Examinership - The Alternative to Liquidation
The Companies (Amendment) Act, 1990 introduced the examinership process to provide a mechanism for the rescue and return to health of ailing, but potentially viable companies. In order to be eligible for examinership the company has to have a reasonable prospect of survival as a going concern in order for an examiner to be appointed.
A petition to the Court for the appointment of an examiner may be presented by the company or its directors, a creditor or contingent or prospective creditor (including an employee) of the company, or by the members holding not less than one tenth of the paid-up capital. Where the Court appoints an examiner to a company, it may at the same time, or at any time thereafter, make an order appointing the examiner to a related company. The duration of the protection of the Court is 70 days from the date of presentation of the petition.
The Court makes an order for the appointment of an examiner for the purpose of examining the state of the company’s affairs and performing such duties in relation to the company as may be imposed by the Act.
When examinership was introduced in Ireland back in 1990, it was intended as a mechanism to give large businesses some protection from their creditors. Under examinership legislation, the company has protection from its creditors for 70 days, during which time the examiner attempts to draft a financial rescue plan for the company. If necessary, the period can be extended for a further 30 days.
Before proposals for a compromise or scheme of arrangement are to be formulated in relation to a company to allow the company to continue trading is sanctioned by the High Court it must be endorsed by the firm’s creditors. Generally the creditors will only approve the scheme if it offers them a better return than they would receive by simply putting the company into liquidation.
29 October 08