Small firms facing insolvency will be able to cut debt with support from a simple majority of creditors without the costs of a High Court examinership, under plans being drawn up by government.
The Department of Business, Enterprise and Innovation is today launching a public consultation on a proposed major reform of the examinership process for small businesses.
It is looking to create a stand-alone approach outside the current High Court process for restructuring the debts of small and micro enterprises. The new “summary rescue process” (SRP), would allow companies with fewer than 50 employees to cut through a lot of the red tape associated with examinership.
It would enable firms to start the restructuring process with a resolution of directors and write down debts with the approval of a simple majority of creditors. The aim is to reduce the length of time companies spend in examinership and cut the high costs they face when trying to get out of insolvency.
The Government sees the proposed changes as part of its medium-term response to the economic challenges of the Covid-19 pandemic, according to Robert Troy, Minister of State for Trade Promotion, Company Regulation and Digital. “The issue of company rescue has become ever more urgent as companies struggle with the continued impact of Covid-19,” he said. “The associated costs [of examinership] 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.”
The proposals are drawn from a Company Law Review Group (CLRG) report published in October 2020 which recommended a streamlined process of up to 70 days that could be initiated by company directors instead of by application to the courts. It also suggested small companies be allowed to “cram down” debts across all creditors and approve rescue plans without court orders.
Small and micro businesses make up 98pc of companies in Ireland and employ 788,000 people, according to department statistics.
Irish Independent, 08 February 2021