Minister for Jobs, Enterprise and Innovation Richard Bruton, this week announced plans to make it easier for small businesses, who are struggling financially, to restructure their debt. The amendment to the Companies Act, via legislation which is to be published before the end of the year, will allow small private Companies to apply directly to the Circuit Court to have an examiner appointed.
Minister for Jobs, Enterprise and Innovation Richard Bruton, this week announced plans to make it easier for small businesses, who are struggling financially, to restructure their debt. The amendment to the Companies Act, via legislation which is to be published before the end of the year, will allow small private Companies to apply directly to the Circuit Court to have an examiner appointed.
The current legislation in Ireland means that Companies who wish to enter the Examinership process must apply first to the Commercial Court, which is a division of the High Court. Currently where the liabilities of the Company are less than €500,000, the case may be referred to the Circuit Court. However, the expense of the initial application to the High Court precludes many small companies from availing of this option. It has led to a very low uptake in this country, and it is estimated that less than 1% of insolvent companies in Ireland enter examinership, 99% go into liquidation or receivership. This is despite the high success rate the examinership process has in preserving employment and effectively saving viable businesses which has been evident over the past number of years in high profile cases such as Fallon & Byrne, Peats, and most recently Eircom. However, due to the high costs associated with the current position in Ireland, the process is under-utilised, and has remained unavailable to many smaller businesses.
However, this is set to change under this new legislation, which comes as a major part of the Government’s Action Plan for Jobs. Minister Bruton, making the announcement this week said that: “Small businesses employ over a third of all people working in Ireland today”, and it has previously been estimated that small and medium sized enterprises contribute over €10 billion to the Exchequer annually. It is further estimated that Irish SMEs make up over 90% of food manufacturing companies in the country. The SME sector is seen as key to Ireland’s economic recovery, and the proposed change to the companies’ legislation is the latest in a series of initiatives aimed at supporting the growth of this sector. Other measures which have been introduced are the Credit Guarantee Scheme, which went live at the end of October, and aims to provide credit for SMEs who encounter difficulty getting finance due to insufficient collateral, and also the Microfinance Fund, which has been in operation since October 1st. The Fund provides for loans of up to €25,000 for viable businesses with less than 10 employees.
In relation to the changes to the Examinership process it is anticipated that Companies will have to satisfy two out of the three following conditions:
- Balance Sheet must not exceed €4.4 million
- Turnover must not exceed €8.8 million
- Number of employees must not exceed 50
The announcement has received widespread approval, ISME (the Irish Small and Medium Enterprises Association) Chief Executive Mark Fielding saying that “it is good news for SMEs in the throes of rescue and should lead to many enterprises being saved, which might have needlessly been liquidated.”
In an interview with RTE News, Mícheál Leydon, Partner with kavanaghfennell highlighted the advantages of the amendment for small firms, as well as their employees and creditors of the company. “The reality is with any examination we see some level of debt relief for the company, on top of that the business is safeguarded and secured which should see employment continue and ultimately for creditors if the examination is successful, a better return to creditors than in liquidation”.
Source: InsolvencyJournal.ie – Small Business to be Given Greater Access to Examinership Process
