An extremely cost-effective method for a company to continue as a going concern is to avail of a Scheme of Arrangement. This underutilised provision of the Companies Act 2014 (the “Act”) is the most efficient way to save a company on the brink of extinction, thus retaining employment and hopefully laying the path for a bright future. If your company meets the criteria, as an alternative to Examinership, this is an excellent option.

Part 9 of the Act; Sections 449 – 454: Schemes of Arrangement provisions provide that an arrangement may be entered into by a company about to be, or in the course of being, wound up. Such an arrangement is entered into between the company and its creditors and requires the consent of the members of the company, which must be given by special resolution (a majority of 75% of the members), and the consent of 75% in number and value of all creditors of the company.

A Scheme of Arrangement proposal must be prepared and sent to shareholders/creditors. If shareholders and creditors meetings vote in favour of the scheme to the requisite value, then it is necessary to bring an application to the High Court to have the scheme sanctioned and approved pursuant to Section 453 (2)(c) of the Act. Once sanctioned by the Court the scheme is binding upon creditors.

Unfortunately, sometimes a company is not suitable for an Examinership or a Scheme of Arrangement. In such circumstances it may be necessary to liquidate the company through a creditor’s voluntary liquidation (pursuant to section 585 of the Companies Act 2014) or a Court appointed liquidation (pursuant to Section 571 of the Act).

Although the company will cease to be a going concern, it is still absolutely imperative that accurate and trusted legal advice is obtained. Sound advice can make a significant difference in protecting various commercial interests.

Our team at Brady Kilroy have acted in multiple Liquidations in the High Court on behalf of companies, directors, creditors and the Revenue Commissioners. We also act in the prosecution and defence of restriction/disqualification of company directors. We are exceptionally experienced in the process and have strategic relationships with leading Insolvency Practitioners. A small sample of some recent cases we advised upon, include:

• PGP Entertainment Limited [High Court Record Number 2019 No. 158 COS]
• Business Mobile Security Services Limited [High Court Record Number 2019 No. 284 COS]
• Lndos Wedding Limited [High Court Record Number 2019 No. 339 COS]
• Tintri Ireland Limited [High Court Record Number 2019]
• Webprint Limited [High Court Record Number 2018 No. 406 COS]
• Hutton International [High Court Record Number 2017 294]
• Ailesbury Capital Limited (In Creditors Voluntary Liquidation)
• KLM Biotechnology Limited [2020/2COS]
• Emuse Corporation Limited (In Creditors Voluntary Liquidation)

SCARP – Ireland’s new restructuring process for SMEs

The Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021 amended the Companies Act 2014 to provide for a new dedicated rescue process for small and micro companies. Small businesses facing insolvency will be able to cut debt with support from a simple majority of creditors.

The Small Company Administrative Rescue Process (SCARP) involves the formulation of a rescue plan to be entered into between the company and its creditors. The rescue plan may involve the partial write off and / or restructuring of the company’s legacy debt.

In order to qualify for a SCARP, a company must be financially viable and have a reasonable prospect of survival.

In order to avail of the SCARP process, a company must have meet two out of the three criteria below:

• An annual turnover of up to €12m;
• A balance sheet total of up to €6m;
• Up to 50 employees.

The primary purpose of SCARP will be saving a company and the underlying jobs, the main aspects of the process are summarised below:

1. The process is commenced by way of a Director Resolution as opposed to a Court application
2. The process is overseen by an Insolvency Practitioner, known as a “Process Advisor”, in conjunction with specialist legal advisors, who prepare a rescue plan for presentation and approval by the creditors;
3. The rescue plan can be approved by a single class of creditor with approval secured with 60% in number representing the majority in value of the claims within that particular class of creditors.
4. It is possible to approve a Rescue Plan without the requirement of a court application, provided no impaired class of creditors object (within the 21-day cooling off period which follows the vote);
5. The process provides for a format of cross-class cram down of debts designed to reduce costs. The approval mechanism is drawn from examinership and means that where one class of impaired creditor votes in favour of the plan, this decision can then be imposed on all classes of creditors;
6. The Process Advisor has 42 days to formulate the Rescue Plan and call meetings of the creditors.
7. Following the holding of the meetings by the Process Advisors any dissenting creditor has a period of 21 days to lodge an objection with the Court and in the absence of any objection the Rescue Plan is deemed approved and becomes legally binding on the parties.