Legislation aims to cut cost of examinership

New legislation to be introduced by the Government is expected to cut the cost of examinership for small businesses by 30% by allowing them to take cases through the Circuit Court.

Under current legislation only 1% of SME are using the courts to enter into examinership to try and trade out of their difficulties due to the high costs that they face.

In the first nine months of this year there were only 12 SME examinerships in Ireland. These 12 resulted in 753 SME jobs being saved.

Managing director of Hughes Blake, Neil Hughes said that figures for companies being wound up in Ireland are extraordinary.

He said that about 2,000 company insolvencies in Ireland this year have resulted in receivership or liquidation.

“99% of companies that find themselves in difficulty in Ireland go under, 99% are wound-up, to me this is extraordinary,” he said.

Mr Hughes said that about 22% of US companies facing difficulty apply for chapter 11, the American equivalent of examinership, in their local city halls.

In Britain, 16% of companies facing insolvency enter examinership.

As well as the barrier of cost, Mr Hughes said that the access to the commercial court, located in Dublin, is also a barrier to SME’s accessing examinership to save jobs and keep businesses trading.

A new provision to be introduced by the Minister for Jobs, Enterprise and Innovation, Richard Bruton in the companies bill will allow small businesses to apply directly to the Circuit Court to have an examiner appointed.

“Small companies will be able to apply to the Circuit Court for examinership so it will be cheaper and easier for businesses to restructure their debts, meaning that morecompanies will be able to do so.

“This will mean that more businesses will survive their current difficulties, meaning crucially that more jobs will be saved and more jobs will be created in this hugely important part of the economy,” said Minister Bruton.

Companies who e satisfy two of the following conditions: employ less than 50 people, a balance sheet not exceeding €4.4m and turnover of no more than €8.8m, will be able toapply to the Circuit Court.

ISME said that they have been lobbying for a number of years for an affordable examinership regime to be introduced.

ISME chief executive Mark Fielding said: “While we welcome the changes to the Companies Bill, which is scheduled for publication before the end of the year, it must be enacted as soon as possible to allow for these long awaited changes to be put in place.

“There is still a need for a form of ‘Examinership Lite’ for micro enterprises which should not have to be put through the rigours of the court system.”