Bill to allow for rescue of small companies without court application to be drafted as priority
Legislation allowing the vast majority of companies in Ireland to be rescued without applying to the courts will be drafted as a matter of priority.
Robert Troy, minister of state in the Department of Enterprise, Trade and Employment, yesterday announced he had secured government approval for the priority drafting of the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021.
The bill will amend the Companies Act 2014 to allow small and micro companies – which make up around 98 per cent of all companies – to access a new dedicated rescue process.
The new process will incorporate “key elements of the existing examinership model in an administrative context”, according to a government press release.
Mr Troy said: “I know that examinership works and saves both companies and employment. However, as it is overseen by the court from beginning to end, it can be an expensive undertaking – and thus out of reach for your average small company, whether that be a local restaurant or hairdresser.
“The Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill provides an alternative to examinership, for the benefit of small and micro companies, which is more cost efficient and capable of conclusion within a shorter period of time.”
The process would be commenced by a resolution of directors rather than by application to court and the rescue plan could be passed by a simple majority in value of creditors, without requiring court approval unless creditors object.
Mr Troy added: “While court involvement is limited, I am conscious the issue of corporate rescue extends far beyond the distressed company itself and as such, the process incorporates robust safeguards and reflects what I believe to be a fair balance of the sometimes, competing interests of stakeholders.
“For example, state creditors will operate on an ‘opt-out basis’ on prescribed grounds such as if the company has a poor history of tax compliance. This should provide comfort to business that the State will not remove itself from the process for arbitrary reasons.”
The bill also makes miscellaneous amendments to the Companies Act 2014 and Industrial and Provident Societies Act 1893 to make permanent provision for virtual meetings.
It further amends the 2014 Act to progress recommendations made by the Company Law Review Group (CLRG) in relation to the provision of information to employees as creditors during a liquidation.