• Addresses the need for a simplified restructuring process for viable small companies that is timely and cost effective
• Mirrors key elements of existing examinership framework in an administrative context
• Process commenced without the need for Court approval
• Bill also gives permanent statutory footing for virtual AGMs
Minister for Trade Promotion, Digital and Company Regulation, Robert Troy T.D., today announced he has secured government approval for the priority drafting of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021. The Bill amends the Companies Act 2014 to provide for a new dedicated rescue process for small and micro companies.
While Ireland’s current rescue framework, examinership, is internationally recognised and successful in its own right, the associated costs mean it may be beyond the reach of small and micro enterprises. The Bill ensures these companies will have access to an alternative framework, which incorporates key elements of the existing examinership model in an administrative context.
Announcing the General Scheme, Minister Troy stated that:
We are all aware of the enormous pressure business owners currently face in terms of not only their immediate liquidity, but also the sustainability of their business into the future. This is particularly true of small and micro companies, with 78% operating in sectors which have been particularly challenged by the pandemic such as retail, hospitality and the service industry. Our response to the crisis has proven successful in mitigating the immediate impact of the pandemic on the sector. However, as the economy re-opens, we must have an appropriate regulatory response which supports fundamentally viable companies to continue to trade and get themselves back on their feet.
I know that examinership works and saves both companies and employment. However, as it is overseen by the Court from beginning to end, it can be an expensive undertaking – and thus out of reach for your average small company, whether that be a local restaurant or hairdresser.
The Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill provides an alternative to examinership, for the benefit of small and micro companies, which is more cost efficient and capable of conclusion within a shorter period of time.
The main provisions of the Bill can be broadly summarised as follows:
• Designed for “small” and micro companies (as defined by the Companies Act 2014) which represent 98% of companies in Ireland.
• Commenced by resolution of directors rather than by application to Court.
• Concluded within a shorter period than examinership.
• Overseen and assisted by insolvency practitioners – a ‘Process Advisor’.
• The rescue plan can be passed by a simple majority in value of creditors.
• Provides for format of cross class cram down of debts designed to reduce costs.
• Does not require application to Court for approval of rescue plan (provided no creditor objections).
• Gives safeguards against irresponsible and dishonest director behaviour.
The Small Company Administrative Rescue Process (SCARP) seeks to mirror key elements of examinership in an administrative context thereby reducing court oversight resulting in efficiencies and lower comparable costs. It has limited court involvement where creditors are engaged in the process and positively disposed to a rescue plan.
Minister Troy continued:
We set ourselves an ambitious task in developing SCARP over a compressed period of time. Throughout the process we have had strong engagement with the Company Law Review Group, Revenue Commissioners, Department of Social Protection and Department of Justice as well as other relevant stakeholders, and through the public consultation launched earlier this year.
“While court involvement is limited, I am conscious the issue of corporate rescue extends far beyond the distressed company itself and as such, the process incorporates robust safeguards and reflects what I believe to be a fair balance of the sometimes, competing interests of stakeholders. For example, state creditors will operate on an “opt-out basis” on prescribed grounds such as if the company has a poor history of tax compliance. This should provide comfort to business that the State will not remove itself from the process for arbitrary reasons.
Small and micro companies’ contribution to our economy cannot be understated. They represent the majority of companies in Ireland and employ in the region of 788,000 workers. The sector will be key to our country’s economic recovery. It is for this reason that I am so committed to providing a genuine alternative for these companies. As we reopen the economy, I want these businesses to know that Government values their contribution and is committed to supporting their long-term viability.
The Bill also makes miscellaneous amendments to the Companies Act 2014 and Industrial and Provident Societies Act 1893 to make permanent provision for virtual meetings. It further amends the Companies Act 2014 to progress recommendations made by the Company Law Review Group in relation to the provision of information to employees as creditors during a liquidation.