More companies will now be eligible to avail of the Small Companies Administrative Recovery Process (SCARP). This follows an increase in the relevant thresholds for ‘micro’, ‘small’, ‘medium’ and ‘large’ companies. The change was brought about by the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (SI 201/2024) (the Regulations) came into effect on 1 July 2024.
Eligibility for SCARP
For a company to avail of SCARP, it must fall within the definition of a 'small' or 'micro' company under the Companies Act 2014. Qualification is assessed under turnover, balance sheet total and number of employees. The relevant figures for turnover and balance sheet total have been increased by the Regulations to take account of significant inflation during 2021 and 2022, whilst the requisite number of employees remains unchanged.
New thresholds
To be considered a Small Company:
- The amount of turnover of the company does not exceed €15 million (previously €12 million)
- The balance sheet total of the company does not exceed €7.5 million (previously €6 million)
- The average number of employees does not exceed 50.
To be considered a Small Company (holding company):
- The aggregate amount of turnover of the group does not exceed €15 million net (or €18 million gross)
- The aggregate balance sheet total of the group does not exceed €7.5 million net (or €9 million gross)
- The aggregate average number of employees of the group does not exceed 50.
To be considered a Micro Company:
- The amount of turnover of the company does not exceed €900,000 (previously €700,000)
- The balance sheet total of the company does not exceed €450,000 (previously €350,000)
- The average number of employees does not exceed 10.
The change applies for the most recent financial year beginning on or after 1 January 2023. The change is beneficial to those entities who experienced an uptake in revenue, profits and costs who may have fallen outside of the parameters to qualify for SCARP.
Other conditions
Once an entity is deemed eligible having satisfied the above factors, the following must also be satisfied to avail of SCARP:
- The company is, or is likely to be, unable to pay its debts;
- No resolution subsists for the winding up of the company;
- No order has been made for the winding up of the company;
- The directors of the company have not passed a resolution for the appointment of a process adviser in the previous 5 years and
- No examiner has been appointed to the company during the previous 5 years.
If you would like to discuss the SCARP mechanism in further detail, please do not hesitate to contact Simon Murphy or Barry Cahir in our Corporate Restructuring & Insolvency team.
Article contributed by Hazel O'Leary.