Rescue Plan

Rescue Plan

The process adviser must formulate a rescue plan for the company. It provides for the detail which must be included in the plan, including how it is to be implemented.

The process adviser is required to treat all classes of creditors and members fairly, i.e. the rescue plan may not be unfairly prejudicial to any one class of person impaired. This is consistent with well-established principles in examinership.

Where a receiver has been appointed for a period less than 3 days or a provisional liquidator stands appointed at the time of the resolution to appoint a process adviser, the process adviser may apply to the relevant court for a determination as to whether or not the receiver or provisional liquidator shall continue to stand appointed. The relevant court may make such orders as it sees fit.

Excludable Debt

Excludable debt pertains to unpaid taxes and liabilities with respect to the Revenue Commissioners and the Department of Social Protection and other liabilities arising from the Redundancy Payments and Protection of Employees Acts.

As soon as practicable after the appointment, the process adviser shall give a notice in writing to the creditor concerned requiring the creditor to inform the process adviser, within 14 days of the giving of the notice, if the creditor objects to the inclusion of the excludable debt in the rescue plan.

Creditors

Unlike examinership, the small company rescue process does not afford a company an automatic period of protection from creditors because it is initiated outside of the courts. A company may however apply to the relevant court for a stay on proceedings and thus avail of the court’s protection. The Act also

There are requirements for creditors to respond to and provide relevant information having received a notice of the process adviser’s appointment and a request for details of outstanding debts owed by the company. The Act details the steps which the process adviser must follow to send reminders to creditors who have failed to respond to earlier notices and to subsequently estimate outstanding debts where creditors have not supplied any information or responded to requests for same. The process adviser must keep records of all such matters.

Certain Contracts

Where the process adviser considers it necessary for the survival of the company as a going concern that the relevant contract be repudiated, they have two options:

• Subject to the approval of the relevant court the process adviser may repudiate the contract;
• The process adviser can engage with the contracting party and follow the process outlined below.

The process adviser will provide written notice to the contracting party of the intention to repudiate the contract, the reasons underpinning the decision, informing them of their rights to object and to be heard in court and offering them the opportunity to propose alternative terms. The contracting party has 10 days within which to respond, or such shorter period as may be agreed.

Where the process adviser intends to pursue repudiation of the contract, they shall provide written notice to the contracting party outlining for example the compensation proposed, that they may attend a meeting to consider the rescue plan and that in the event that the rescue plan is approved by a majority of creditors they have the right to object to the repudiation and compensation at that meeting.

Lease

Where the contract is a lease, there are grounds on which the process adviser shall assess loss or damage. The rescue plan or order of the court cannot contain proposals for a reduction in the amount of rent and/or the complete extinguishment of the right of the lessor to such payments.

In the event of failure to make payments as regards outstanding leases, lessors shall not exercise any right (except in specific circumstances) to the repossession of land, to the forfeiture of lease or to the recovery of the amount of outstanding rent or damages arising. These provisions do not apply where the lessor has agreed to the rescue plan.

Unable to Prepare Rescue Plan

In circumstances where the process adviser is unable to secure an agreement or formulate proposals for the rescue of the company, he or she is required to report this fact to the directors of the company. This report must include the reasons as to why a rescue plan could not be facilitated and a recommendation as to the next steps for the directors, up to and including the winding up of the company. This report must also be provided to creditors.

While the recommendation of the process adviser is not binding on the company, where the process adviser recommends that the company be wound up and the directors choose to continue to trade and there is a subsequent insolvent liquidation within 6 months of such recommendation, this fact may be taken into consideration by the courts when making a determination in respect of reckless trading under the Principal Act.

Consideration of a Rescue Plan

The process adviser is required to call a meeting as soon as practicable of all creditors and members, either separately or jointly, to present a rescue plan for the company. This meeting must take place no later than 49 days after the date on which the process adviser is appointed.

The process adviser is required to give notice to all relevant parties of the members and creditors meeting no less than 7 days in advance of the meeting. This notice is to be accompanied by documents such as

• a copy of the rescue plan,
• a detailed statement of the assets and liabilities of the company,
• the estimated amount the creditor or member would receive in the event the rescue plan is unsuccessful and the company is wound up,
• the costs associated with the appointment of the process adviser and the rescue process.

The notice must also detail for example, the procedures on how to object to, modify or agree with the rescue plan.

The process adviser is to make and retain records verifying that all of the requirements pertaining to this process have been met.

There are procedural requirements for a meeting There is a procedure for relevant parties to assign a proxy to act on their behalf in matters pertaining to the rescue process. There are requirements for the assignment of a proxy to be valid.

Where a creditor or member does not vote, their abstention shall not be counted as a vote against the rescue plan. Where a State authority is a creditor they shall be entitled to accept proposals even though the proposals may impair their claim.

Approval of Plan

There is provision for the consideration by members and creditors at its meeting of a proposal for a rescue plan. A modification may be put to the meeting but may only be accepted with the consent of the process adviser.

There may be a cross class cram down. This is drawn from comparable provisions in examinership but provides flexibility for small and micro companies.

A rescue plan shall be binding on all members and creditors where it is accepted by 60% in number of one class of impaired creditors representing a majority in value of the claims.  21 days must pass without any creditor triggering an objection to the plan in accordance with other provisions. Where such an objection is triggered, it will be for the court to confirm the plan.

Notification of the approval of the rescue plan must be provided within 48 hours of the approval of the plan to all relevant parties as prescribed – principally the creditors of the company. The details of the content and items are to be supplied as part of the notification requirement. A notice of the acceptance of the rescue plan must also be provided to the Registrar of Companies within 48 hours of the acceptance having been recorded.

Process Adviser’s Report

The process adviser must prepare a specified form of report after the conclusion of the meetings of the creditors and members. This report must be supplied within 49 days of the appointment of the process adviser.

The report must be supplied to the company directors, the employees, the Director of Corporate Enforcement, the relevant court and any interested party who has requested a copy by writing.

The court may approve the omission of commercially sensitive information from the report being supplied to interested parties.

Objections to Rescue Plan

A rescue plan becomes binding within 21 days of the filing of the approval of the rescue plan, unless an objection is lodged within that time period. A creditor or member may file an objection to a rescue plan and that the objection be notified to the process adviser, and the office of the relevant court.

Th grounds under which an objection may be made are set out and  include an objection made by contracting parties in respect of the repudiation of a contract.

The court’s may approve a rescue plan where an objection is triggered Certain parties may be heard by the court. The court may confirm, modify or refuse to confirm proposals for a rescue plan and that where the court upholds an objection under this section, it may make such orders as it sees fit.

Where the court dismisses an objection or approves modified terms of a rescue plan, it may make such orders for the implementation of its decision as it deems fit. Where an objection is dismissed, the rescue plan is deemed to come into immediate effect.

Where an objection is upheld and the rescue plan is modified the court may specify a commencement date for the modified plan, to be no later than 21 days after the rescue plan’s approval. The court may also order the winding up of the company. The process adviser is required to file all resultant orders of the court with the Companies Registration Office.

Liability of Third Parties for Company Debts

The following applies to any liability owed by a third party arising from a debt of a company engaged in the rescue process owed to another party. The liability of the third person is not affected by the rescue plan.

A creditor of the company with respect to which a third person has liability, may not legally enforce that liability without having first given notice of an offer to the third person to transfer any rights the creditor may have to vote in meetings concerning the rescue plan and process.

Where a third person has made a payment to the creditor (i.e. compensated the creditor), in fulfilment of a liability arising from the non-payment by the eligible company of their debts to the creditor – any amount that would have been payable by the eligible company to the creditor, but for the compensation paid by the third party to the creditor, is payable to the third party instead of the creditor.

Conclusion of Rescue Process

The process adviser’s appointment is terminated on conclusion of the process or such other events as provided for in the Act.

If the company or any interested party discovers that the rescue plan was procured by fraud, then, within 180 days after the confirmation of the rescue plan, it can apply to the court to have the confirmation revoked. If it is so revoked, a certified copy of the order must be sent to the Registrar of Companies and the Director of Corporate Enforcement. The court may also direct that it be forwarded to any other person.

The court may make an order to return assets which have been improperly transferred. If it can be shown to the satisfaction of the court that the effect of the disposal of any property of a company under court protection was to perpetrate a fraud on the company, its creditors or members, the court may order the return of that property or order the payment of a sum in respect of it to the process adviser.