The Companies (Rescue Process for Small and Micro Companies) Act 2021, commenced on the 8th December 2021 and provides a simplified corporate rescue mechanism specifically geared towards small and micro companies.

The Act provides for a Small Company Administrative Rescue Process (SCARP) which mirrors key elements of examinership in an administrative context, thereby reducing court oversight resulting in efficiencies and lower comparable costs. It has limited court involvement where creditors are engaged in the process and positively disposed to a Rescue Plan.

Main provisions of the Act

The main provisions of the Act can be summarised as follows:

• designed for small and micro companies (as defined by the Companies Act 2014) which represent 98% of companies in Ireland;
• commenced by resolution of directors rather than by application to Court;
• concluded within a shorter period than examinership;
• overseen and assisted by an insolvency practitioner – Process Advisor;
• the Rescue Plan can be passed by 60% in number representing the majority in value of creditors;
• provides for format of cross class cram down of debts designed to reduce costs;
• does not require application to Court for approval of Rescue Plan (provided no creditor objections, in which case the courts will determine);
• gives safeguards against irresponsible and dishonest director behaviour;
• the company must be a small company based on eligibility criteria.

Eligibility Requirements to place a company into a SCARP

The company must satisfy two of the following three conditions:

• Annual turnover up to €12m.
• A balance sheet total up to €6m.
• Up to 50 employees.

The company must be able to show that it will be financially viable following the process.

The company will engage an Independent Insolvency Practitioner to act as the Process Advisor. The Process Advisor must have the same qualifications for appointment as a liquidator.

The Application Process

A director of the company will prepare a Statement of Affairs (SOA) by statutory declaration, which is submitted to the Process Advisor. The designated Process Advisor, in a consultative capacity, meets with the directors to discuss and then issues a report. The directors then pass a resolution to commence the process and appoint the Process Advisor.

This process involves the following:

• As soon as practicable after the passing of the resolution, the Process Advisor shall give notice to creditors with excludable debt requiring the creditor to inform the Process Advisor, within 14 days, if the creditor objects to the inclusion of the excludable debt in the Rescue Plan on any of the grounds specified.
• The directors pass a resolution to cease all payments to creditors for the duration of the process.
• The directors, in consultation with the Process Advisor, decides which court would have jurisdiction: Circuit Court or High Court.
• There is no requirement to apply to court to commence the process (as is the case in Examinerships).
• The directors’ resolution is filed with the relevant court, notified to creditors and employees and delivered to the Companies Registration Office (CRO) to be publicly advertised on the company’s website (if any) and Iris Oifigiúil.
• Creditors/employees receive the Statement of Affairs and the Process Advisor’s Report.
• The Process Advisor will issue a Proof of Debt (POD) form to creditors, which must be completed and returned.
• A Rescue Plan is deemed to be approved if at least 60% of creditors in number representing a majority in value vote in favour.

A Process Advisor may apply for a Protective Certificate in relation to a specific creditor before notifying a creditor of the intention to enter a SCARP. If a Protective Certificate issues from the Court, all collection must be put on hold, including debt at Revenue enforcement.