Recession
The Role of the Personal Insolvency Practitioner
By Russell Brennan Keane
Jul 9, 2013 - 11:54:17 AM

The Personal Insolvency Act 2012 was signed into law on 26th December 2012.

Brendan O’Donoghue, Restructuring & Insolvency Partner with Russell Brennan Keane, says “The Act is a major overhaul of the personal insolvency legislation regime in Ireland and includes the introduction of an automatic discharge from bankruptcy after three years (subject to certain conditions) as opposed to twelve year period under the previous legislation.” 

The Act also introduces three new non-judicial debt settlement processes allowing for the write off of debt by individuals without the need to enter the formal bankruptcy process.

These are;

• Debt Relief Notice (DRN)
• Debt Settlement Arrangement (DSA)
• Personal Insolvency Arrangement (PIA)

The Act provides for the establishment of The Insolvency Service of Ireland (ISI) which will oversee the operation of the new arrangements. This body formally came into being on 1 March 2013 and ISI has recently published various guidelines which  set out in detail the new procedures which will allow indebted individuals to come to arrangement with their creditors, including guidelines on a reasonable standard of living and reasonable living expenses for debtors who seek a DRN or enter into a DSA or PIA process.

The ISI will also be responsible for authorising and regulating Approved Intermediaries and Personal Insolvency Practitioners to deal with persons wishing to avail of these debt settlement processes. An Approved Intermediary (AI) will deal with the Debt Relief procedure while the Personal Insolvency Practitioner (PIP) will oversee individuals seeking to utilise either the Debt Settlement or Personal Insolvency processes.

In short, the Personal Insolvency Practitioner assumes a very "hands on" role from start to finish in both arrangements.  

Chapters 2 and 3 of the Personal Insolvency Act 2012 deal with the appointment and role of the Personal Insolvency Practitioner under both processes which include;

• The initial engagement with a debtor who is contemplating making a proposal for a DSA or PIA  
• Providing an opinion as to the debtor meeting the criteria set out for making such a proposal  
• Accepting the appointment to act as PIP
• Reviewing the prescribed Financial Statement (PFS) prepared by the debtor and providing advices to the debtor on options and their eligibility to make a proposal for a DSA or PIA.  
• Obtaining a written instruction from the debtor to  make a proposal 
• Apply on behalf of the debtor for a protective certificate  
• Notification to all creditors of the PIP appointment enclosing a copy of PFS
• Preparation of a proposal to creditors and convening of a meeting of creditors to consider and vote upon same 
• Where proposal is approved, notify ISI and all creditors of the outcome
• Operate the terms of the arrangement including the collection funds from the debtor  and payment to creditors over the duration of the arrangement
• Monitor the arrangement throughout its lifetime
• Carry out a review of the arrangement including an updated PFS at least annually and distribute the PFS to creditors 

Fees and Costs of a PIP
The fees and costs of a PIP will form part of the DSA or PIA arrangement. In simple terms they will be paid out of the assets available to the creditors who will have the opportunity to vote on them at the meeting of creditors. The PIP will be obliged at the outset of either process to set out in writing to the debtor the expected level of costs involved. 

Becoming a PIP
In April 2013, The Insolvency Service of Ireland (ISI) issued a draft guideline setting out who can become a PIP, the necessary skillsets required, other relevant criteria and the steps involved in the application process to become a PIP. 

Who can become a PIP

• A solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts 1954 to 2011) is in force; 
• a barrister at law called to the Bar of Ireland;
• A qualified accountant and a member of a prescribed accountancy body within the meaning of section 4 of the Companies (Auditing and Accounting) Act 2003; 
• A qualified financial advisor who holds a current qualification from the Life Insurance Association of Ireland (LIA), the Insurance Institute or the Institute of Bankers School of Professional Finance; or holds a qualification in law, business, finance or other appropriate similar qualification to the satisfaction of the Insolvency Service recognised to at least level 7 of the National Qualifications Framework by Quality and Qualifications Ireland (or equivalent)

AND

Can demonstrate to the satisfaction of the Insolvency Service that he or she has relevant knowledge and experience of and has completed a course of study and passed an examination on the law and practice generally as it applies in the State relating to the insolvency of individuals; and the Act.

The necessary skillsets as set out in the ISI draft guideline include the appropriate people, communication, judgement and negotiation skills, in addition to their qualifications.

ISI also advise that It will be an integral part of the process that practitioners are both honest and independent in their approach in reaching debt solutions.

Any individual applying to be a PIP will also have to satisfy that ISI that he /she

• has adequate organisational capability and resources to carry on the practice of a personal insolvency practitioner under the Act;
• holds, or will hold before commencing to carry on practice as a personal insolvency practitioner, a policy of professional indemnity insurance.
• has submitted a completed application, together with supporting information, documentation and mandates as the Insolvency Service has requested; and 
• is tax compliant.

Practitioners will be expected to meet a number of other standards, including fitness and probity.

Applying to be a PIP
The following is a summary of the application process outlined in the ISI draft guideline of April 2013;

• A complete an application form to be submitted in electronic format supported by the following documentation 
• A statutory declaration from the applicant, stating that they have answered all the questions truthfully, and that they are aware that it may be an offense to provide false or misleading information. The applicant must also undertake to notify the Insolvency Service of details of any changes in the information provided.
• A copy of their current tax clearance certificate. 
• Evidence that professional indemnity insurance will be available upon authorisation. The amount insured for each claim shall not be less than €1 million and a minimum of €1.5 million in aggregate.
• The practitioner must hold this policy on a continuing basis for the duration of their authorisation as a practitioner
• Qualification certificates (solicitors practising certificate, Qualified Financial Adviser Diploma etc)
• Accountants report (This is a statement from a qualified accountant. The accountant must state that they have reviewed the financial systems and controls of the prospective practitioner, and that they believe these are appropriate for the protection of monies received from debtors should they be authorised to carry on practice as a personal insolvency practitioner under the Personal Insolvency Act 2012)
• The applicant must also show that they have satisfactorily completed a course - from a relevant professional educational body – on personal insolvency and practice in the State.

Application / Annual Renewal Fees
The fees associated with becoming a PIP are;

Initial Application Fee                  €1,500
Annual Renewal Fee                    €1,000

The Personal Insolvency Act 2012 introduces significant changes in addressing personal indebtedness in Ireland and the PIP will be central to the success or otherwise of the process, concluded Brendan.

Further information or to discuss your specific requirements confidentially please contact Brendan O’Donoghue, Restructuring & Insolvency Partner at 01 6440100 or email bodonoghue@rbk.ie. 

About Russell Brennan Keane
Russell Brennan Keane is a leading business advisory and accountancy firm. With 50 years experience providing professional advisory services to a range of clients in the mid to large corporate market in Ireland, from offices in Dublin, Athlone and Roscommon.

Brendan O'Donoghue
Restructuring & Insolvency Partner
Russell Brennan Keane,
96 Lower Baggot Street,
Dublin 2.
T: 01 6440100
E: bodonoghue@rbk.ie
W: http://www.rbk.ie