What does the process involve? And what determines whether a company is a candidate for examinership?
The Examinership Process
The examinership process is a Corporate Advisory rescue mechanism which provides Court protection of up to 100 days to companies which are insolvent or about to be insolvent but otherwise have a good underlying trade and a ‘reasonable prospect of survival’.
Its primary purpose is firstly to save the undertaking and thereby preserve employment, and secondly provide a return to creditors so that they are not unfairly prejudiced as compared to the amount which they would recover in a liquidation or receivership.
The process provides a ‘breathing-space’ restructuring period during which all historical monies owed are frozen and cannot be paid.
The business continues to trade as normal honouring all existing orders and is very much open for business while investment is sought to restructure the company and formulate proposals to creditors.
An examiner is delegated the role by a Circuit or High Court judge and is an officer of the Court.
Typically, an accountant or solicitor will refer a potential case if a company has encountered difficulties but otherwise has a good underlying trade which, in turn, would allow it to survive if it can deal with the issues it faces.
Determining whether a company is a suitable candidate.
Characteristics of companies which are good candidates for examinership are those with:
2. A strong underlying business
3. ‘One-off’ issues which can be dealt with
Examples of issues identified in examinership candidates would include:
1. Appointment of a receiver / removal of banking facilities
2. Petition to wind up having been threatened or issued
3. Notice of attachment having been placed on company bank account
4. Large bad debt suffered
5. Misappropriation of funds
6. Loss of significant contract with a customer
7. Dispute on collectability of debtors restricting cash-flow
8. Loss-making divisions of a business / loss-making locations
9. Onerous contracts e.g. rent at a level above market rate or loss-making contract with a customer
10. Legacy debt at a level which is clearly unsustainable
Is it business as usual for the company when they are undergoing examinership?
Yes, while historical liabilities are frozen and cannot be paid, the provision of goods and services for on-going trade can be paid as normal.
It is very much business as usual and on-going orders are honoured. The day to day running of the company remains with the directors while an examiner provides additional oversight and examines the affairs of the company.
Get in touch.
If you have any questions regarding the examinership process, contact Dessie Morrow on (01) 6699999.
You can find out more about Dessie Morrow by visiting his LinkedIn profile.