Proposed Light Version of Examinership in Ireland
In Ireland
the Examinership process is a means by which companies can avail of the
protection of the High Court for a period in order to explore options to
reorganize and restructure in the hope of securing the future viability of the
company. As High Court Justice Clarke noted in the Traffic Group Ltd Case
(2008) "It is clear that the principal focus of the legislation is to
enable in an appropriate case, an enterprise to continue in existence for the
benefit of the economy as a whole and, of equal, or indeed greater, importance
to enable as many as possible of the jobs which may be at stake in such
enterprise to be maintained for the benefit of the community in which the
relevant employment is located. It is important both for the court and, indeed,
for examiners, to keep in mind that such is the focus of the legislation".
It is a process unique to Ireland and it
allows firms to avail of the stewardship of an independent examiner (usually an
accountant) to negotiate and reorganize itself so that it can continue to
operate into the future.
At
the moment the process is extremely expensive both in terms of the legal costs
because of the fact the High Court is the court involved and also because of
the costs of the examiner who because he is appointed by the High Court is also
under a duty of care and responsibility that can only lead to high costs. Also
the highly complicated and detailed work involved makes it costly.
However
there are proposals that the proposed new Companies Act will provide provisions
for the process to be availed of by smaller companies. The usual criteria of
meeting two of the following will likely apply
(1) Turnover is less than
8.8million per annum
(2)
A balance sheet value of less than 4.4 Million
(3)
Fewer than 50 Employees
This
new process will allow applications for examinership of a certain size to go to
the Circuit court. Hopefully this will help to reduce the costs involved and to
allow more companies to avail of it.
A
lot of companies that fail do so because they can not meet their debts as they
fall due at a particular point in time. However this liquidity failure does not
mean the business couldn’t be made viable by reducing its cost base and
intelligent restructuring of its systems and processes.
Hopefully
the Minister can recognize this and implement a scheme that will allow for the
successful protection of firms and the employment they provide.
By
Frank McGivney BA ACMA CGMA 30 July 2013
