In our Client Bulletin earlier this year we summarised the provisions contained in the Companies (Miscellaneous Provisions) Act 2013 (the “Act”) which granted the Circuit Court jurisdiction to deal with examinership applications in respect of small private companies which meet certain criteria. This process is becoming commonly referred to as “examinership lite”.
A “small company” is defined as one which satisfies the qualifying conditions for a given year and the proceeding financial year. The qualifying conditions are satisfied where 2 or more of the following criteria are met for a particular year:
- The turnover for that year does not exceed €8.8m;
- The balance sheet total for that year does not exceed €4.4m;
- The average number of employees in the company for that year does not exceed 50.
Section 2 of the Act, which was signed into law on 24 December 2013, could not be commenced until new Circuit Court Rules were put in place. The Circuit Court Rules (Examinership) 2014 are shortly due to come into effect on 14 July 2014 which also marks the date the examinership lite process will come into operation (pursuant to S.I. No. 285/2014, Companies (Miscellaneous Provisions) Act 2013 (Section 2) (Commencement) Order 2014). It is worth noting that all aspects of the process, other than the court in which such cases are heard, remain unchanged.
Small companies experiencing financial difficulties will now be able to apply directly to the Circuit Court for protection from 14 July 2014. The Companies (Amendment) Act 1990 did previously allow for a High Court petition to appoint an examiner to be remitted to the Circuit Court in circumstances where the company had liabilities of less than €317,434.52. In March of this year, Celbridge Playzone Limited became the very first company in Ireland to successfully petition the Circuit Court for the appointment of an examiner in this regard. That case remains ongoing.
With effect from 14 July 2014, applications and proceedings under the new Circuit Court Rules will be much more straightforward. Under the new Rules, applications can be made either in the county in which the registered office of the company is situate or where the company has its principal place of business at the time of presentation of the originating notice of motion. If at the time of application, there is no registered office of the company in Ireland and the company’s principal place of business is outside the State, applications must be brought in the Dublin Circuit Court.
Given the continuing important role the SME sector plays in Ireland’s economy the examinership lite process is a welcome development. We await with interest to see how the new regime operates in practice.