The Companies (Rescue Process for Small and Micro Companies) Act 2021 (the “Act”) was signed into law by the President on 22 July 2021. The Act provides for a new rescue process, exclusively for small and micro companies only. Ian Barrett of our Restructuring practice explains.
What is SCARP?
The Small Company Administrative Rescue Process (“SCARP”) has been introduced to provide a quicker and more affordable restructuring option to small and micro businesses in Ireland, who are facing insolvency. SCARP is based on the key components of the examinership process, but will be a more streamlined and quicker process without Court involvement.
Over the years there have been calls for a formal rescue process to deal with small companies and these calls have increased since the onset of the COVID-19 pandemic. With the difficulties faced by many sectors which comprise small and micro companies, SCARP may be a suitable restructuring mechanism to allow such companies to continue to trade and avoid closure.
Summary of SCARP
The process essentially involves the following steps:
- The directors prepare a statement of affairs detailing the financial position of the company and make a statutory declaration that they have made a full inquiry into the affairs of the company.
- The directors must obtain a report from an insolvency practitioner (Process Advisor), which includes the Process Advisor’s opinion on whether a rescue plan (“rescue plan”) provides a reasonable prospect of survival of the company.
- Within 7 days of receiving the Process Advisor’s report, the directors pass a resolution appointing the same Process Advisor and commencing SCARP. Within 2 days of his / her appointment, the Process Advisor is required to file a notice with the CRO of the appointment and also advertise a notice in Iris Oifigiuil.
- The Process Advisor notifies all creditors within 5 days of his / her appointment and requests the submission of claims.
- The Process Advisor has 42 days to form a rescue plan to propose to the company’s creditors, ultimately restructuring the company’s debt and saving the company from insolvency.
- The Process Advisor holds meetings of the various classes of creditors and members to present the rescue plan, and hold a vote for its approval. These meetings must be held within 49 days of the commencement of SCARP.
- The rescue plan is approved by creditors when approved by 60 per cent in number, representing a majority in value of at least one class of impaired creditors at the creditors' meetings. The approved rescue plan can provide for the write-down of liabilities across all classes of creditors.
- A creditor or member has 21 days to object to the rescue plan. If an objection is raised, the Process Advisor must seek the Court’s approval of the rescue plan.
- If no objection to the rescue plan is filed within 21 days, the rescue plan becomes binding on all members and creditors, without the need for a court application.
Get in touch
If you have any queries on the SCARP process or its impact on your business, please contact Ian Barrett of our Restructuring team. We'd be delighted to hear from you.