SMALL and micro companies that are in trouble with their solvency are being offered a new way of trading their way out of difficulty.
he Government this afternoon announces a safety net for such firms, many of which have been devastated by the pandemic and are in the red.
Business owners face enormous pressure in terms of not only their immediate liquidity, but also their long-term viability. Now a scheme called SCARP will save many from the scrap heap.
The Small Company Administrative Rescue Process which mirrors key elements of examinership, but at sharply lower costs and bureaucracy.
Robert Troy, junior minster for Enterprise, says it will reduce court oversight “resulting in efficiencies and lower comparable costs.”
The process has limited court involvement where creditors are positively disposed to a rescue plan.
It stems from proposals put forward by the Company Law Review Group (CLRG) on foot of the Tánaiste Leo Varadkar’s request that it examine the issue of corporate rescue for small companies.
Minister Troy said: “SCARP provides an alternative to examinership, for the benefit of small and micro companies, which is more cost efficient and capable of conclusion within a shorter period of time.”
It is designed for small and micro companies, which represent 98pc of companies in Ireland. Protection will be begun by resolution of directors rather than by application to a court.
It will be concluded within a shorter period than examinership, and overseen and assisted by insolvency practitioners, known as PIPs. The rescue plan can be passed by a majority in value and number of creditors.
Nor does SCARP require application to a court for approval of rescue plan, once there are no creditor objections.
Creditors will be afforded an opportunity to provide input to the insolvency practitioner upon his or her appointment as process administrator, to whom they can disclose any facts they consider material to the process,
There are various enforcement provisions in relation to failure to comply with filing, notice and information obligations.
Minister Troy says he believes the new Bill will assist viable companies remain in business as the economy recovers, saying it has already received broad support in principle from stakeholders.
It is priority legislation for the summer session, and Minister Troy intends to introduce it to the Oireachtas “at the earliest opportunity.”