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High court confirms test for determining whether transfer of debt is a ’true sale’ agreement

The Irish High Court has confirmed that the settled train of authority in English law on the test for determining whether a transaction amounts to a ’true sale’ represents good law and that it is appropriate for the Irish courts to follow such authority (The Governor and Company of the Bank of Ireland v Eteams (International) Limited (in voluntary liquidation) [2017] IEHC 393).

This train of English authority shows a reluctance to re-characterise a transaction that is described as a sale as something other than a sale, unless the transaction is clearly a sham.

The proper characterisation of the transfer of debt has long been an issue for practitioners to consider. An issue arises where the transfer is characterised as a charge rather than a ’true sale’. In such circumstances, the charge will be void if it has not been registered with the Companies Registration Office within the strict 21 day time limit set down in the Companies Act 2014.

The judgment of the Irish High Court provides certainty to practitioners providing ’true sale’ opinions that English authorities on this issue can be relied upon. Up until this point, it had been necessary to qualify such opinions given the lack of Irish jurisprudence in the area.