When companies begin to face difficulties, it is not uncommon for their directors to stick their ’heads in the sand’ and hope that things will improve.  Unfortunately, it is often the case that by the time they realise and accept something needs to be done it is often too late to be able to do anything about it (Never wait until you are starving to start planning seeds!).

Many SME businesses in Ireland have experienced difficulties with their lending institutions in terms of refusal of credit, conversion of overdrafts into term loans and unreasonable demands for repayment and may feel a constant threat of having a receiver appointed.  This is a fear instilled into many in the SME sector and a fear which has caused many sleepless nights throughout the length and breadth of the island.

The outcome of this is that a large number of companies in Ireland tend to end up in receivership or liquidation following a period of difficulty rather than explore the opportunities which Examinership may bring.  

“Examinership is a process in Irish law which allows a company to seek the protection of the Courts to have the time to restructure the business and find a way to survive.”
Victor Clarke, Managing Partner, Clarke Jeffers.

It is important to note that the application to appoint an Examiner and the subsequent appointment of an Examiner can defeat the appointment of a receiver by a bank to a business provided certain criteria are met and very tight deadlines are adhered to (3 days from the receivers appointment).  

To some they may not have been aware of the existence of Examinership whereas for others they may have considered Examinership but discounted it owing to the perceived costs involved by having to apply to the High Court.

The good news is that in recent years the Irish government has introduced legislation which permits smaller companies to apply for what has become known as ‘Examinership Lite’ through the Circuit Court rather than the High Court.

The criteria which companies must meet in order to apply to the Circuit Court to restructure their business and renegotiate their debts (including rent!) includes:

  1. The company’s balance sheet must not exceed €4.4 million and
  2. The company’s turnover must not exceed €8.8 million and
  3. The number of employees in the company must not exceed 50.

Being able to apply to the Circuit Court, and not the more expensive option of the High Court, now makes Examinership a much more economical and attractive route for smaller businesses across Ireland.

Over 160,000 businesses in Ireland currently avail of audit exemptions owing to their smaller size and would therefore most likely qualify for Examinership Lite should they need it.  The fact that these companies employ over one third of the Irish workforce would indicate that for the sake of the wider economy, Examinership Lite should be a very real option for these companies should they fall upon hard times.

A successful application by a company to its local Circuit Court for Examinership, and therefore receiving the protection of the Court, can be completed from start to finish within 3 months.  In the event that a restructuring deal can be implemented then the company could emerge at the end of the process with the real and distinctive possibility of long term survival.  This is extremely attractive when compared with liquidation which can last for up to 2 years and possibly result in the restriction or disqualification of a director from acting in that capacity again or for a fixed period of time.

All in all, the Examinership process in Ireland is extremely underutilised when compared with other jurisdictions.  Whilst cost may have been seen as a limiting factor in the past, Examinership Lite could be a very real option for consideration should your business be facing financial difficulties.

If you are a viable business experiencing financial difficulties and believe that a restructuring of the company’s debts, or renegotiation in terms of rent, or some fresh investment could provide a long term solution to your business then talk to us today to find out whether the Examinership process is suitable for you.  As the old saying goes, “a stitch in time saves nine”.  If the process is commenced early and before matters get too bad your chances of survival will be far greater.

Article attributed to Victor Clarke.  Victor is the Managing Partner of Clarke Jeffers & Co. Solicitors and heads up the firm’s Commercial Insolvency team.