Accountancy giant calls for more options for struggling small firms

ACCOUNTANCY and tax consultancy giant Grant Thornton has called for more options — outside of examinership, liquidation and receivership — for small firms in need of court protection while they attempt to overcome financial difficulties.

Michael McAteer of Grant Thornton’s Dublin office said that no middle ground exists for smaller companies, for whom the examinership route can be both legally demanding and cost intensive.

The request is currently with the Company Law Review Group, although any official ruling is not expected in the near-term. One possible alternative is the process of “credit voluntary arrangement”, popular in the British market. This is arranged outside of the courts and, as a result, tends to be more cost-effective.

The call for a new model of company protection coincides with new figures from Grant Thornton showing that the number of examiners appointed to companies totalled 70 last year, more than double the total in 2007.

In terms of success rate — basically the percentage of companies that survived through the process and resumed trading normally afterwards — high rates were seen earlier in the year, with a significant reduction — down to just above 30% — by the end of September.

Figures for the last three months of the year are not yet available.

One of the reasons given for the fall off in successful examinerships was that “the wrong type of company” was applying for the service — meaning those companies, a number of them in the construction sector, who didn’t have a steady flow of new business upcoming.

Indeed only four out of 15 construction firms that filed for examinership from the end of 2006 to the end of last year, are still in business.