THE Government has recently published the Companies (Miscellaneous Provisions) Bill 2013 which will enable certain companies to seek examinership protection from creditors through the Circuit Court.
On 11 October, the Minister for Jobs, Enterprise and Innovation, Richard Bruton, announced the fast-tracking of legislation to allow companies to apply to the Circuit Court for examinership. This measure is aimed at reducing the costs associated with an application for examinership.
At present applications must first be made to the High Court for such protection. The Bill provides that an applicant can choose to apply to the Circuit Court rather than the High Court if the company is a "small" company.
The introduction of this option aims to reduce the cost of examinerships to make them more accessible to SMEs. A "small" company is one that has at least two of the following – turnover of no more than €8.8m; balance sheet total of no more than €4.4m; average number of employees no more than 50.
The only up-front costs associated with seeking examinership protection are the costs of an independent accountant in preparing a report on the company's viability and the application papers, prepared by the applicant's lawyers.
The Bill makes no change to the content of this report or to the content of the application papers, therefore, the same level of work is required to be done whether the application is to be made in the Circuit or High Court. The main cost of examinership is the work carried out by the Examiner and by the company once the examiner is appointed. When examinerships are a success, the Examiner's fees, costs and expenses are paid out of the investment, and so, will be subject to a deal being struck between the Examiner and the investor. If examinership fails (which rarely happens) that the Examiner's fees, costs and expenses fall to be paid out of the subsequent liquidation or receivership of the company.
Usually, it is the company's bank that will in effect bear this cost.
If you have a query in relation to this area of law please contact John Bollard on 01-6794165 or by email at john@donaghys.ie