Is It the Cheaper, Quicker and More Efficient Restructuring Process for SME’s?
The Government introduced the Small Company Administrative Rescue Process (SCARP) to provide a restructuring option to SMEs similar to the examinership process; however, SCARP is quicker, more cost-effective and does not require the close oversight of the Court. It is an accessible restructuring option for SMEs, proving successful thus far with more than 70% of cases in 2022 having been approved by creditors.
SCARP provides that State creditors may be excludable from the process only on limited and specified grounds, primarily aimed at prohibiting tax avoidance.
Onerous leases can only be repudiated where the Lease Holder consents. Without such consent and where repudiation is necessary for the survival of the company, an application to Court is required.
Statement of Affairs (SoA)
Company directors prepare SoA for the Company.
Process Advisor (PA) provides report on survival prospects
PA must review the SoA and issues a report confirming that the Company has a reasonable prospect of survival from SCARP.
Initiate SCARP (Day 1)
Company directors meet to formally appoint the PA and commence the process.
Preparation of Rescue Plan (Day 2 - 42)
PA undertakes a review of the company, investigates its affairs and consults with creditors to prepare and draft the Rescue Plan.
Assessment of Excludable Creditors
Excludable creditors must be identified by the PA and notice served to them without delay that the process is intending to compromise their debt, along with other creditors.
Meeting of Members and Creditors (Day 42)
Meetings of Members and Creditors are required to be held to consider and approve or object to the Rescue Plan. The Rescue Plan is deemed to have been accepted if 60% in number, representing the majority in value, of an impaired class of creditor vote in favour of the plan and no creditor files a formal objection to the plan within 21 days of creditor approval.
Confirmation Hearing (SoA)
If the plan is not approved during the meetings of Members and Creditors the PA must apply to the Court to have the Rescue Plan confirmed and must satisfy the Court that the rescue plan is fair and equitable and does not unfairly prejudice the objecting creditor. If this can be evidenced, the Court will approve the Rescue Plan.
