New Rescue Administrative Process for SMEs in Financial Difficulty

The government has issued details in relation to a new rescue process for small companies. This process known as the small company administrative rescue process (SCARP) involves some elements from the Court Examinership process but the main feature of it is to keep the process out of Court in as much as possible so as to avoid the high cost which has become associated with the examinership process.

This process may allow for the possibility of non-performing loans being reduced to a streamlined administrative process which may involve the restructuring of debts against the wishes of certain creditors.

The main features of this new process include the following:

  1. This process can be availed of by SMEs which have a turnover not exceeding turnover not exceeding €12million and a balance sheet not exceeding €6million and the number of employees not exceeding 50.
  2. The process would commence by way of a company resolution rather than a Court application.
  3. Similar to the examinership process an insolvency practitioner will be appointed to engage with creditors and to come up with a rescue plan for the company. During this period however, the company shall continue to be managed by its Directors.
  4. The company will have a period of 70 days to have a rescue plan approved. However, the creditors must vote on any rescue plan within 42 days. A cooling off period of 21 days will then follow this vote. During these 21 days a creditor may object to the rescue plan by bringing an application to Court. There is no automatic stay on the process by reason of this objection.
  5. Where one impaired class of creditors votes in favour of the rescue plan it can be approved.
  6. There is a process whereby preferential creditors such as the Revenue Commissioners and the Department of Social Protection can be excluded from the process.

We will provide a further update once the draft legislation has been furnished but first impressions would indicate that this is a welcome development to allow small companies which have a future but require a restructuring of their debts in order to survive may be able to avail of this process.

 

For further information please don’t hesitate to contact either Brendan Dillon or Conor White on 01-2960666.