331 jobs in SME sector saved by examinership in second quarter

The second quarter of the year saw a significant increase in Circuit Court usage by SMEs applying for examinership.

Latest data from chartered accountants Hughes Blake shows that 331 jobs in small and medium-sized companies were saved between the beginning of April and the end of June, through struggling SMEs opting for examinership when seeking court protection. In the year to date, just over 700 jobs have been saved in this manner.

The Government last year introduced new legislation making it easier for SMEs to apply for examinership. By allowing them to apply via the Circuit Court, rather than the High Court in Dublin, costs can be cut by 30%. It also allows firms with fewer than 50 employees to enter the process.

Companies such as Transaero Engineering and the Odessa club and restaurant in Dublin were among examinerships during the latest quarter.

The period was also notable for being the first time in which Circuit Court appointments outnumbered those issued by the High Court.

Hughes Blake said the data should serve as a “wake-up call” to struggling SMEs.

Circuit courts in counties Galway, Clare, Dublin, and Waterford granted examinerships in the past three months, but many jobs are still being lost via receivers being appointed and firms being liquidated; as legacy debts continue to weigh on SMEs, despite the wider economic recovery.

“The findings of the index will be a wake-up call for some,” said Hughes Blake’s managing partner Neil Hughes.

“We would all prefer to think that the rising tides we are seeing in the Irish economy have lifted all boats. But the fact is that many SMEs have been unable to benefit from the upturn because of legacy debts.

"The Central Bank has pointed to €22.6bn in impaired SME debt, and while we are seeing welcome steps being taken to address the mortgage arrears crisis, the plight of the heavily indebted SME has remained largely under the radar.

“The recent Clerys controversy and loss of jobs has starkly illustrated the risks many businesses face where their secured loan has been sold on to a private equity fund that has no long term interests in Ireland.

“Not every company is suitable for examinership, of course — it’s really made for companies which provide strong local employment and provide goods or services to the community where they operate.

"It gives companies which would have a healthy trade if freed from the burden of debt or overly high rents a second chance, and preserves the employment they offer.

"It would be very positive to see more firms move to enter the process before a creditor moves against them, thereby triggering a crisis.”

Earlier this quarter, the Government’s new early-warning system to red flag jobs in jeopardy in the economy was outlined.

Mr Hughes observed that the move was a welcome one and noted that it will be interesting to see what role it plays in helping to identify troubled SMEs as it comes into use this summer.

“It would be really be helpful to know which areas of the country and which industries will see companies close their doors so that preventative measures could be entered into by individual companies,” said Mr Hughes.

“In rural areas, losing an employer can mean devastation for local families and whole communities as there is no guarantee of a company coming to set up in the same location. If the warning was sufficient, examinership could be deployed by the affected firms in good time.”