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“Examinership-lite” - changes introduced by the Companies (Miscellaneous Provisions) Act 2013
The Companies (Miscellaneous Provisions) Act, 2013 (the “Act”) was signed into law on 24 December 2013 and 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 introduces a number of amendments to existing company law legislation, the most significant of which alters the regime in respect of the role of the Circuit Court in the examinership process.
Prior to the Act being signed into law, there was no option for a company to apply directly to the Circuit Court for the appointment of an examiner under the examinership regime as set out in the Companies (Amendment) Act 1990. Instead, the High Court could choose to remit the matter to the Circuit Court, where it is satisfied that the total liabilities of the company do not exceed £250,000 (€317,500).
The Act prescribes the statutory criteria to be satisfied in order for the Circuit Court to have jurisdiction. The Circuit Court has jurisdiction where the company is a “small company”, which is defined as one which satisfies the qualifying conditions for a given year and the preceding financial year. The qualifying conditions are satisfied where two or more of the following criteria are met for a particular year:
- The turnover for that year does not exceed €8.8 million;
- The balance sheet total for that year does not exceed €4.4 million;
- The average number of employees in the company for that year does not exceed 50.
Importantly, the Act enables a “small company” to elect 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”.
“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. Also, 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 although 60% of examinerships heard in the High Court in 2013 were eligible to be heard in the Circuit Court under the pre-existing regime, none were ultimately remitted. The general consensus amongst practitioners at this stage seems to be that examinership will continue to be seen by practitioners 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 may in fact 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.