Examinership is Ireland’s formal corporate recovery mechanism in Ireland. It is similar to the US Chapter 11 and the UK Process of Administration (Leeds United). This is a formal process to restructure the debts of an Irish Company under the protection of the High Court for up to 100 days. Normally the High Court grants 70 days to the Examiner and this can be extended for 30 days. During this period Management remain in control. This cocoons the insolvent company with comprehensive protection from its creditors. A typical scenario would be that leasing companies are not allowed to repossess their assets without approval of the Examiner and the Court. The High Court must be satisfied there is a reasonable chance of survival of the company.
One of the benefits for the company by the appointment of a Receiver is that no winding up can be instituted or a Receiver appointed thus protecting the company. A Receiver appointed within 3 days prior to Examinership must cease to act. It is not possible to seek to enforce debts or security against the Company, to repossess leased or hire purchase goods or exercise retention of title agreement without the Examiner’s consent. Secured Creditors cannot take steps to realise their securities. No personal guarantees can be enforced. No proceedings may be taken against the Company including notices of attachment or enforcement.
It is advisable to carefully monitor the cash flow of the company throughout the protection period to ensure the company trades in accordance with the projections furnished to the Court at the Petition stage.
The Examiner has a right to access all books and records and a right to attend board meetings.
The Examiner does not take over the executive function of the Board of Directors.
Proposals for a Scheme and Arrangement.
You should split the members and creditors into different classes. This should include unsecured, preferential, etc. and balance the competing claims of each class over what is usually a limited amount of money or fund.
Provide for the implementation of the proposals, the disposal of any non core assets, specify any necessary changes to the Management or direction of the Company and include such other matters as the Examiner may deem appropriate.
Include a Statement of Affairs of the Company and describe the estimated financial outcome of the winding up of the Company for each class of members and creditors. A majority in value of claims in each class represented at the meeting as required for the proposals to be carried by the class.
For High Court approval, the Court cannot confirm a scheme unless:
a) It has been accepted by at least one class of creditors, whose interests would be impaired by their implementation (in practice a scheme must enjoy some form of popular support;
b) They are fair and equitable in relation to each class of members or creditors;
c) They are not unfair to anybody or prejudicial to any interested party and are not designed for the principal purpose of avoidance of tax;
If the Court confirms the proposals they would become legally binding.
Advantages to the Company
As previously mentioned, the promoters or shareholders retain control. The company maintains intangible assets such as Supplier Certification and Leasehold Interest, Brands and so forth. There is comprehensive protection of the Company. A Receiver cannot be appointed by a Debenture Holder nor a Petition presented to the High Court to have an Official Liquidator appointed.
For a company in financial difficulty Examinership provides time, protection from creditors and a framework to agree a compromise with the creditors