A public consultation seeking views on how small and micro companies could be rescued is launching today (8 February 2021).
Robert Troy (Minister for Trade Promotion, Digital and Company Regulation) announced the proposed ‘Summary Rescue Process’ restructuring framework.
The simplified process for the rescue of small and micro companies provides for a stand-alone process, mirroring key elements of examinership.
Submissions are sought to inform the development of amendments to the Companies Act 2014, to support companies.
Small companies rescue plan
This follows extensive engagement with the Company Law Review Group (CLRG), a statutory advisory body charged with advising the minister on company law, which last October published advice on legal structures for the rescue of small businesses.
The consultation announced today aims to make provision for a stand-alone process outside existing frameworks for the rescue of small companies, and is part of the Government’s stabilisation response to the economic challenges of the pandemic.
Tánaiste Leo Varadkar had asked the CLRG to examine the issue of rescue for small companies, and make recommendations as to how such a process might be designed.
‘Summary Rescue Process’
The CLRG submitted its report in October 2020 and has recommended a ‘Summary Rescue Process’, which should be a stand-alone process separate from the examinership process, but which would mirror key elements of examinership legislation.
Such a process would:
- Be designed for ‘small’ and micro companies (as defined by the Companies Act 2014), which represent 98% of companies in Ireland,
- Be commenced by resolution of directors rather than by application to a court,
- Be concluded within a shorter period than examinership,
- Be overseen and assisted by insolvency practitioners,
- Provide that the rescue plan be passed by a simple majority in value of creditors,
- Provide for a format of “cross-class cram-down” of debts designed to reduce costs,
- Not require application to a court for approval of a rescue plan (provided there are no creditor objections), and
- Have safeguards against irresponsible and dishonest director behaviour.
‘Cross-class cram-down’ procedure
The ‘cross-class cram-down’ procedure is a new one that allows a court to bind creditors to a restructuring plan if it’s considered fair, equitable, and in the interests of creditors.
It is envisaged that this process will reduce the associated costs and regulatory burden for ease of access for small companies, while also maintaining appropriate safeguards for creditors.
Urgent measure
Minister Robert Troy said this morning: “This consultation is an important phase in the development of the Summary Rescue Process.
“The issue of company rescue has become ever more urgent as companies struggle with the continued impact of COVID-19.
“While we know that examinership is internationally recognised and works well in its current form, the associated costs are beyond the reach of our small and micro enterprises, and act as a barrier to access. This must be addressed as smaller businesses continue to struggle with the impact of the pandemic on their liquidity.
Key priority
“Small and micro enterprises account for the majority of companies in Ireland and support somewhere in the region of 788,000 jobs.
“I know that small local businesses such as newsagents, hairdressers and cafés will play an integral role in our country’s economic recovery following this pandemic. Supporting their viability remains a key priority for Government.”
The Companies (Miscellaneous Provisions) (COVID-19) Act 2020 commenced on 21 August 2020 and dealt with emergency measures requiring immediate amendment.
Stabilisation measures
The CLRG further examined the issue of rescue for companies in the context of medium-term stabilisation measures.
The review group submitted its report to the Tánaiste in October 2020 and recommended the implementation of a stand-alone process, distinct from examinership, which would provide for the rescue of small and micro companies.