True Sales: Irish Legal Position Settled

The recent decision of the High Court in Bank of Ireland v Eteams International Limited [2017] IEHC 393 has clarified how the question of whether a transaction involves the sale of an asset, or the creation of security over that asset, should be assessed. Until now, Irish practitioners making this assessment had to rely upon the presumption that the Irish position would reflect the approach from an English legal perspective, being the principles as set out by the English courts in a series of decisions commencing with Re George Inglefield Ltd. These decisions demonstrated a reluctance to re-characterise a transaction that was described as a sale as something else, unless the transaction is clearly a “sham”.

Background
Eteams International Limited (“Eteams”), a company providing translation services, had entered into a debt purchase agreement with Bank of Ireland (the “Bank”) in 2007. The agreement was documented in two parts - the formal agreement and the Bank’s standard terms and conditions for the purchase of debt (the “Conditions”). The agreement provided that the Bank was to purchase, and was to become the owner of, the debts owing to Eteams, at that time and in the future. When Eteams went into liquidation, the liquidator contended that the agreement was a charge, which was void because it was not registered with the Companies Registration Office in accordance with company law (section 99 of the Companies Act 1963, applicable at the time).

 

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