The Companies (Rescue Process for Small and Micro Companies) Bill 2021 has now passed both houses of the Oireachtas.
The Bill will now be sent to the Office of the President for signature and enactment into law. The new Act will provide the legislative basis for a new corporate rescue process available to small and micro companies in Irish law which it is hoped will act as a form of “examinership lite” for small and micro-companies. The Insolvency Team at LK Shields has previously examined the elements of this new corporate rescue process in previous articles found here.
The passing of the Bill prior to the Summer legislative recess is to be welcomed. The quick passage of the Bill suggests that the Government was eager to ensure that the new corporate rescue process will be available to small companies at the onset of Q4 of the 2021 trading year. Repeated calls for a formal rescue process specifically designed to cater to small companies has been a recurring feature of the Irish corporate restructuring landscape in recent years, a feature which has increased dramatically in the past 18 months since the onset of the COVID-19 pandemic. With the particular difficulties faced by the retail and hospitality sectors, which by and large are dominated by small and micro companies, the new company rescue process may permit such companies to successfully trade going forward. From a legal point of view SCARP differs significantly from examinership in certain notable aspects, for example:
- it does not require a Court application in order for a Company to enter the rescue process; and
- It does not require a Court application for the scheme of arrangement restructuring the company’s debts to be approved by a Court.
Another significant distinction in comparison with examinership is the fact that the Revenue retains an option to opt-out of the rescue process albeit in certain limited basis. It will be interesting to note the attitude Revenue will take in respect of companies availing of this process, particularly as many such companies will have been availing of significant Revenue’s debt warehousing scheme throughout the pandemic crisis.
As stated above, it is hoped that the new corporate rescue process will be available to small companies at the onset of Q4 of 2021.