Ireland’s economic outlook in 2024 has remained robust, with low unemployment, moderate GDP growth, and a projected budget surplus of €30 billion. Inflation and interest rates are easing. However, despite these optimistic indicators, corporate insolvencies in the year to date have increased by over 35% compared to 2023, mostly within the retail, hospitality and construction sectors.
Insolvency in the hospitality sector
The hospitality sector has been impacted by both legacy debts and rising operational costs, with insolvencies up over 50% compared to 2023. The return of the VAT rate to 13.5% and the introduction of warehoused debt repayments have added pressure to already stretched finances. As these debts fall due, businesses must now navigate commercial and financial challenges to avoid insolvency and mitigate the attendant risks. Directors in financially vulnerable businesses must be vigilant about their obligations to creditors, as failing to act appropriately can result in personal liability. We consider the key indicators, directors’ duties, and strategic restructuring options in our full article.
How can board minutes protect directors during financial difficulties?
Ensuring board minutes capture careful consideration of financial conditions and professional advice can help document responsible decision-making and mitigate the risk of personal liability. By addressing potential liabilities early, directors can significantly improve the likelihood of implementing successful restructuring plans or, if necessary, liquidating companies without negative personal consequences.
We provide essential guidance on effective minute-keeping.
New commercial rates regime
The new commercial rates regime that took effect on 1 January 2024 requires careful navigation. Property owners and occupiers must address outstanding rates before completing a sale, adding compliance and financial obligations. Additionally, ambiguity in the definition of “liable person” and new requirements to discharge outstanding rates in some jurisdictions place further administrative and financial burdens on companies looking to transact property. The reduction in abatement on vacant property rates in several areas has also increased costs for property owners, who may now delay taking possession until new tenants are secured.
This article explores critical obligations and practical implications for owners, occupiers and lenders.
Prospects for 2025
Forecasts suggest that financial pressures on many businesses will continue, and the level of insolvencies is unlikely to decrease in the short term, at least in the worst affected sectors.
Accordingly, directors, particularly in sectors under pressure, should seek prompt expert advice if financial difficulty arises or is anticipated, assess the feasibility of restructuring options like SCARP and examinership, and ensure compliance with their fiduciary obligations.
For more information on insolvency and financial restructuring matters, contact a member of our Restructuring & Insolvency team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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