Proposed law would allow for rescue of small companies without going to court
The vast majority of companies in Ireland are set to benefit from a proposed new stand-alone process which will allow for them to be rescued without going to court as part of the examinership process.
The proposed “summary rescue process”, now out for consultation, was designed by the Company Law Reform Group (CLRG) as a stand-alone process, separate from the examinership process but mirroring key elements of it.
Small and micro companies, as defined by the Companies Act 2014, represent 98 per cent of companies in Ireland.
The proposed process would be commenced by resolution of directors rather than by application to court and would be concluded within a shorter period than examinership.
The process would be overseen and assisted by insolvency practitioners and the rescue plan would be passed by a simple majority in value of creditors with no requirement for an application to court for approval.
The government envisages that this process will reduce the associated costs and regulatory burden for ease of access for small companies while also maintaining appropriate safeguards for creditors.
The plan forms part of the government’s medium-term stabilisation response to the economic challenges of the pandemic and keeps with commitments in the Programme for Government.
Robert Troy, minister of state for trade promotion, said: “This consultation is an important phase in the development of the Summary Rescue Process. The issue of company rescue has become ever more urgent as companies struggle with the continued impact of Covid-19.
“Following receipt of the Company Law Review Group’s Report, and as minister with responsibility for matters of company law, I instructed officials from my department to immediately consider the recommendations contained in the report and begin the necessary work to develop the proposals.”
He added: “While we know that examinership is internationally recognised and works well in its current form, the associated costs are beyond the reach of our small and micro enterprises and act as a barrier to access. This must be addressed as smaller businesses continue to struggle with the impact of the pandemic on their liquidity.
“Small and micro enterprises account for the majority of companies in Ireland and support somewhere in the region of 788,000 jobs. I know that small local businesses like newsagents, hairdressers and cafés will play an integral role in our country’s economic recovery following this pandemic. Supporting their viability remains a key priority for Government.”