The High Court has appointed joint provisional liquidators to a financial firm that issues prepaid cards allowing customers to buy goods and services throughout the European Union.
On Wednesday, Mr Justice Mark Sanfey appointed experienced insolvency practitioners Kieran Wallace and Andrew O'Leary of Interpath Advisory Ireland as provisional liquidators to PFS Card Services Ireland Ltd, which is owned by the Australian financial technology group EML.
PFS Card Services Ireland, which is not currently insolvent, brought the winding up petition before the court on the grounds that its business model is no longer commercially viable or sustainable, is loss-making and is bound to fail in the coming months.
Mr Justice Sanfey noted that despite its current position, the company expects to be in a position to pay all of what it owes his creditors.
The company current holds €516 million of segregated funds for its customers with 2.4 million prepaid cards in issue.
Kelley Smith SC, with John Lavelle Bl, the company, told the court that, unusually in a winding up application, the company is currently solvent.
However, counsel said that the firm was "significantly financially distressed" for reasons including that its operating revenues were falling, and its costs were rising.
Losses
It lost €7.3 million in 2022, is expected to confirm some €15 million in losses for 2023, and in the current financial year is projected to lose an additional €3.7 million, counsel said.
There was also risk that key commercial counterparties, which account for a large part of its revenues, will cease trading with it in the coming year.
Counsel said that the company, which was acquired by EML in 2020, requires substantial future investment in areas including technology and operational efficiency.
While significant capital investment had been put into the company by its parent since 2020, the EML group was not prepared to invest further in the company.
The company employs 144 people, 112 of whom are based at the company's facilities at Bray, Co Wicklow and Trim in Co Meath. The rest of the employees are based at the firms branches in Spain and France.
The court also heard that company has been authorised to operate as an electronic money institution by the Central Bank of Ireland and that there had been extensive engagement between the company and the bank since 2020.
The bank opened an investigation into the firm's business after it raised concerns about its alleged failings in respect to anti-money laundering controls and governance arrangements.
The bank also imposed certain regulatory directions, including restrictions on its ability to accept payments from customers.
PFS Card Services Ireland put a plan in place to address the issues raised, counsel said, adding that it was hoped that the plan would be completed before the end of last year.
However, the bank expressed its dissatisfaction with the firm's plan, and had indicated that it was considering issuing a direction that would limit the firm's ability to grow.
Following those compliance issues, the company changed its board of directors, and its parent commenced a strategic review of PFS's operations, counsel said.
After detailed considerations, it was decided that the best option for all the relevant stakeholders, including the employees and customers, was to put the company into liquidation via the courts.
Counsel said that the company's parent had given careful consideration as to what to do with the firm, but given that it is expected to continue to make losses it had come to the conclusion that it was justice and equitable that the Irish entity be wound up.
Counsel said that the company believes that it is in the best interests of all parties that court appointed liquidators be put in place.
It was anticipated that there may be considerable unease among the firm's customers once its liquidation became public knowledge. The liquidators would be able to communicate professionally and effectively with the firm's customers.
Alternative providers
They could ensure that customers will continue to be able to avail of the firm's prepaid card services for an acceptable period until alternative providers can be obtained.
They will further be able to engage with the various regulatory bodies and the company's employees.
Caren Geoghegan SC for the Central Bank told the court that her client has been made aware of the application.
It was not objecting to the company's application, but counsel added that the decision did not mean that anything would automatically follow in relation to the Central Bank's regulatory role over the firm.
After considering the application, Mr Justice Sanfey agreed that, given the circumstances, the best option for all parties was to appoint the joint provisional liquidators to the company.
The judge directed that relevant parties be put on notice of the application, and adjourned the matter to a date next month.
This story was amended at 11am on January 18th, 2024.
