The Companies (Rescue Process for Small and Micro Companies) Act 2021 was enacted in December 2021 to provide a more cost-effective restructuring process for smaller companies in Ireland (SCARP). It has a wide range of features which provide excellent opportunities to assist businesses in difficulty, in a similar format to Examinership but without the cost of the associated court hearings.
Process
SCARP is a very attractive restructuring tool as it provides a formal process for the restructuring of companies but usually requires no court involvement. Prior to beginning the process, companies engage with an insolvency practitioner called a Process Advisor who forms a view as to whether there is a reasonable prospect of survival of the company. The Process Advisor prepares a rescue plan for the company, which normally involves the write down of the company's debt and the injection of investment. The process to prepare a rescue plan and have it voted upon by creditors is very quick and limited to 49 days following appointment of the Process Advisor. At the expiry of a three-week appeal period the rescue plan becomes binding.
Low uptake
The last 18 months have seen less than 40 companies utilise SCARP, but over 70% of companies that have engaged in the process have been successful in completing their restructure.
While the level of restructuring in Ireland remains surprisingly low when compared to similar jurisdictions such as England and Wales, much of the reduced restructuring activity with respect to small companies is linked to the debt warehousing scheme introduced to help businesses who experienced cash-flow and trading difficulties during the COVID-19 pandemic. There remains approximately €2.2 billion of debt within the scheme and companies have until 1 May 2024 to agree a phased payment arrangement with the Revenue Commissioners for the warehoused debt.
Take steps
Given the huge importance of small companies - they make up the vast majority of companies and employ a large section of the workforce – it is important that business owners be aware and understand the options available to save a struggling business. As the Revenue debt warehousing scheme moves to a conclusion, small companies should take steps sooner rather than later to ensure that they are in a strong position to carry on business for years to come.
If you have any query in relation to restructuring or for further information, please get in touch with our Insolvency and Restructuring team:
Simon Murphy, Barry Cahir, Aisling Duffy