SCARP was introduced under the Companies (Rescue Process for Small and Micro Companies) Act 2021.
It is intended to facilitate the rescue of viable small and micro companies experiencing financial difficulties. The process is broadly modelled on examinership but is designed to be more accessible, streamlined and cost-effective.
A qualified insolvency practitioner is appointed as the Process Advisor (PA). The PA independently assesses the company's financial position and prospects and, where appropriate, develops a Rescue Plan with the company and its stakeholders.
The objective of the Rescue Plan is to restructure the company's liabilities so that the business can continue as a viable going concern.
Broadly, SCARP is available to companies which meet the statutory requirements for a small or micro company and which are, or are likely to become, unable to pay their debts.
For a small company, the company generally needs to satisfy at least two of the following criteria:
| Criterion | Threshold |
| Turnover | Not more than €15 million |
| Balance sheet total | Not more than €7.5 million |
| Average number of employees | Not more than 50 |
There are separate statutory criteria for micro companies.
Other eligibility requirements also apply. For example, the company must not already be in liquidation or subject to a winding-up order, and restrictions apply where the company has previously used SCARP or had an examiner or Process Advisor appointed.
Eligibility should therefore be assessed on the individual circumstances of the company rather than solely by reference to its size.
Initial assessment
The first step is to understand the company's financial position and determine whether there is a realistic prospect of survival.
Appointment of a Process Advisor
The directors appoint a suitably qualified insolvency practitioner to act as Process Advisor. The Process Advisor independently considers the company's financial position and whether there is a reasonable prospect of survival, and whether SCARP is an appropriate mechanism for achieving that survival.
Development of a Rescue Plan
Where SCARP is considered appropriate, the Process Advisor works with the company and its stakeholders to develop a Rescue Plan. The proposed outcome must provide creditors with an appropriate return and demonstrate that the company has a reasonable prospect of survival.
Creditor engagement and approval
Creditors are given information about the proposed Rescue Plan and have an opportunity to consider and vote on it. The statutory approval requirements must be satisfied for the Rescue Plan to become binding. Where objections arise, court involvement may be required.
Implementation of the Rescue Plan
Once approved and confirmed as required, the Rescue Plan becomes binding in accordance with the legislation. The company can then continue trading while implementing the agreed restructuring.
Revenue liabilities can be particularly important in a restructuring.
Revenue debt is treated as Excludable Debt for SCARP purposes. Revenue may therefore elect to opt out of the Rescue Plan in certain circumstances.
This makes early engagement and careful consideration of the company's tax position particularly important.
The Process Advisor must engage with Revenue as part of the SCARP process, and the company's tax compliance and ongoing ability to meet current tax obligations will be relevant to the restructuring.
SCARP and examinership are both corporate rescue mechanisms, but they are designed for different circumstances.
| Â | SCARP | Examinership |
| Target | Small and micro companies | Broader range of companies |
| Objective | Rescue a viable business | Rescue a viable business |
| Process | More streamlined | Court-supervised |
| Court involvement | Generally limited, but may arise | Central to the process |
| Process Advisor / Examiner | Process Advisor | Examiner |
| Cost and complexity | Generally lower | Generally higher |
| Time pressure | Significant | Significant |
The appropriate process depends on the company's size, financial position, creditor profile, funding requirements and prospects for survival. SCARP is not automatically the right solution simply because a company qualifies.
One of the most important considerations is timing.
SCARP is a rescue process. It is not designed to be a last-minute solution after the business has exhausted all available cash and creditors have taken enforcement action.
Directors should seek advice when they begin to identify signs such as:
- Cash-flow forecasts showing a funding shortfall
- Increasing creditor arrears
- Revenue liabilities becoming difficult to manage
- Suppliers moving to cash-on-delivery terms
- Banks or lenders expressing concerns
- Pressure from landlords or other major creditors
- Persistent losses
- Difficulty meeting payroll or other critical costs
- A significant one-off event placing pressure on the business
The earlier the position is assessed, the more restructuring options are generally available.
SCARP may be appropriate where:
The business is fundamentally viable
There is a viable underlying business once the company's financial structure and/or cost base is addressed.
The company has a debt problem rather than simply a business problem
The business may be profitable or capable of becoming profitable, but historical liabilities are preventing it from moving forward.
Creditors are likely to receive a better outcome through restructuring
The Rescue Plan must be capable of providing an appropriate outcome compared with the alternative, which may be liquidation.
There is a realistic plan for the future
The company needs more than a reduction in historical debt. It needs a credible strategy for remaining viable after the restructuring.
