Dail 'will rush to fix defect in insolvency legislation'
A DEFECT in the personal insolvency legislation that gives banks extra powers to vote down debt deals will be fixed, officials have pledged.
The Department of Justice insisted the change to the personal insolvency legislation will be given priority when the Dail returns in the autumn.
But it emerged at the weekend that the Government has known about a flaw in the insolvency law since last April.
A briefing note provided to new Justice Minister Frances Fitzgerald has informed her of an urgent need to amend the Personal Insolvency Act 2012. Sloppy wording in the act means banks could end up with greater powers to veto debt-settlement deals.
Failing to change the legislation could lead to uncertainty and court challenges.
The memo, uncovered by 'The Sunday Times', also states there has been a "slow uptake of insolvency arrangements under the act". However, the memo says that the Department of the Taoiseach was concerned that it would look bad to have to amend legislation so quickly.
A spokeswoman for the Department of Justice said: "Regarding your query on the insolvency legislation, the required amendments were agreed by Government without opposition from any department.
"The technical bill needed to correct the potential ambiguity identified, on a prudential basis, has since been finalised. There has been a heavy legislative programme this Dail term, and the enactment of this bill will be a priority on the return of the Dail."
The insolvency legislation has been dogged by controversy since the new Insolvency Service of Ireland came into operation in March last year.
Issues around the cost of putting a formal insolvency deal together – and the veto on deals that banks have – are acknowledged in the memo prepared for Ms Fitzgerald.
Former Minister for Justice Alan Shatter, who introduced the legislation, had denied there was a bank veto on deals.