Lords Bankruptcy Ruling Will Have Implications For Ireland

by Jason Gorringe, for LawAndTax-News.com, London

17 August 2005

Speaking this week with regard to the ruling delivered by the UK's House of Lords in the Natwest v. Spectrum case, president of ACCA Ireland, Gerard Loughnane suggested that the decision is likely to have implications for small businesses across the Irish Sea as well.

Following the Lords decision that banks should lose their place at the head of the repayment list when a business collapses, the Irish accounting industry body has suggested that they are likely to compensate for this by asking for additional security from small businesses seeking loans. It also fears that such policies will spread to the Republic.

"Banks are...likely to react by imposing tighter restrictions on the use of the proceeds of charged debts," the ACCA Ireland was quoted by the Irish Independent as observing on Tuesday.

He continued:

"Accordingly, these cash flows will no longer be able to act as a potential source of working capital for small companies, which could worsen financial problems and conceivably tip some small firms over the edge."

"Those firms that have no option but to borrow from banks will just have to accept these new stricter conditions. Bank borrowing may become more problematic for small businesses and so small and medium-sized enterprises may turn to other alternative forms of finance to support their business."

He concluded by suggesting that:

"It could be that we will see greater recourse for small companies to factoring and leasing, and other alternative sources of finance."

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