Examinership process saves 1,243 jobs in 2014

Improved access to the examinership process has seen a near-50% rise in the number of jobs saved in SMEs this year, according to new data.

The latest SME Examinership Index, published yesterday by chartered accountants Hughes Blake, shows that 1,243 jobs were saved in small- and medium-sized enterprises in 2014, a 49% increase on the 832 jobs salvaged, via the process, last year.

In the final quarter of the year, 154 jobs were saved via examinership. The success rate of firms emerging from the process still trading stands at 90% for 2014.

The introduction of legislation this year allowing SMEs easier access to the examinership process via the circuit court has been the main contributory factor.

The option of the circuit court route, rather than just the High Court, has lowered the average cost of examinership by an estimated 30% and enables struggling firms, with fewer than 50 employees, to enter the process.

The removal of the need to travel to Dublin has been an additional benefit to rural firms. Circuit court examinership cases are under way in the Donegal circuit court — relating to local construction services firm Henry McGinley & Sons Limited — and in the Dublin circuit court, with Fossett’s Circus.

According to Neil Hughes, managing partner at Hughes Blake: “Examinership has always been aimed at businesses which are fundamentally sound but which have been rendered insolvent due to large debts or unsustainable overheads.

“High retail rents continue to be a factor for small and medium businesses across the country. The fashion retail industry alone has seen a number of prominent players move to access examinership in the past quarter — Karen Millen, Warehouse, and Coast.

“By freeing companies from burdensome leases and in some cases writing off debts, they are empowered to continue to provide goods and services to local Irish communities and to breathe life into regional high streets. More importantly, employment is retained, along with the consumer spending it enables, resulting in a multiplier effect that benefits the economy at large.”

“The introduction of circuit court examinership has received a very favourable reaction on the ground. Local business owners have told us that the removal of the need to travel to Dublin has made examinership a possibility where they otherwise would have faced receivership or liquidation.

“It is also associated with lower costs and with a reduced requirement for the input of barristers, and we have found the reduction in cost is something struggling SMEs have welcomed with open arms,” Mr Hughes added.

In 2013, when large firms are included, examinership saved nearly 2,700 jobs, with 832 among SMEs. In 2015, the expectation is for a further rise in firms accessing the mechanism. “Set against the economic recovery we are experiencing as a country, the legacy debt weighing on small firms may be too much for many companies to be able to return to health,” Mr Hughes said.

“It is only after proactively addressing the debt burden head-on that such firms can truly begin to partake in the recovery, and examinership remains the most effective way of doing this in many situations as it also frequently pairs companies with new sources of capital.”