Small Company Administrative Rescue Process
Introduction
The Companies (Rescue Process for Small and Micro Companies) Act 2021 came into effect on 7 December 2021. The Act inserts a new Part 10A into the Companies Act 2014 to provide for a dedicated rescue process for small and micro companies, the Small Companies Administrative Rescue Process known as SCARP.
Also, below are three statutory instruments which relate to SCARP with links included:
si-no-674-of-2021.pdf (enterprise.gov.ie)
si-no-675-of-2021.pdf (enterprise.gov.ie) – this one is particularly helpful as it includes a template statement of affairs.
si-no-676-of-2021.pdf (enterprise.gov.ie)
The SCARP is designed to address the specific needs of small and micro companies in financial difficulties. It allows viable companies experiencing temporary financial problems to restructure with the agreement of creditors. It has limited court involvement where creditors are engaged in the process and are positively disposed to a Rescue Plan. The process mirrors elements of examinership but in a simplified administrative content, thus reducing court involvement, making it potentially both quicker and cheaper.
Order 74C of the Rules of the Superior Courts
With effect from 9 May 2022, a new order, Order 74C of the Rules of the Superior Courts (
Order 74C), that facilitates the operation of the SCARP process came into effect. These new rules govern proceedings in the High Court and prescribe how a Process Advisor can give notification of their appointment by filing documents with the Central Office.
Order 74C deals with the administrative aspects of certain procedures under Part 10A of the Companies Act 2014. It details the various applications that should be initiated by notice of motion, and the service requirements, including those:
- for directions as to the effect of the appointment of the Process Advisor on the appointment of a Receiver and on the appointment of a provisional Liquidator;
- to stay or restrain proceedings against the company;
- to repudiate or affirm a contract;
- for an order determining that the proceedings at a meeting were not valid;
- to enforce the obligation of a third party in respect of a liability of the third person;
- for an order relating to the delivery, return or payment for an asset of the company;
- to remit the matter to the Circuit Court.
It also prescribes applications that can be commenced ex parte by the Process Advisor, including for payment of their remuneration and costs.
Order 74C, Rule 11 sets out the procedure to be followed where there is a notice of objection. It lists several directions the Court can make for the determination of the objections in a manner which is just, expeditious and likely to minimise the costs of the application, including directions:
- as to the hearing together or in sequence of any applications or proceedings under Part 10A concerning the company;
- relating to the filing and delivery of any further affidavits by any parties to the objections or other proceedings under Part 10A;
- that the objections be determined on oral evidence where the Court believes they are likely to involve a substantial dispute or where necessary in the interests of justice.
Order 74C also deals with the provision of a certificate to Court where there has been a refusal to comply with the requirements of the Process Advisor. It provides for the review of costs of the Process Advisor and the resignation and appointment of a new Process Advisor.
SCARP v examinership
The main differences between SCARP and examinership are outlined below:
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SCARP
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Examinership
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Company size
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Small company as defined by the Companies (Accounting) Act 2017 section 280A or a micro company as defined by the Companies (Accounting) Act 2017 section 280D.
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Available to all companies.
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Entry
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Process Advisor appointed following passing of resolution by directors.
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Petition to court accompanied by Independent Accountants Report.
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Day to day control of the company
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Directors of the company.
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Directors of the company.
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Protection from creditors
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No – a court application would be required.
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Yes – immediate protection from creditors and enforcement.
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Timeframe
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Up to 49 days to present rescue plan to creditors for approval.
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Up to 99 days to present rescue plan to creditors for approval.
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Repudiation of onerous contracts
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Yes.
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Yes.
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Excludable creditors
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Yes.
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No.
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Approval of rescue plan
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A rescue plan is approved where it is accepted by 60% in number representing the majority in value of claims of at least one class of impaired creditors.
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A scheme of arrangement is approved where it is accepted by majority in number and in value of at least one class of impaired creditors.
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Failure of the process
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Liquidation not automatic if rescue plan is not approved.
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Automatic entry into liquidation is scheme of arrangement is not approved.
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SCARP process
The SCARP process is outlined below:
SCARP timeline
The SCARP timeline is outlined below:
Webinar
The Institute recently hosted a webinar on SCARP - what we know so far with guest speakers Des Gibney of McStay Luby and Hilary Larkin of Mazars. The webinar discussed the SCARP process, how to prepare for it, what to look out for and key matters to be aware of when considering it. It explored some practical issues including how SCARP is working in practice, dealing with creditors and what your balance sheet may look like before entering the process versus afterwards. A recording of the webinar is available here.
The Institute also hosted webinar in March 2022 with David Swinburne and Sinead Mc Namara of FitzGerald Legal & Advisory LLP on the new Companies (Rescue Process for Small and Micro Companies) Act 2021 (SCARP). The webinar discussed the new SCARP process, how to prepare for it and key matters to be aware of when considering it. You can access a recording of the webinar at the following link.
Technical Alert
The CCAB-I Insolvency Committee has recently published Technical Alert 02/2022 Small Companies Administrative Rescue Process and an additional guidance document Small Companies Administrative Rescue Process - practical guidance for company directors in a Q&A style.
This Technical Alert highlights the features of the Companies (Rescue Process for Small and Micro Companies) Act 2021.
This Technical Alert and guidance document are both available on our website.
Frequently Asked Questions
The Institute has prepared some practical questions and answers to assist members.
Certain material in the questions and answers was prepared for a joint webinar that was held with FitzGerald Legal & Advisory LLP in February 2022 and this material is reproduced with their kind permission.
Other resources
Over the past number of months, much has been issued in terms of commentary and advice on the introduction of the SCARP process from accountancy firms, law firms, Government and other bodies. We have assembled below some information that we have come across that may be of assistance to members.
From the accountancy firms
The articles below generally include an overview of the SCARP process, key features and stages, timelines and eligibility.
From the law firms
From Government and other bodies
These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.
Chartered Accountants Ireland can accept no responsibility for the content on any site that is linked to/from the Institute website. Links are provided in good faith for the potential support of members and students.
These pages are provided as resources and information only and nothing in these pages purports to provide professional or legal advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.
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