Law firm Beauchamps says that there has been a low uptake so far for a scheme designed to provide a more cost-effective restructuring process for smaller companies.

The Small Company Administrative Rescue Process (SCARP) is similar to examinership, but without the cost of associated court hearings.

The scheme was introduced in the Companies (Rescue Process for Small and Micro Companies) Act 2021, which was enacted in December 2021.

‘Attractive tool’

In a note on the firm’s website, partner Simon Murphy describes SCARP “a very attractive restructuring tool”, as it provides a formal process for the restructuring of companies, but usually requires no court involvement.

He says that fewer than 40 companies have used SCARP over the past 18 months, but points out that more than 70% of the firms that have engaged in the process have been successful in completing their restructure.

The Beauchamps partner says that the level of restructuring in Ireland remains “surprisingly low” compared with similar jurisdictions such as England and Wales.

Debt warehousing

He attributes this to the debt warehousing scheme introduced to help businesses who experienced cash-flow and trading difficulties during the COVID-19 pandemic.

“There remains approximately €2.2 billion of debt within the scheme, and companies have until 1 May 2024 to agree a phased payment arrangement with the Revenue Commissioners for the warehoused debt,” Murphy writes.

He urges business owners to be aware of and understand the options available to help struggling firms, as the Revenue scheme comes to a conclusion.