Small Company Rescue

2021 Act Provisions

The purpose of the Companies (Rescue Process for Small and Micro Companies) Act is to provide an alternative to examinership, for the benefit of small and micro companies, which is more accessible and cost efficient than the existing examinership process and capable of conclusion within a shorter period of time and to assist viable small and micro companies to remain in business while trading through periods of temporary difficulty.

Eligibility Requirements

The requirements an eligible company must meet to avail a rescue plan are defined in this section. The principal conditions are:

• the company is, or is likely to be, unable to pay its debts,
• no resolution subsists for the winding up of the company,
• no order has been made for the winding up of the company,
• the company directors have not passed a resolution for the appointment of a process adviser in respect of the company during the 5-year period ending with the date on which it is proposed that such a resolution be passed by the company or no examiner has been appointed, and
• no petition for examinership is currently before a court or no examiner has been appointed to the company concerned.

In advance of passing a resolution to enter the process, the company directors must prepare a statement of affairs, in the prescribed form, detailing the financial and trading position of the company. Where any untrue statement has been included in the statement of affairs any director of the company who is in default shall be guilty of a category 2 offence.

Reasonable Prospect of Survival

The process adviser to decide whether the company has a reasonable prospect of survival and is therefore eligible to avail of a rescue plan. The factors the process adviser may consider in making his or her determination have been drawn from case law in examinership and are non-exhaustive.

• the nature of, and prospects for, the business of the eligible company,
• the availability of funding for, and investment in, the eligible company in the future, including expressions of interest by external funders,
• the cost structure of the eligible company, including any cost reductions already achieved or that may be achieved,
• whether projections and business plans for the eligible company are based on objective and independent evidence,
• whether the eligible company can generate a sufficient return to remunerate investment and repay funding,
• the wider economic situation,
• the circumstances of the market in which the eligible company is operating, including the likely future prospects of the market,
• the expertise, brand and historic success of the eligible company,
• where the eligible company is part of a group of companies, the place of the company in the structure of the group and its prospects in that context,
• whether a secured creditor has expressed an interest in (or attempted to initiate) a trading receivership,
• such other matters as the process adviser considers relevant in the circumstances.

Having come to a determination on the matter, the process adviser is required to meet with the directors and detail the reasons for reaching their conclusion. This determination must also be provided in writing.

Process Adviser’s Report

Where the process adviser determines that there is a reasonable prospect of survival for the company, they must prepare a detailed report in accordance with the criteria laid down for the purpose of accurately assessing the position of the company, recommending an appropriate court in the event of any proceedings under the Act and making recommendations for next steps. This may include draft proposals for a rescue plan.

The criteria laid out in the report are drawn from the Principal Act which provides for the independent expert’s report in examinership. This report and its recommendations are to be presented to the directors of the company.

Appointment and Review

The company directors may hold a meeting within 7 days of having received the process adviser’s report to vote on a resolution on whether to appoint a process adviser and commence the rescue process.

The process adviser, having been appointed by resolution of an eligible company, shall keep the original determination as to the viability of the company under constant review. Where the process adviser determines that there is no longer a reasonable prospect of survival, they are required to inform the company directors and resign.

Where the process adviser determines that there is no longer a reasonable prospect of the survival of the eligible company and informs the company directors, the company directors are required to take such steps as they consider appropriate to protect the interests of the employees of the company.

Process

The process adviser is to determine which court, the Circuit or High Court, is most appropriate for the purpose of any court applications required during the process. This determination is made in conjunction with the company directors and bearing in mind the associated costs to the company and the requirement to expedite the process.

The process adviser is to secure email addresses for specified relevant parties, primarily the creditors of the company. The process adviser, within 2 working days of their appointment, must formally notify the Registrar of Companies and the relevant court of his or her appointment and to arrange for publication of a notice of the appointment in Iris Oifigiúil and within 48 hours on any company website.

The process adviser shall as soon as practicable, but no later than 5 days after the passing of the resolution, give to the persons prescribed by the Act, principally creditors of the company, a notice of the resolution of the appointment of the process adviser, a copy of the process adviser’s report, a statement on the relevant court for any proceedings which may be brought and a request to each creditor for all relevant information concerning outstanding debts, securities held and obligations.

Powers of Process Adviser

The powers of the process adviser are set out and are based on the Principal Act. The provision of the Companies Act which applies to the rights and powers of a statutory auditor and the supplying of information to and co-operation with such auditor  apply to a process adviser.

The process adviser has the power to convene, set the agenda for and preside at meetings of the board of directors and general meetings of the company and may also propose motions or resolutions and give reports to such meetings. They are entitled to receive notice of and be heard at all meetings of the board of directors and general meetings of the company.

The process adviser may take whatever steps are necessary to halt, prevent or rectify the effects of any act, omission, course of conduct, decision or contract in relation to the income, assets or liabilities of the company which is or is likely to be to the detriment of the company, or any interested party. This  is subject to the right of parties acquiring an interest in good faith and for value in such income, assets or liabilities of the company.

Resignation

Provision is made for the resignation, removal, replacement, title and validation of actions of process advisers. It is based on the equivalent provisions of the Principal Act with some alteration to reflect the fact that the process adviser is appointed by way of passing of a resolution by the company directors rather than the court.

There are conditions that apply when a process adviser resigns from the position. It specifies the content of a statement which must be served on the company. This provision mirrors the Principal Act as it relates to the resignation of statutory auditors.

Where there are circumstances connected with the resignation that the process adviser concerned considers would warrant further inquiries with a view to proceedings under the Principal Act, they are required to report the matter to the Director of Public Prosecutions and the Director of Corporate Enforcement.

Process Adviser: Remuneration, Costs and Expenses

The court may authorise the remuneration, costs, and expenses of the process adviser. Any creditor or member to apply to the court to review the remuneration, costs and expenses of the process adviser.

Notice of the objection to the remuneration etc. must be sent in the prescribed form to the process adviser and the relevant court. If no notice is received within 21 days following the approval of the remuneration the amount shall be deemed to be fixed.

Any liabilities incurred by the company from the appointment of the process adviser are treated as expenses of the process adviser. The company may continue to trade during the process and encourages creditors, such as suppliers, to continue to engage with the company.

Liabilities incurred by the company as a result of the work of the process adviser and the remuneration, costs and expenses of the process adviser will take priority over all other outstanding claims.