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Juggling enforcement and compassion
24 April 2009
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Companies complain about unreasonable Revenue demands, yet some experts say the Revenue could be more aggressive in chasing unpaid bills. Larry Ryan talks to Collector General Gerry Harrahill about Revenue’s delicate balancing act.
“We have always had a consistent message for business, even when times were good. Come and talk to Revenue at an early stage when you notice the problems developing. If we can work with a business at an early stage and create a bit of space or an opportunity to deal with a problem, then it can be managed in a way that allows the business to continue and ensure the Revenue side of things gets sorted.”
Engaging with the Revenue before problems escalate has always given firms greater credibility.
“Where a business, for want of a better description, puts its head in the sand and hopes the problem will go away, unfortunately, the reality is the Revenue is not going to go away. And at some stage in the not too distant future, we’ll be making contact with that business.
“Sometimes three or four weeks can go by before the business will engage with the problem and that time can be crucial in terms of our ability to be flexible and understanding, and to work with the business in trying to find a solution.”
In many cases, the bottom line for the Revenue is whether they are dealing with a viable business.
“If we are, we will work hard with them to find a solution to get them out of the difficulty. The reality is, if we are dealing with a business that isn’t viable, it’s not in the interests of the business itself, in the interests of Revenue or indeed in the interests of other creditors to just simply allow it to clock up debts. In that kind of scenario, we are forced to take action that would guarantee the Revenue debt situation is addressed.
”That could ultimately result in us having to petition the courts for the appointment of a liquidator or to put in a sheriff to recover the Revenue debt or to take legal proceedings in court.”
Harrahill admits that the liquidation route hasn’t typically resulted in large recoveries for the Revenue.
“To be honest, when we get to the stage of liquidating a business, generally speaking, we’re looking at a business that has very few assets and is probably not just in difficulty with Revenue but with other creditors as well. The level of recovery in liquidations would be relatively low.
“A lot depends on the kind of arrangements the business has. If, for example, they have a debt-factoring arrangement in place or if they have stock that’s held under retention of title, that’s not available to us or other creditors.
“We do take this into account when considering if liquidation is the best recovery method for Revenue. However, in some cases, we have to move to get a liquidator appointed simply to stop a company continuing to clock up debts – even if we won’t necessarily recover a great deal.
“There’s another factor too. We have a responsibility to the companies out there that are in compliance to maintain a level playing field. If one company is using the funds it owes Revenue to pay suppliers and staff, it’s gaining an unfair advantage over its competitors.”
Despite fewer examinership cases reaching a healthy conclusion, Harrahill believes the examiner can still play a vital role in reviving stricken firms.
“In the right circumstances, where you’re dealing with a company with a good plan and structure but needs additional capital, examinerships do work. The possibility of bringing in a new investor may give the company enough working capital to make it viable and it will result in some kind of dividend being paid to creditors.
“When voting on a scheme of arrangement, we would consider the trading position of a company and whether it has a reasonable chance of survival. We would also look at how the company is being managed and even take into account how many employees are involved. Then we would take a view on whether the scheme delivers a good outcome for Revenue and a good outcome for creditors generally.”
Harrahill insists that he enjoys a good working relationship with the majority of insolvency professionals.
“We work very closely with them, from cases where Revenue is responsible for petitioning the courts to put a liquidator in place to creditor voluntary liquidations, where there’s a nominee from the company.
“Sometimes we are a significant creditor. In other cases, we may be a less significant creditor but we have a very proactive role in terms of attending the initial creditors meetings and becoming involved in committees of inspection.
“Where we have issues or concerns we raise those through the committees of inspection but, generally, we would see ourselves as having a very good, positive working relationship with the bulk of insolvency practitioners out there.”
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