The High Court has appointed joint provisional liquidators to a firm that issues prepaid cards allowing customers to buy goods and services throughout the European Union.
The court heard PFS Card Services Ireland Ltd (PCSIL) employs 144 people, 112 of whom are based in counties Wicklow and Meath.
On Wednesday Mr Justice Mark Sanfey appointed 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 Australian financial technology group EML.
PCSIL, which is not currently insolvent, brought the winding-up petition before the court because 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 its debts to creditors.
The company currently holds €516 million of segregated funds for its customers with 2.4 million prepaid cards in issue.
Kelley Smith SC, with John Lavelle, the company, told the court that unusually in a winding-up application, the company is currently solvent.
However, counsel said, the firm is “significantly financially distressed” for reasons including that its operating revenues were falling and its costs were rising.
It lost €7.3 million in 2022, is expected to confirm some €15 million in losses for 2023 and is projected to lose an additional €3.7 million this financial year, counsel said.
There was also a 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 the company, which was acquired by EML in 2020, requires substantial future investment in technology and operational efficiency.
While significant capital investment was put into the company by its parent since 2020, the EML group was not prepared to invest further.
The court also heard the company has been authorised to operate as an electronic money institution by the Central Bank.
The court heard there was 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 regarding anti-money laundering controls and governance arrangements.
The bank also imposed certain regulatory directions including restrictions on its ability to accept payments from customers.
PCSIL put a plan in place to address the issues raised, counsel said, adding that it was hoped the plan would be completed before the end of last year.
However, the bank expressed its dissatisfaction with the firm’s plan and indicated 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 PCSIL’s operations, counsel said.
After detailed consideration, it was decided that the best option for all of the relevant stakeholders, including the employees and customers, was to put the company into liquidation via the courts.
Counsel said the company’s parent gave careful consideration as to what to do with the firm but, given that it is expected to continue to make losses it concluded it was just and equitable that the Irish entity be wound up.
It was anticipated there may be considerable unease among the firm’s customers once its liquidation becomes public knowledge.
The liquidators would be able to communicate professionally and effectively and ensure 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 her client had been notified about the application and was not objecting. Counsel added that this did not mean that anything would automatically follow regarding the Central Bank’s regulatory role over the firm.
Mr Justice Sanfey agreed it was best for all parties to appoint the provisional liquidators.
He adjourned the matter to a date next month.
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* This article was amended to note that the acronym for PFS Card Services Ireland Ltd is PCSIL
