The office of the Sheriff pre dates Norman times. The laws governing their activities are complex. While the Law Reform commission made a number of recommendations in 1988 on changing the law, none of these have yet been implemented.

When a creditor obtains a judgment against a debtor for monies which are due, and if the debtor does not pay the monies within a reasonable period of time it is open to the creditor to employ the services of a sheriff to carry out “execution” of the judgment.

Execution Procedure

If judgment is awarded through the High Court, then the execution order which is directed to the Sheriff is known as a writ of fieri facias (“fi fa”); in the Circuit Court it is known as an execution order against the goods, and in the District Court the decree of the court itself is sent to the Sheriff for execution.

Types of Sheriffs

Trade creditors can obtain judgment and use a sheriff to enforce. The execution procedure is carried out in Dublin and Cork by “private sector” Sheriffs and in other counties by County Registrars.  The Revenue are empowered to confer Sheriff’s power on their own appointees, and they have appointed 16 sheriffs around the country. A major advantage of the sheriff system as far as the Revenue is concerned is that unpaid taxes can be collected by a Revenue Sheriff without the need for judgment being given against the tax payer.

What can be seized?

The Sheriff may seize any goods, chattels, growing crops and any money, bank notes, cheques, bills of exchange, promissory notes, bonds or securities for money belonging to the debtor.

The Sheriff cannot take property belonging to third parties, such as property acquired under hire purchase. Stock which is subject to Reservation of Title claims is a more complex area.

Under Sections 606 and 607 of the 2014 Companies Act (“the Act”), the Sheriff must, after the sale, hold the proceeds for 14 days to allow for notice of a winding up of the company to be served on him. If such notice is served within that time, he must, after the deduction of his costs, pay the balance to the liquidator, who is entitled to retain it as against the execution creditor. If, however, the Sheriff receives notice of the winding up before the sale or the completion of the execution by the receipt or the recovery of the full amount of the levy, he must deliver the goods or any money received to the liquidator without deducting the costs of execution.

How to deal with the Sheriff?

Obviously, it is better to reach arrangements with creditors before sheriffs are instructed so as to avoid the “poundage” costs of the sheriff.

Before the Sheriff makes a visit, it is normal for him to contact the debtor by letter requesting his proposals for payment. The receipt of such a letter is a significant event for the directors of a company, as it is evidence that the company is unable to pay its debts as they fall due. The directors need to consider very carefully if they should continue to trade, as it is possible that they be held personally liable for any new debts incurred by the company.

At this stage the directors, and its business advisors, should consider whether the company is insolvent, and if so should cease trading to avoid the directors being made personally liable for reckless trading. If the company is insolvent and has no prospect of its fortunes reviving then the directors should take immediate steps to place the company into liquidation. A copy of the notice to creditors convening the creditors meeting pursuant to section 587 of the 2014 Companies Act should be sent at the earliest opportunity to the Sheriff. Provided the Sheriff receives this notification within the appropriate time frame then the  creditor, pursuant to  the Act, is not entitled to retain the benefit of any execution. The purpose of the Act is to prevent any one creditor being preferred over another. Another alternative open to the debtor is to invite the bank to appoint a Receiver if the bank has the appropriate debenture.

If the directors considers that the business is viable, but is just suffering from short term cash flow difficulties, then they should open up dialogue with the Sheriff and present positive proposals for settling the debt. If no such proposals are forthcoming, then the Sheriff will visit the premises to seize whatever assets he can.

The Revenue sheriffs are “private sector” self employed individuals. As a result, they can be very pragmatic: It does not pay them to become involved in complex seizures of assets.  The sheriffs have been given authority by the Revenue to negotiate instalment plans of up to 2 years.

The directors should also consider the possibility of examinership.

We set below Section 607 of the Companies Act 2014 which sets out some of the duties of a sheriff when he has seized goods from a company.

 

(1) Subject to subsections (2) to (4), where a creditor has—
(a) issued execution against the goods or lands of a company, or
(b) attached any debt due to the company,
and the company is subsequently wound up, the creditor shall not be entitled to retain the benefit of the execution or attachment against the liquidator in the winding up of the company unless the creditor has completed the execution or attachment before the commencement of the winding up.
(2) In a case where a creditor has had notice of a meeting having been called at which a resolution for voluntary winding up of the company concerned is to be proposed, then, for the purposes of subsection (1), the date on which the creditor so had notice shall be substituted for the date of the commencement of the winding up.
(3) A person who purchases in good faith, under a sale by a sheriff, any goods of a company on which an execution has been levied shall, in all cases, acquire a good title to them against the liquidator.
(4) Notwithstanding subsection (1), the rights conferred by that subsection on the liquidator may be set aside by the court in favour of the creditor to such extent and subject to such terms as the court thinks fit.
(5) For the purposes of this section—
(a) an execution against goods shall be deemed to be completed by seizure and sale,
(b) an attachment of a debt shall be deemed to be completed by receipt of the debt,
(c) an execution against land shall be deemed to be completed by seizure, and
(d) an execution in the case of an equitable interest shall be deemed to be completed by the appointment of a receiver.
(6) Nothing in this section shall give any validity to any payment constituting an unfair preference.
(7) In this section—
“goods” includes all chattels personal;
“sheriff” includes any officer charged with the execution of a writ or other process.

If the debtor considers that his business is viable, but is just suffering from short term cash flow difficulties, then the debtor should open up dialogue with the Sheriff and present positive proposals for settling the debt. If no such possible proposals are forthcoming, then the Sheriff will visit the premises to seize whatever assets he can. As with any dispute, it is better to keep open the lines of communication. At a minimum, the debtor should negotiate a schedule of deferred payments.

For further information please contact Jim Stafford or Tom Murray on 01 661 4066 or jim.stafford@frielstafford.ie or tom.murray@frielstafford.ie