Lawyers at DLA Piper say that some elements of new regulations announced last month will have “a material impact” on how the examinership process operates in Ireland.
They say that the new rules import some significant changes to a process that, up until now, has been “very effective”.
On Friday (29 July), the Minister for Enterprise, Trade and Employment signed into law the European Union (Preventive Restructuring) Regulations 2022.
The regulations provide for the transposition of the mandatory articles of EU Directive 2019/1023, which includes measures aimed at increasing the efficiency of procedures concerning restructuring, insolvency, and discharge of debt.
2014 act amended
In a note on the firm’s website, the DLA Piper lawyers say that, while the directive could have been implemented by introducing a separate restructuring regime, the new rules modify the examinership process set out in the Companies Act 2014.
The amendments to the act apply with immediate effect to all examinerships where a petition had not been presented to the court before Friday, 29 July.
They see an amendment to voting rights as “possibly the most significant” amendment to the examinership process.
The lawyers say that it remains the case that approval from only a single class of creditor is required for a court to confirm a scheme proposed by an examiner.
They point out, however, that it will now be a requirement that any such class is also ‘in-the-money’, or in line to receive some payment.
“This is a material departure from how examinership previously operated,” the DLA Piper analysis says.
The firm adds that, up until now, many examinerships would have relied on a class of creditors – unsecured trade creditors, for example – who would be likely to receive nothing in a liquidation scenario, but who would receive some payment under an examiner’s scheme, to vote in favour of the scheme.
“Under the revised voting rules brought about by the regulations, the votes of an impaired class of creditors who are ‘out-of-the-money’ (that is, would not receive a dividend in a liquidation scenario) do not count.
“In practice, this may mean that some examinership schemes that would, in the past, have been sanctioned by the court will not pass the voting stage.”