Companies (Rescue Process for Small and Micro Companies) Bill 2021 approved by Government

The main provisions of the Bill can be broadly summarised as follows:

• Available to small and micro companies (as defined by the Companies Act 2014).
• Commenced by resolution of directors rather than by application to Court.
• An insolvency practitioner (who must be qualified to act as liquidator under the Companies Act) is appointed by the company to begin engagement with creditors and prepare a rescue plan. The rescue plan must satisfy the ‘best interest of creditors’ test and provide each creditor with a better outcome than a liquidation. In addition to this, no creditor may be unfairly prejudiced by the plan. This is in keeping with established principles under examinership.
• Creditors are invited to vote on the rescue plan by day 49 of the insolvency practitioner’s appointment. The proceedings in relation to the required meetings of creditors are in keeping with existing provisions of the Companies Act.
• The rescue plan is approved without the requirement for court approval provided that 60% in number and value of an impaired class of creditors vote in favour of the proposal and no creditor raises an objection to the plan within the 21-day cooling off period which follows the vote. The approval mechanism is drawn from examinership and provides for a cross class cram down. This means that where one class of impaired creditor votes in favour of the plan, this decision can then be imposed on all classes of creditors.
• Where an objection to the rescue plan is raised, there is an automatic obligation on the company to seek the court’s approval. This acts as a safeguard for creditors.
• Repudiation of onerous contracts, including leases, is provided for subject to court oversight as appropriate.
• Concluded within a shorter period than examinership (examinerships can currently run for up to 150 days, SCARP seeks to arrive at a conclusion within a shortened timeframe, subject to extension where necessary for court applications),
• Has safeguards against irresponsible and dishonest director behaviour. The process will be within scope of existing reckless trading provisions. The Director of Corporate Enforcement has a suite of powers to examine books and investigate, as appropriate, in line with that which is provided for in relation to liquidations, receiverships and examinerships.
• Includes State creditors such as the Department of Social Protection and the Revenue Commissioners. They may opt out of the process on specified statutory grounds.