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Ticking timebomb

13 Mar 2024 / taxation Print

Ticking timebomb

‘Warehoused’ Revenue debt is a ticking timebomb for company directors, with over €2.1 billion due to fall for collection on 1 May. Mark Woodcock and Ciara Gilroy weigh up directors’ options

It appears that the anticipated rise in corporate insolvencies in the wake of the COVID-19 restrictions is now on our doorstep.

here is over €2.1 billion of warehoused Revenue debt due to fall for collection on 1 May 2024. This is an enormous figure, and one that will have huge implications for thousands of companies and the economy as a whole.

Now that there is clear visibility on the May deadline, directors of companies with warehoused debt should be considering their options as a matter of priority.

Directors should be mindful of their statutory duties, not just to their company and their shareholders, but to the creditors, and particularly the Revenue Commissioners, and they should seek advice on the options available to them, given the looming Revenue claims.

Duties on insolvency

Directors of a company who believe, or have reasonable cause to believe, that their company is, or is likely to be, unable to pay its debts as they fall due are obliged under the Companies Act 2014 (CA2014) to have regard to:

a) The interests of the creditors,

b) The need to take steps to avoid insolvency, and

c) The need to avoid deliberate or grossly negligent conduct that threatens the viability of the business of the company (see section 224A(1) of CA2014).

In practical terms, the implications of this provision is that, where directors know or ought to know that their company is insolvent, their responsibility in managing the company’s affairs shifts from running the company for the benefit of their shareholders to running the company in the best interests of their creditors.

This onerous responsibility is particularly acute where directors are aware of the level of warehoused debt, and have from now until 1 May to agree an affordable repayment arrangement with the Revenue Commissioners.

Potential consequences

Directors should be mindful that they can be penalised for any breach of their statutory duties to creditors.

They may be subject to restriction (see section 819 CA2014) or disqualification (section 842) orders and can, in certain cases, be made personally liable for some or all of the debts of their company.

Consequently, it is imperative that directors are aware of their duties and obligations under company law.

An information note has been issued by the Corporate Enforcement Authority, which advises company directors to seek advice from their professional advisor at the earliest available opportunity if they have concerns that the company is facing financial difficulties (see Information Note 2023/1).

Directors who have warehoused Revenue debt should consult their accountants or auditors now to properly assess what the company can afford as regards a payment arrangement with Revenue.

If it appears that an acceptable repayment arrangement cannot be reached with Revenue, the directors should meet with an experienced insolvency practitioner (solicitor and/or accountant) to discuss whether a restructure of company debt could be achieved and, ultimately, increase the company’s chances of survival.

Options for directors

In terms of taking steps to avoid a liquidation scenario, the earlier that a company can identify its financial difficulties and take the appropriate action, the higher the probability of success of a restructuring process.

There are a number of restructuring rescue processes available to Irish companies. The size of the company and the level of liabilities will determine which process is most appropriate. Informal restructuring can take place by negotiation and agreement between a company and its creditors to find a mutually agreeable solution.

However, it can often prove difficult to reach a consensus agreement with all creditors.

Alternatively, there are three formal statutory processes available to directors attempting to restructure debt: the examinership process, the Small Company Administrative Rescue Process (SCARP), and schemes of arrangement.


This process is available to an insolvent company that has its centre of main interests in Ireland and is deemed to have a reasonable prospect of survival.

The directors must obtain a report from an independent accountant confirming that, although insolvent, the company has a reasonable prospect of survival, provided certain conditions are met.

The directors make an application to court relying on this report and, if successful, the court will grant protection from creditors for 70 days (extendable to a maximum to 100 days) and appoint an examiner.

The examiner’s role is to advise the directors who retain executive control of the company, but also to identify an investor for the company. The funds raised by the examiner are used to formulate a scheme of arrangement with creditors.

The distinguishing feature of this scheme is that creditors are paid a dividend, which is less than their debt but more than they would receive in a liquidation.

In this way, the creditors are not considered “unfairly prejudiced” by the scheme (see section 541(4)(b)(iii) CA2014). This is a key provision, since, if the examiner cannot put a scheme in place, the company will go into liquidation.

The examiner convenes meetings of different classes of creditors and, if the support of one class of impaired creditors is obtained, the examiner may apply to court for approval of the scheme.

All dissenting creditors are on notice of the application, but if the court is satisfied that the requisite support for the scheme has been obtained and none of the dissenting creditors have been “unfairly prejudiced” – that is to say, that they will achieve a higher return on their debt through the scheme than they would in a liquidation – the scheme can be imposed on all of the creditors of the company, whether they voted in favour of it or not.

The process must be completed within 70-100 days. The primary benefit of the examinership process is that the company has court protection from creditors for this period. If a scheme of arrangement is confirmed by the court, the company will exit the process debt free, with every prospect of survival as a going concern.

This is a difficult pill to swallow for creditors, but the greater economy benefits from ongoing employment and trade.


The Small Company Administrative Rescue Process was introduced by the Government in November 2021 to assist with the restructuring of small companies in the wake of the COVID-19 restrictions.

Small or medium-sized companies eligible to avail of SCARP must have a turnover of less than €12 million, a balance-sheet total of no more than €6 million, and have less than 50 employees.

It effectively applies to about 98% of companies in Ireland and was specifically designed to assist companies to restructure debt in a way that is less formal and less expensive than examinership.

The distinguishing feature of SCARP is that it is an out-of-court process that significantly reduces the time and costs associated with corporate restructuring.

An insolvency practitioner is appointed a ‘process advisor’ by way of a resolution.

Where SCARP is an administrative out-of-court process, there is no immediate protection from creditors and from enforcement of debts, as there is in examinership. However, protection can be sought from the court, if required.

The process advisor drafts a scheme of arrangement that involves a dividend to creditors, which is less than their debt but more than they would receive in a liquidation.

The scheme is put to the creditors for support and must be accepted by a 60% in numbers of an impaired class of creditors of the company. This 60% represents a majority of value of the claims of the creditors within that class, and it can be difficult to achieve without a high level of consensus.

The timeframe within which the SCARP procedure must complete is 49 days, with a further 21-day ‘cooling-down’ period. If no objections are raised by day 70, the rescue plan is put into effect.

SCARP is particularly appropriate for the vast majority of companies facing the Revenue debt-warehousing deadline of 1 May 2024. However, it is worth noting that the Revenue Commissioners have a statutory right to opt out of a scheme if the eligible company has failed at any time to comply with a requirement relating to tax imposed.

Schemes of arrangement

A scheme of arrangement is a statutory procedure whereby a company may negotiate either:

  • The rearrangement of its capital structure with its members, or
  • The rearrangement (including a compromise) of its obligations and liabilities to its creditors (part 9, CA2014).

This process is not a court-led process either, and so there is no statutory deadline. Furthermore, there is no requirement that the company is insolvent, and so the process can be utilised at an earlier stage.

Directors can engage insolvency practitioners (solicitors and/or accountants) to prepare a scheme of arrangement that, again, is a proposal to creditors for the payment of a dividend that is less than their debt, but more than they would receive in a liquidation.

If the scheme is approved by a ‘special majority’ (meaning a majority in number representing at least 75% in value of the creditors or class of creditors or members or class of member), an application can be made for court approval that will make it binding on all of the company’s creditors/members.

The High Court will only approve the scheme if the scheme’s proposals are fair, reasonable, and represent a genuine attempt to reach agreement between a company and its creditors or members.

Significantly, all three formal restructuring processes allow for ‘cross-class cramdown’ of debts. This means that where the requisite support for a scheme is obtained, it may be confirmed and become binding, despite there being one or more classes of dissenting creditors or other adversely affected parties who did not vote in favour.

Classification of debt

In terms of the classification of debt, creditors are usually classed in order of priority, such as preferential, secured, unsecured, and contingent debt.

For example, and key to the timing of this article, the majority of Revenue debt is usually classified as preferential, which means that they must be paid in priority to most other creditors.

However, due to the passage of time, a large volume of the warehoused debt may now have become unsecured and does not attract priority status.

Accordingly, the Revenue Commissioners will rank with the other unsecured creditors in respect of that debt.

If directors facing significant Revenue debt seek the necessary advice in time, one of the available restructuring processes could be applicable and used to reorganise and, ultimately, save their business.

Directors have two options: they can seek professional advice and take control of the process, or they can run the risk of being pushed into an insolvency process by their creditors.

Early engagement with the Revenue Commissioners is key to the survival of hundreds of companies over the coming months. Start the process now with your clients and experienced insolvency practitioners.

Mark Woodcock heads up Fieldfisher Ireland LLP’s insolvency and restructuring unit. Ciara Gilroy is an associate in the same unit.



On 5 February, the Minister for Finance announced that the interest rate applicable to warehoused debt will be reduced to 0%.

Revenue has confirmed that it will operate the reduced interest rate on an administrative basis pending the legislative change. Revenue will also issue refunds of any interest at 3% already paid by businesses on warehoused debt.

Businesses availing of the warehousing scheme have until 1 May to either:

  • Pay their warehoused debt in full, if they can, or
  • Engage with Revenue on addressing the debt, including arranments for a phased payment arrangement.

Businesses will be provided with every possible flexibility in managing the payment of their warehoused debt. This includes:

  • The level of down-payment, if any, to commence the payment arrangement,
  • An extended payment duration, and
  • The availability of payment breaks and payment deferral if temporary cash-flow difficulties arise during the arrangement term.

It is essential that you keep up to date with current returns and payments and engage with Revenue about dealing with your warehoused debt.

To remain in the debt warehouse, you must:

  • Continue to file your current tax returns, and
  • Pay the current liabilities as they fall due.

By remaining in the warehouse, you will benefit from the 0% interest rate and flexible payment options available in respect of your warehoused debt. If you do not continue to meet these conditions, you will be removed from the debt warehouse.

Where you are removed from the warehouse, periods that had been warehoused:

  • Will become payable immediately,
  • May be subjected to debt-collection enforcement action, and
  • Will be subject to interest charges of 8% or 10% per annum.




  • Corporate Enforcement Authority’s Information Note 2023/1European
    Union (Preventive Restructuring) Regulations 2022: Early warning tools and restructuring frameworks
Mark Woodcock and Ciara Gilroy
Mark Woodcock heads up Fieldfisher Ireland LLP’s insolvency and restructuring unit. Ciara Gilroy is an associate in the same unit.