knowledge | 13 May 2021 |
Small Company Administrative Rescue Process – Welcome News for Small and Micro Businesses
Minister for Trade Promotion, Digital and Company Regulation, Robert Troy T.D. has published a general scheme for an Administrative Rescue Process for small and micro businesses.
The Minister has secured government approval for the priority drafting of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021. The Bill will amend the Companies Act 2014 to provide for a new dedicated rescue process for small and micro companies. It is intended to address the need for a simplified restructuring process for viable small companies that is timely and cost effective. The process will mirror key elements of existing examinership framework in an administrative context, without the need for Court approval.
The main provisions of the Small Company Administrative Rescue Process (“SCARP”) will be as follows:
- Designed for “small” and micro companies, as defined under Section 280A of 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’;
- Rescue plan passed by a simple majority (51%) 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 objects); and
- Gives safeguards against irresponsible and dishonest director behaviour.
On announcing the general scheme, Mr Troy commented:
The Bill will also give permanent statutory footing for the holding of virtual AGMs, currently possible pursuant to the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 for the interim period currently due to expire on 9 June 2021.
If you have queries on the potential impact of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021 on your business or more generally, please contact Michael Murphy, Áine Murphy or your usual contact within McCann FitzGerald for further information.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.