To assist companies under pressure during the pandemic, the government extended the maximum period of examinership from 100 days to 150 days. Companies who can demonstrate “exceptional circumstances” (among other things) for needing the additional time may apply to the High Court for an extension. These provisions of the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the 2020 Act) came up for consideration in the High Court case of Premier Periclase Ltd v Companies Act. The High Court determined that the war in Ukraine, which had adversely impacted the company and the progress of its examinership, constituted exceptional circumstances for the purposes of the 2020 Act.
In this ALG Soundbite, we discuss the key aspects of the case and the court's consideration of the legislation. A more detailed account of the case is also available below.
A closer look at the case
In December 2021, Premier Periclase Ltd was granted the protection of the courts and an examiner was appointed. The company had been successful for many years, but got into difficulties due to the dramatic rise of gas and energy prices during the pandemic. These challenges were further exacerbated by the impacts of the war in Ukraine, which "had a profound effect on the Company and on the progress of the examinership".
The examiner applied to the court under the 2020 Act to extend the protection period from 100 days to 150 days. Counsel for the examiner submitted that, if the period of protection for the company was not extended, it would be impossible for the examiner to deliver his report by the deadline. The examinership would therefore fail and would result in the loss of 82 jobs, with the company becoming a likely candidate for immediate liquidation.
The examiner maintained that, if the Court decided to grant a further extension, there was a reasonable prospect that he could engage with potential investors and conclude binding investment proposals. While the war in Ukraine was having a negative impact on efforts to source the required investment, there was still a viable interest in investment, according to the examiner.
The Court had to consider whether it could extend the protection period in circumstances where the Covid-19 pandemic was not the exceptional circumstance grounding the extension request.
The 2020 Act lays down the circumstances whereby an extension may be permitted, which include that "exceptional circumstances exist in respect of the company the subject of the application".
Mr Justice O'Moore noted that the title of the 2020 Act indicates that it was enacted in order to address "the inevitable adverse effects on businesses caused by a global pandemic". He also noted an unusual feature, which requires the Minister for Health to be consulted before the legislation may be extended. Despite these features, the Judge concluded that this did not confine operation of the 2020 Act exclusively to commercial challenges presented by the pandemic.
O'Moore J looked at the wording of section 13 in particular and noted the definition of "exceptional circumstances", which states that "'exceptional circumstances' include (but are not limited to) the nature and potential or actual impact of Covid-19 on the company". [emphasis added]
O'Moore J was satisfied that the exceptional circumstances required to justify the additional extension could include circumstances that were in no way related to Covid-19. According to the Judge, the inclusion of the words 'but are not limited to' was "deliberately done to make it perfectly clear that the circumstances justifying such an extension are not in any way circumscribed, except for the fact that they must be exceptional".
O'Moore J was of the opinion that the legislature had drafted section 13 to provide for the possibility that a range of circumstances might justify extension of an examinership; even though a war in Europe was "singularly unlikely" to have been contemplated at the time of drafting. He concluded that companies, already weakened by the pandemic, "should have the chance to have their period of protection further extended while the interim period applies if this is justified by any type of exceptional circumstance".
Having reached these conclusions on the proper application of the statute, O'Moore J went on to find that the examiner in this case had established the exceptional circumstances contemplated by the 2020 Act in order for the Court to exercise its discretion and extend the period of examinership to 150 days