions may not be initiated while it is in force.
  • The Insolvency Practitioner must then notify the relevant creditors of the issue of the protective certificate and the proposed PIA, seek creditor submissions and provide them with certain documents.
  • Where a PIA includes terms providing for a write-down of secured debt to a specified amount the terms of the PIA shall (unless the secured creditor agrees otherwise) provide that such written down amount shall rank equally with and abate in equal proportion to the unsecured debts covered by the PIA and shall be discharged with those unsecured debts on completion of the obligations specified in the PIA.
  • The Act sets out a non-exhaustive list of repayment options that can be included in a PIA and sets out certain mandatory provisions regarding the treatment of security. Specific provisions are included which are designed to ensure that a minimum amount is payable to secured creditors and that any write-down does not reduce the amount to be paid to the secured creditor on the sale of the property below the lesser of (a) the value of the security or (b) the amount of the debt secured thereby. It also provides for a claw-back if the property is subsequently sold for an amount greater than the written-down value of the debt it secured, unless agreed otherwise.
  • The value of the security is to be determined by agreement between the debtor, the Insolvency Practitioner and the relevant secured creditor. In the absence of agreement, those parties must appoint an independent expert and, where the parties cannot agree on an independent expert, they may refer the issue to the Insolvency Service which will then appoint an independent expert whose valuation will be binding.
  • Where a PIA relates to PPR mortgage debt, it should be borne in mind that all secured debt (mortgages over PPRs and buy-to-let properties, and second charges) are treated the same. Judgment mortgages will also be treated as secured debt. This could produce unfair results at PIA creditors' meetings in respect of holders of PPR mortgages. For a proposed PIA to be approved at a creditors meeting, it must be approved by:-

1. a majority of creditors representing not less than 65% in value of the total of the debtor's debts owed to the creditors participating in, and voting at, the meeting

2. creditors representing more than 50% of the value of secured debts owed to creditors participating in, and voting at, the meeting

3. creditors representing more than 50% of the value of the unsecured debts owed to creditors participating in, and voting at, the meeting

  • If the PIA is approved, it must then be sent to the Insolvency Service which, in turn, must notify the appropriate court. If no creditor objection is lodged with the appropriate court within 14 days, or if such a creditor objection is not approved by the appropriate court which then approves the PIA, the appropriate court must notify the Insolvency Service which will then register the PIA in the Register of Personal Insolvency Arrangements, following which it will come into effect.
  • If a PIA is not agreed, the process terminates and the debtor will be open to bankruptcy and other enforcement proceedings.
  • Ongoing obligations are imposed on both the Insolvency Practitioner and the debtor for the duration of the PIA, including an obligation on the Insolvency Practitioner to ensure that proceeds under the PIA are applied in accordance with its terms and an obligation to review the PIA at least annually. Notably, payments to creditors of the same class will be apportioned on a pari passu basis unless otherwise provided in the PIA. Unless terminated during its term (for example, if a 6 month arrears default occurs), the debtor will be discharged from the unsecured debts specified in the PIA and secured debts to the extent specified in the PIA once the PIA reaches its conclusion. Where a PIA terminates prematurely, the debtor will be liable in full for all debts covered by the PIA unless otherwise provided for in the PIA or unless the appropriate court makes an order to the contrary. It is possible for a PIA to be varied with the consent of a debtor, and subject to approval at a creditors' meeting. The same approval thresholds apply as with the original approval of the PIA.

2. Debt Settlement Arrangements (DSAs)

  • A DSA allows for settlement of unsecured debt; secured debt is unaffected.
  • A DSA may be proposed by a debtor to one or more creditors in respect of the settlement of unsecured debts. Again, the debtor must be insolvent and meet certain eligibility criteria.
  • The debtor must provide a written statement in relation to his financial affairs to an Insolvency Practitioner following which a meeting between the debtor and the Insolvency Practitioner will take place. The debtor will then complete a prescribed financial statement and the Insolvency Practitioner will advise the debtor of his options, and manage the debtor's DSA proposal. The Insolvency Practitioner will make the application to the Insolvency Service on the debtor's behalf accompanied by a statement that the Insolvency Practitioner is of the opinion that the information in the debtor's financial statement is correct, that the debtor satisfies the eligibility criteria, that there is no likelihood of the debtor becoming solvent within the next 5 years and that it is appropriate for the debtor to apply for a DSA. The application will also be accompanied by a statutory declaration from the debtor.
  • The Insolvency Service will, if it is satisfied that the application is in order, issue a certificate to that effect and forward the certificate, the application and any supporting documentation to the appropriate court. The court will then decide whether or not to issue the protective certificate, and may hold a hearing if it requires further information or evidence. A protective certificate will last for 70 days, with provision for extension by a further 40 days in certain circumstances. Once the protective certificate issues, certain enforcement proceedings and other actions may not be initiated in relation to the debts specified therein while it is in force. The Insolvency Practitioner must then notify the relevant creditors, and invite submissions as to how the debts might be settled.
  • While secured debt cannot form part of a DSA, the Insolvency Practitioner may share information with secured creditors. The Insolvency Practitioner must arrange a creditors' meeting at which creditors representing not less than 65% in value of the debts due to creditors participating in the meeting must approve the DSA for it to move forward. If approved, the Insolvency Practitioner must notify the Insolvency Service, which must provide a copy of the DSA to the appropriate court. If approved by the court (and no creditor objection is entered within 14 days or where any creditor objection has been dismissed) the DSA will take effect once registered by the Insolvency Service in the Register of Debt Settlement Arrangements.
  • A DSA may include provisions for the payment of lump sums, the transfer of assets to creditors or the sale of assets. Unless otherwise specified, payments shall be made to creditors who are party to the DSA on a pari passu basis, and provision may also be included for a charge or guarantee to be provided by the debtor or another person.
  • A DSA will last for 5 years (with a possible 1 year extension) during which time certain enforcement and other action is stayed. Ongoing obligations are imposed on both the Insolvency Practitioner and the debtor for the duration of the DSA and, unless terminated during its term (for example, if a 6 month arrears default occurs), the debtor will be discharged from the debts specified in the DSA once it expires.

3. Debt Relief Notices (DRNs)

  • A DRN allows a full write-off of qualifying unsecured debt up to €20,000 following a 3 year "supervision period". Secured debt is unaffected.
  • The DRN procedure is designed to provide debt forgiveness to those debtors with little or no ability to pay off their debts and is available in respect of certain qualifying unsecured debts including credit card debt, utility bills and overdrafts. In addition to the requirement that the debtor be insolvent and have no likelihood of becoming solvent within 3 years of the application date, the eligibility criteria for a DRN also include the debtor having net disposable income of less than €60 per month, assets or savings worth less than €400 and Irish domicile or ordinary residence.
  • Further, a debtor may not apply for a DRN where, within the 2 years preceding the application date, he has entered into a transaction at an undervalue which has contributed towards his financial difficulties, or he has given a preference to a person that has substantially reduced the amount available to discharge his other debts. A debtor will, however, be allowed to exclude from a DRN certain household items and business-related books, tools and equipment up to €6,000, an item of personal jewellery valued up to €750 and a motor vehicle worth less than €2,000.
  • Applications are managed by an Approved Intermediary (such as MABS) who must meet with the debtor, advise as to possible options, assist in the completion of a prescribed financial statement and make the DRN application on the debtor's behalf to the Insolvency Service. If satisfied that a DRN application is in order, the Insolvency Service will issue a certificate to that effect and refer the application and supporting documentation to the appropriate court for approval. If approved by the court (the court has a right to hold a hearing where it requires further information or evidence to enable it to reach its decision) the court will issue the DRN and notify the Insolvency Service.
  • The DRN will take effect once registered by the Insolvency Service in the Register of Debt Relief Notices.
  • A DRN will remain in place for a 3 year period. Where a debtor's income increases by €400 or more per month during the supervision period, he must surrender at least 50% of that increase to the Insolvency Service. The debtor may also buy himself out of the DRN by making repayments equivalent to at least 50% in value of the qualifying debt (the balance then being written-off). At the end of the 3 year moratorium, the qualifying debts are written-off without affecting the rights of the debtor's secured creditors to enforce their security.

Treatment of Pensions
Additional provisions were approved at Report Stage in the Seanad regarding the treatment of pensions. In the case of a DRN, a pension will not be counted when calculating the assets and savings threshold of €400 however payments which the debtor is entitled to receive but has not yet received will be regarded as income. In the case of DSAs and PIAs a debtor cannot be required to hand over his 'pension pot' nor can he be required to draw his pension early.

In relation to Debt Settlement Arrangements and Personal Insolvency Arrangements, where a debtor has an interest in or an entitlement under a relevant pension scheme that interest / entitlement:

1) Must be disclosed in the Prescribed Financial Statement
2) Shall not be treated as an asset of the debtor unless…

The usual caveat above relates to two matters being that should a party be entitled to a draw down / income from the pension either before, during or in the 6 months following the maximum period of any insolvency scheme, they are considered to be in receipt of the funds and secondly, to avoid parties attempting to unfairly keep assets in a pension, subject to a Court action, a claw back period of three years has been included to prevent excessive pension contributions. Similar provisions are provided for in a bankruptcy process.

The Insolvency Service
Under the Act, an independent body known as the Insolvency Service has been established. It will be responsible for monitoring the operation of the Arrangements, considering applications for DRNs, processing applications for protective certificates, maintaining registers of Arrangements, providing information to the public, preparing and issuing guidelines as to what constitutes "a reasonable standard of living" and "reasonable living expenses" and authorising, supervising and regulating Insolvency Practitioners. The Insolvency Service will be required to prepare and adopt a business plan each year, and submit annual reports to the Minister. The Director Designate of the Insolvency Service, Lorcan O'Connor, was appointed by the Minister in September 2012.

Guidelines
As mentioned above, for the purposes of applications for an Arrangement, the Insolvency Service has issued guidelines as to what constitutes "a reasonable standard of living" and "reasonable living expenses" following consultation with the Minister, the Minister for Finance and the Minister for Social Protection. In preparing those guidelines, the Insolvency Service had to have regard to Government policy publications on poverty, official statistics and surveys published by the Central Statistics Office, the Consumer Price Index, individual needs and the principle of social inclusion. The guidelines, which are publicly available on the website of the Insolvency Service and which must be updated annually, provide examples of expenses which are, and are not, allowable.

Approved Intermediaries and Insolvency Practitioners
In the case of DRNs, the debtor must apply through an Approved Intermediary who must be authorised by the Insolvency Service. The Insolvency Service may also (with the Minister's consent) prescribe criteria that persons must meet to be so authorised. It is expected that the Money Advice and Budgeting Service will be the Approved Intermediary in the majority of cases.

In the case of DSAs and PIAs the Minister introduced, at Seanad stage, detailed provisions relating to Insolvency Practitioners which address the manner in which Insolvency Practitioners are to be authorised, regulated, investigated and sanctioned. Applications for authorisation will be to the Insolvency Service, will be valid for 1 year and can be renewed. The Insolvency Service will require detailed information from applicants including reports from qualified accountants, and may also require additional evidence of character, competence or financial position.

Unsuccessful applicants for authorisation or for renewal of authorisation will have a right of appeal to the Circuit Court. The Act also sets out general provisions regarding Insolvency Practitioners' record-retention obligations (6 years following completion of his involvement in an Arrangement) and the obligation to hold professional indemnity insurance.

The Insolvency Service may also make regulations regarding the types of bank accounts that Insolvency Practitioners may open, how they are to be managed, and what records must be kept. The Insolvency Service may also apply to the High Court for orders directing that payments not be made from particular accounts, or that disposals not take place. The Act also provides for the establishment of a Complaints Committee by the Insolvency Service and the appointment of inspectors to investigate those complaints. Inspectors will have wide-ranging powers and will be able to apply to the District Court for search warrants. The Act contemplates two types of sanction for Insolvency Practitioners: major sanctions (revocation of authorisation, suspension of authorisation, prohibition from future authorisation, a fine of up to €30,000 or a combination of the foregoing) and minor sanctions (an advice, a caution, a warning, a reprimand or a combination of the foregoing). The Insolvency Service may seek the assistance of the Central Bank and the Garda Síochána in connection with the performance of its functions. Separately, the Act also contains provisions dealing with the resignation and removal of Approved Intermediaries and Insolvency Practitioners.

Specialist Judges of the Circuit Court
Part 6 of the Act establishes a new role - that of a specialist judge of the Circuit Court, for the purposes of performing and exercising the functions, powers and jurisdiction conferred on the Circuit Court by the Act. These roles will initially be filled by appropriately qualified serving county registrars.

Bankruptcy
The main changes which the Act will make to the Bankruptcy Act are as follows:

  • For a creditor to petition, the minimum amount owed must be €20,000
  • Where the petition is presented by a debtor, the debtor must provide an affidavit that he has made reasonable efforts to reach an arrangement with his creditors by proposing a DSA or a PIA and show that his debts exceed his assets by at least €20,000 and the court must be satisfied that he is unable to meet his engagements with creditors for him to be declared bankrupt.
  • Where the petition is presented by a creditor, the court shall consider whether a DSA or a PIA would be a more appropriate solution.
  • Certain provisions regarding fraudulent preference and avoidance of certain transactions have been extended to 3 years.
  • The automatic discharge period has been reduced from 12 years to 3 years
  • Where a debtor has been adjudicated bankrupt more than 3 years before the Act came into force, he shall be discharged 6 months later (subject to the rights of creditors to raise objections)
  • The court may suspend an automatic discharge up to the eighth anniversary of the debtor being adjudicated bankrupt
  • Once a debtor is discharged from bankruptcy, he will remain under a duty to cooperate with the Official Assignee in the realisation and distribution of such property as is vested in the Official Assignee
  • The Bankruptcy Office keeps a separate register of Irish People with assets here who have been made bankrupt in the UK or elsewhere within the EU. Any EU bankruptcy proceedings issued must be recognised here and will cover the Irish assets.

General Comments
While creditors may vote against a DSA or a PIA, the effect of such a course of action would be to leave debtors with the option of seeking bankruptcy, which would generally free them of all debts within 3 years. As mentioned above, the approval thresholds for PIAs may make it difficult for a secured creditor to block a proposed PIA, however the requirement that final approval of any Arrangement rests with the appropriate court is a welcome additional protection for secured creditors.

Where more than one secured creditor is participating in a creditors' meeting in respect of a PIA, given that distributions to creditors of the same class under a PIA will be on a pari passu basis unless the contrary is provided for in the PIA, which could result in a judgment mortgagee being placed on the same footing as a secured PPR lender, the PIAs provisions regarding the allocation of amounts received will likely form a key point of discussion at PIA creditors' meetings.

There are protections for PPRs and a PIA cannot provide for the sale of the PPR unless the costs of continuing to reside there are disproportionately large. So there will not be wholesale evictions but neither will borrowers be allowed stay in PPRs they clearly cannot afford. This appears to be a good balance.

When presenting the Bill to Seanad Eireann on 21 November, the Minister set out his estimates as to the numbers that will avail of an Arrangement, or apply for bankruptcy, during the first full year of the Act's operation. He anticipates (based on experiences under similar legislation in the United Kingdom and in Northern Ireland) 15,000 applications for the two main Arrangements: DSAs and PIAs, 3,000-4,000 applications for DRNs and 3,000 bankruptcy applications.

Summary Notes – 2012 PERSONAL INSOLVENCY LEGISLATION- ROI

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2012 PERSONAL INSOLVENCY LEGISLATION

The Personal Insolvency Act 2012 has now come into operation. The Act offers three types of non-judicial arrangements which allow the write down or restructuring of secured and unsecured debts under certain conditions. A summary of the options is listed below.

1 Personal Insolvency Arrangements
These are an alternative to Bankruptcy and apply to secured debt up to €3 million and unlimited unsecured debt .The debtor must engage a Personal Insolvency practitioner to review his financial situation and make a proposal to creditors for payment of agreed amounts over 6 years.The proposals are put to a vote of the creditors of whom 65% of the total value of the debts must attend and vote and the vote must be passed by creditors representing 50% of the secured debts and 50% of the unsecured debts. The Insolvency Service then seeks Court approval of the proposals.

2 Debt Settlement Arrangements
These apply to unsecured debt only with no monetary limit. Again a Personal Insolvency Practitioner is engaged to make a proposal to unsecured creditors for payment over 5 years. Again 65% of creditors must attend and vote at the creditors meeting. Court approval is then sought on the proposals.

3 Debt Relief Notices
These apply only to unsecured debt and subject to a limit of €20,000. The debt can be written off if the debtor proves a very restricted ability to pay and that he is insolvent and unlikely to be solvent within 3 years. An Approved Intermediary (such as MABS) will review the debtor’s financial situation and make a report to the Insolvency Service who may issue a notice which effectively wipes out the debts. The debtor can only apply for this relief once in his lifetime.

What can creditors do to reduce the risk of their debts being written off/reduced?
If a creditor gets a judgment and registers it as a judgment mortgage on the debtor’s property, this converts an unsecured debt to a secured debt under the Act and therefore means options 2 and 3 above will not affect the debt, provided the judgment mortgage is in place 3 months before the debtor applies for relief. The debtor can still avail of option 1 above but as the judgment mortgage holder is a secured creditor, their voting will be in line with that of other secured creditors , e.g. lenders who have a mortgage, rather than with the unsecured creditors. Lenders with prior charges will still have priority over sale proceeds and it is never certain that there will be sufficient equity to pay a subsequent judgment mortgage creditor, but it does give a better chance of securing some payment if there is equity, and before that equity is distributed to unsecured creditors.

April 2013

AMRIL PRESS RELEASE

Amril is approved for Consumer Credit Licence

Amril, the leading credit management and debt recovery firm based in Crawley, has been approved for its Consumer Credit Licence.

Graham Sands, Managing Director said “At Amril, we have been committed to offering our clients and their customers the highest possible standards of service in the commercial sector for the last three years. We are delighted that we have now been approved for our Consumer Credit Licence as this will support our growth strategy & our core beliefs in treating customers fairly.

The company has seen a steady increase of new customers in recent months and is now embarking on a period of significant growth in the consumer and commercial credit management sector.

“Our commercial clients consistently use Amril because we put relationship management at the heart of what we do. We will continue offering the same high quality service to our consumer facing clients” added Sands.

About Amril 
Amril Ltd, which has traded for three years from its Crawley HQ, provides commercial and consumer debt recovery and credit management including full Litigation services. They are members of the Association of Credit Professionals (ACP) and in the process of joining the Credit Service Association.

For further information please contact:
Graham Sands, Managing Director
Tel: 01293 763060
Email: [email protected]
Website: www.amril.co.uk

Riskier Business

It may seem like a contradiction, but there are times when more bad debt can mean an improvement to the bottom line.
By ABE WALKINGBEAR SANCHEZ
I received a call recently from the CEO of a $30-million-a-year distribution company in Portland, OR, who had a question: "Last year we wrote off $5,000 to bad debt, do you think we're too tight on credit approval?"
"Let me ask you a couple of questions," I responded. "First, do you have any unused capacity? Could you take on more business without having to hire any new people or take on any more fixed expenses?"
The answer was "yes," they could take on more business. Next I asked, "Are you currently turning down credit sales? Are you rejecting riskier credit customers?" Again, the answer was "yes."
I then asked the CEO to draw a table representing his current sales and to keep things simple, to make the amount $100 (like the table at left). The first 5% or $5 is the pretax profit. The next 45% or $45 is variable expenses including cost of goods and sales commission.

http://www.armg-usa.com/RiskierBusiness.pdf

The Jackson Reforms to Civil Litigation – FREE GUIDE

The Jackson Reforms

A practical approach for debt recovery departments, legal teams and volume debt recovery operations 

Lord Justice Jackson’s review of civil litigation costs has been widely reported since the publication of his Final Report in January 2010.

The aim of implementing some of his recommendations is to make civil litigation quicker, easier and cheaper.

Do you fully understand the effect that the reforms will have on your business?

Take this simple test to find out if you’re ready for Jackson?

  1. What proportion of your litigation cases are for values greater than £10,000?
  2. How well does your actual value of contested cases match your budgeted value of contested cases?
  3. If you use After the Event (ATE) insurance, by how much have you revised your budget for 2013/14?
  4. What percentage of your litigation cases pay the principle debt in full?

The answers to these questions affect your recovery strategy both before and after the implementation of the reforms.

Whether you are concerned with delivering the best results for your own organisation, or for those of your clients, whilst protecting revenue, profit and cash-flow, follow the link below to obtain your FREE guide.

Please send me a FREE Jackson 20 Top Tips Guide

Legal Practice Credit Professionals (LPCP) is a free to join, ‘members only’ organisation for Professionals working in credit related roles within legal practices.  Our aim is to improve their standing and credibility through skills sharing at our networking events, training and development.

If you’d like details of how to join us, or we can help in any other way, contact Julie by following this link  or call us on 07501 769563

Business confidence among UK credit managers hits new peak

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Business confidence levels among credit managers representing a broad cross-section of UK industry rose over the three months ending December 2012 to their highest level since the survey began in 2008.

On a scale of 1 (low) to 10 (high), respondents to Moore Stephens latest credit management survey expressed an average confidence level of 6.8 in the industries in which they operate, compared to 6.3 in the previous survey, in September 2012. This is the highest figure since the 6.7 recorded in June 2011, and the highest ever in the life of the survey, which was launched in 2008 with a confidence rating of 6.0.

Just over one-third of our respondents this time expected their Days’ Sales Outstanding to increase during the coming year. There was however a big increase in the number of respondents who anticipated that their export volume turnover would improve and a significant improvement in the credit insurance market in the last quarter of 2012.

Moore Stephens restructuring and insolvency partner, Jeremy Willmont said, “Initially, it might come as a surprise to find confidence among our respondents at an all-time survey high. The external portents, after all, are not particularly auspicious. The Institute for Public Policy Research predicts that the UK could experience a Groundhog Day-type 2013, revisited by austerity measures and eurozone crises. The Centre for Economics & Business Research thinks there is a 50% chance of a triple-dip recession this year. And The British Retail Consortium reports that 52 chain stores have gone out of business since the start of what was then called the credit crunch, and predicts that more well-known names will disappear in 2013. The Olympics have come and gone, leaving behind many enduring memories but little in the way of immediate economic benefit. And the rain has fallen in biblical volumes, even for the UK. So what has fired the optimism of our respondents?

The answer may be simple. It could just be, as one respondent remarked, that we have reached the bottom. This will be no consolation to those businesses which have gone under in the past four years or so – and even less to those which may yet fail to make it over the line. But it should mean that the nucleus which has endured, and which remains today, is in better financial shape than that which went before. It is sad to see businesses going into administration, but every failure represents an opportunity for well-managed competitors to become stronger.”

For a full copy of the Moore Stephens Survey click here Credit management survey report January 13

Ten New Years Resolutions for Credit Managers

I know that the words New Year Resolutions is really a bad work that is synonymous with failure. A large proportion of the population make them and the vast majority are broken within the very first week. This leads some people to think that resolutions and goal setting are all the same thing and should be avoided completely. I agree that most are broken; I don’t agree that it has to be that way. The reason I have chosen the words deliberately here is to see if you will act on even some of the ten items below. I guarantee it will make a difference to your bottom line in 2013.

1.       I am going to read all the small print in our own Terms and Conditions this year.

Pete Seeger once asked “Do you know the difference between Education & Experience? Education is when you read the fine print. Experience is what you get if you don't.” I know life is short, so if you find this job too tedious then get someone to do it for you – make sure it is done and that are clear, understandable and most importantly serve you.

2.       I am going to create and implement a clear policy in our business this year.

We all know we should have a clear written policy and the truth is most businesses don’t. Do yours as soon as you can, implementing it with management approval will make a real difference to every aspect of your business

3.       I am going to invest in my Credit function this year.

It is the most important function and it deserves it. The main area is in quality information, so you can make the best decisions at all times, also look at systems, and automation that will help..

4.       I am going to speed up the entire process this year.

Excellent Credit Control is all about speed, accuracy and urgency. Discover ways you can make things leaner faster and better all round.

5.       I am going to read Credit Magazines and articles

It is important to keep up-to-date with what is going on in credit circles and reading about others in your business overcame the problems that you are currently experiencing, the fact you are reading this means you are a step ahead of the rest already!

6.       I am going to invest in the best available education & training for my management and staff

Experienced people who know what they are doing and work at a level of excellence are the greatest asset to any business. You can increase the loyalty and performance through proper education & training.

7.       I am going to have a long look at the reports we have been generating on a daily, weekly and monthly basis

To me the worst reason for doing anything is “because we have always done it that way!” Reports often fall into this category without anyone giving it a single thought. We simply generate the same reports month in and month out – time for change and time for radical improvement.

8.       I am going to put in an extra effort when it comes to internal communications.

I wrote some time ago that the Credit Manager should have responsibility for all communications within the business – and if they are not capable of such a role I would question their ability to do the job. Better communications leads to better business and that is what proper Credit management is all about.

9.       I am going to meet at least one key customer every month.

To be successful you have to make sure your customers are happy, you also have to make sure they are financially secure and in a position to pay what is due when it is due. The best way to make both happen is take time to call in person and build the relationship.

10.   I am not going to take any work home with me in 2013.

This is a real no no for me. Work late if you have to. Stay all night if you have a deadline to meet and when you go home, you are home and in a position to give whoever is there your undivided attention. Cloud the lines between work and home and I guarantee both will suffer.  Anyway most of the work taken home arrives back in the office in the exact same state as it did when it left – with no work having been done at all. The downside is that its very presence had a negative impact on your evening. Stop taking work home.

Good Luck in implementing some or all of the suggestions above, as always I love to get your feedback, comments and ideas, so feel free to contact me directly – my details are below.  Thank you for reading and I wish you all the very best for 2013.

Declan Flood FIACP
[email protected]
+353 (0) 87 244 7052