Friday, January 03 14:52:04
A leading Irish insolvency lawyer has said that new 'examinership-lite' process is unlikely to have much immediate practical effect in driving down costs for struggling SMEs.
Julie Murphy-O'Connor of Matheson said that a "real impact on cost would probably be better achieved by the introduction of a completely new restructuring tool which requires less court input, perhaps along the lines of the company voluntary arrangement in the UK."
The Companies (Miscellaneous Provisions) Act, 2013 (the "Act") has introduced what has become colloquially referred to as "examinership-lite", or what it is hoped will be a new SME-friendly examinership regime. Examinership is the legal mechanism by which an ailing but potentially viable company can be rescued.
The Act was signed into law on 24 December 2013. It alters the previous regime in respect of the role of the Circuit Court in the examinership process to allow a company to apply directly to the Circuit Court for the appointment of an examiner.
The Act enables a "small company" to apply directly to the Circuit Court (rather than the High Court) for the appointment of an examiner. In such a situation, the powers and jurisdiction of the High Court in relation to examinership may be exercised by the Circuit Court. The High Court, however, still retains jurisdiction to deal with the examinership of a "small company".
Julie Murphy-O'Connor, a partner in Matheson's Corporate Restructuring and Insolvency Law Group, said: "'Examinership-lite' is being promoted as a more cost-efficient process. However, it remains to be seen whether this will hold true, in circumstances where the professionals with the relevant specialised expertise will remain best placed to advise the relevant stakeholders, and the costs associated with the working capital required to fund the company during the process and the dividends for creditors will not change."
"The reality is that 60pc of examinerships in 2013 would have been eligible to be heard in the Circuit Court under the existing regime, but all were brought in the High Court. The general consensus amongst practitioners at this stage seems to be that examinership will continue to be seen as something best done in the High Court. The creation of a parallel jurisdiction in the Circuit Court may not in fact have much of a visible effect in practice, at least in the short to medium term. Any real impact on cost would probably be better achieved by the introduction of a completely new restructuring tool which requires less court input, perhaps along the lines of the company voluntary arrangement in the UK."