Companies (Rescue Process for Small and Micro Companies) Act 2021 (SCARP) was passed on 13th July 2021. The commencement order has yet to be signed.
The Act introduces the Small Company Administrative Rescue Process (SCARP). The purpose of SCARP is to provide SME’s with a low-cost alternative to examinership with the primary objective being to save a company and any jobs provided by it.
All the accounting institutes and insolvency practitioners have provided comprehensive guidance on SCARP and the differences between the new process and examinership.
So we will focus on the key points of SCARP:
- It is only available to Small and Micro companies who meet two of the following criteria;
- Turnover does not exceed €12M.
- Balance Sheet total does not exceed €6M.
- Average number of employees does not exceed 50.
- It is only suitable for a company where the directors can show that the company will be financially viable in the future and that creditors are better off financially under a SCARP than in a liquidation.
- The directors will prepare a Statement of Affairs in a prescribed form.
- The process is led by an independent qualified insolvency practitioner who is appointed as the “Process Advisor” and who is tasked with formulating a rescue plan for agreement with creditors
- The Process Advisor will issue a report on whether the company in their opinion has a reasonable prospect of survival.
- The process will commence following the passing of a resolution of the directors of the company.
- The process will have a 70-day timeline from commencement:-
- 49 days for creditors to receive & vote on rescue proposals and
- 21-day cooling off period where creditors objections can be raised.
- The majority of creditors are required to approve a proposed rescue plan is 60% in number, and a simple 51% majority of value in respect of at least one class of creditors.
- In order to object to a rescue plan, creditors must file a Notice of Objection with the Process Advisor and the Court.
- Requirement on the ‘Process Advisor’ to report to the ‘Office of the Director of Corporate Enforcement’ (ODCE) on the historical conduct of the directors.
Note: The content of this article is provided for information purposes only and does not constitute legal or other advice.