Proposed Light Version of Examinership in Ireland

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