If I sell my animals through the mart and the mart gets into financial difficulty, what position am I in? What if the farmer receives part or no payment following the liquidation? Where does the farmer go?
Following the recent liquidation of Castleblayney Mart in Co Monaghan it has emerged that approximately 80 farmers are owed money in relation to sales – thus many may wonder about the position of such a farmer following a mart going into liquidation.
Liquidation is a process under company law that results in a company ceasing to exist and being removed from the companies register. While marts are generally co-ops rather than companies, the legislation governing co-ops (The Industrial and Provident Society Act 1893-2014) does not have much provision regarding how a liquidation would be treated, thus arguably the provisions provided for under company law would apply.
When a mart goes into liquidation, a liquidator will take control of the business, sell the assets and pay the creditors from the proceeds of any assets in the company.
Those that are owed money by the company are called creditors. There are two types of creditor – secured and unsecured.
The mart considers the farmer an unsecured creditor.
Company law provides that there are three types of liquidation:
Compulsory/ official liquidation, which occurs where creditors or members of the company petition the High Court to wind up the company.Members’ voluntary liquidation, which applies when company has sufficient assets to pay all its creditors (solvent company).Creditors’ voluntary liquidations, which relates to a company that does not have sufficient assets to repay all debts. Where there are insufficient funds to pay all the creditors, the funds available are distributed in a particular order as set out in company law.
Company law sets out who gets paid first, with the liquidator themselves and secured creditors being paid first, followed by preferential creditors (employees), unsecured creditors (the farmer) and lastly any shareholders.
A secured creditor is usually a bank or credit union that has lent money to the business to purchase assets such as the business premises, vehicles, machinery and equipment . When a business becomes insolvent, the asset is sold to repay the money owed to the bank or credit union.
Preferential creditors will receive any payment due.
Unsecured creditors rank after secured and preferential creditors in an insolvency situation. They are one of the last groups to be paid, being placed above the shareholders of the company. It is often the case that this group receives little money from the distribution of assets once all other creditor groups have been paid.
Unsecured creditors can include suppliers, customers, contractors and in the case of a mart, the farmer.
Unsecured creditors often feel they have little involvement or influence during a liquidation, when compared with secured and preferential creditors.
Claims
The liquidator will often write to all known creditors asking them to submit claims. The farmer should submit their claim to the liquidator and send any supporting evidence of the claim.
All unsecured creditors are treated equally.
If there is not enough money left to pay all unsecured creditors in full, the funds that are left will be distributed to farmers in proportion to what they are owed.
For example, if there is €100,000 owed to unsecured creditors (farmers) but there is only €75,000 of funds left over, each farmer will get three-quarters of what they are owed.
Upon appointment of a liquidator, it will often take some time before unsecured creditors will receive payment, if at all.
Thus, all a farmer can do is wait until the liquidation is complete to see how much they recover of what they are owed.
Some marts may have professional indemnity insurance that would compensate the farmer. However, this depends on each individual mart’s insurance cover.
The Property Services (Regulation) Act 2011 applies to all property services providers, including cooperative marts. The Property Services Regulatory Authority (PSRA) is the regulatory authority that governs marts and grants the mart its licence.
The PSRA does have a compensation fund available but the purpose of the compensation fund is to provide compensation to clients of auctioneers who have suffered a loss as a result of the dishonesty of the auctioneer and the auctioneer needs to have a licence. The authority is not entitled to make a grant out of the compensation fund on the basis that a client suffered loss as a result of the negligence of an auctioneer.
A claim for negligence or incompetence against an auctioneer may be made against the auctioneer’s professional indemnity insurance policy.
Read more
Legal query: promise of property under a will
If I sell my animals through the mart and the mart gets into financial difficulty, what position am I in? What if the farmer receives part or no payment following the liquidation? Where does the farmer go?
Following the recent liquidation of Castleblayney Mart in Co Monaghan it has emerged that approximately 80 farmers are owed money in relation to sales – thus many may wonder about the position of such a farmer following a mart going into liquidation.
Liquidation is a process under company law that results in a company ceasing to exist and being removed from the companies register. While marts are generally co-ops rather than companies, the legislation governing co-ops (The Industrial and Provident Society Act 1893-2014) does not have much provision regarding how a liquidation would be treated, thus arguably the provisions provided for under company law would apply.
When a mart goes into liquidation, a liquidator will take control of the business, sell the assets and pay the creditors from the proceeds of any assets in the company.
Those that are owed money by the company are called creditors. There are two types of creditor – secured and unsecured.
The mart considers the farmer an unsecured creditor.
Company law provides that there are three types of liquidation:
Compulsory/ official liquidation, which occurs where creditors or members of the company petition the High Court to wind up the company.Members’ voluntary liquidation, which applies when company has sufficient assets to pay all its creditors (solvent company).Creditors’ voluntary liquidations, which relates to a company that does not have sufficient assets to repay all debts. Where there are insufficient funds to pay all the creditors, the funds available are distributed in a particular order as set out in company law.
Company law sets out who gets paid first, with the liquidator themselves and secured creditors being paid first, followed by preferential creditors (employees), unsecured creditors (the farmer) and lastly any shareholders.
A secured creditor is usually a bank or credit union that has lent money to the business to purchase assets such as the business premises, vehicles, machinery and equipment . When a business becomes insolvent, the asset is sold to repay the money owed to the bank or credit union.
Preferential creditors will receive any payment due.
Unsecured creditors rank after secured and preferential creditors in an insolvency situation. They are one of the last groups to be paid, being placed above the shareholders of the company. It is often the case that this group receives little money from the distribution of assets once all other creditor groups have been paid.
Unsecured creditors can include suppliers, customers, contractors and in the case of a mart, the farmer.
Unsecured creditors often feel they have little involvement or influence during a liquidation, when compared with secured and preferential creditors.
Claims
The liquidator will often write to all known creditors asking them to submit claims. The farmer should submit their claim to the liquidator and send any supporting evidence of the claim.
All unsecured creditors are treated equally.
If there is not enough money left to pay all unsecured creditors in full, the funds that are left will be distributed to farmers in proportion to what they are owed.
For example, if there is €100,000 owed to unsecured creditors (farmers) but there is only €75,000 of funds left over, each farmer will get three-quarters of what they are owed.
Upon appointment of a liquidator, it will often take some time before unsecured creditors will receive payment, if at all.
Thus, all a farmer can do is wait until the liquidation is complete to see how much they recover of what they are owed.
Some marts may have professional indemnity insurance that would compensate the farmer. However, this depends on each individual mart’s insurance cover.
The Property Services (Regulation) Act 2011 applies to all property services providers, including cooperative marts. The Property Services Regulatory Authority (PSRA) is the regulatory authority that governs marts and grants the mart its licence.
The PSRA does have a compensation fund available but the purpose of the compensation fund is to provide compensation to clients of auctioneers who have suffered a loss as a result of the dishonesty of the auctioneer and the auctioneer needs to have a licence. The authority is not entitled to make a grant out of the compensation fund on the basis that a client suffered loss as a result of the negligence of an auctioneer.
A claim for negligence or incompetence against an auctioneer may be made against the auctioneer’s professional indemnity insurance policy.
Read more
Legal query: promise of property under a will
This is a subscriber-only article
SHARING OPTIONS: