8th February 2021
- New simplified process for the rescue of small and micro companies proposed
- Proposal provides for a stand-alone process, mirroring key elements of examinership
- Submissions sought to inform the development of the General Scheme
Minister for Trade Promotion, Digital and Company Regulation, Robert Troy TD today (Monday, 8 February 2021) launched a public consultation seeking views on the proposed ‘Summary Rescue Process’, a restructuring framework suitable for the rescue of small and micro companies, to inform the development of the General Scheme of the Bill.
As part of the Government’s medium-term stabilisation response to the economic challenges of the pandemic, and in keeping with commitments in the Programme for Government, it is proposed provision is made for a stand-alone process outside existing frameworks for the rescue of small companies. In this regard, the Tánaiste wrote to the Company Law Review Group (CLRG) requesting it to examine the issue of rescue for small companies and make recommendations as to how such a process might be designed.
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 the 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 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 format of cross class cram down of debts designed to reduce costs,
- not require application to Court for approval of rescue plan (provided no creditor objections), and
- have safeguards against irresponsible and dishonest director behaviour.
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.
The Minister for Trade Promotion, Company Regulation and Digital, Robert Troy TD said:
“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. Following receipt of the Company Law Review Group’s Report, and as Minister with responsibility for matters of company law, I instructed officials from my Department to immediately consider the recommendations contained in the report and begin the necessary work to develop the proposals.”
“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.
“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 like 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.”
A full copy of the terms of reference referred and CLRG’s report can be accessed at the following link: clrg.org/clrg/publications/the-company-law-review-group-s-special-report-on-the-rescue-of-small-business.pdf
Consultation: Summary Rescue Process - Public consultation on a restructuring process suitable for the rescue of small companies
Notes to Editor
Amendments to the Companies Act 2014
From the onset of the COVID-19 business closures, the Department of Enterprise, Trade and Employment led on proposed amendments to the Companies Act 2014, intended to support companies mitigate the impact that COVID-19 continues to have on the normal operation of business. This included a significant number of representations and extensive engagement with the Company Law Review Group (CLRG), a statutory advisory body charged with advising the Minister for Enterprise, Trade and Employment on all matters pertaining to company law.
Membership of the CLRG is broad and representative of key stakeholders in company law including: the Irish Congress of Trade Unions, the Irish SME Association, the Office of the Director of Corporate Enforcement, the Revenue Commissioners, the Attorney General’s Office, the Law Society, the Irish Business and Employers’ Confederation, insolvency practitioners, legal practitioners and academics.
This engagement led to the enactment of the Companies (Miscellaneous Provisions) (Covid-19) Act 2020, which was commenced on August 21, 2020 and dealt with emergency measures requiring immediate amendment.
The CLRG further examined the issue of rescue for companies in the context of medium-term stabilisation measures required to mitigate the economic impacts of the pandemic. The CLRG 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. It is envisaged that the ‘Summary Rescue Process’ will mirror key elements of the examinership process in a more flexible and cost-effective manner while maintaining the appropriate safeguards for the protection of creditors.
A full copy of the CLRG’s Report and terms of reference referred to it by the Tánaiste can be accessed at the following link: clrg.org/clrg/publications/the-company-law-review-group-s-special-report-on-the-rescue-of-small-business.pdf
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