Small firms to be allowed seek low-cost examinerships
Published 29/11/2011 | 05:00
Thousands of smaller firms will be able to seek examinerships for the first time at low cost under changes that are being planned by the Government.
Examinerships, which give troubled companies protection from their creditors, are mostly used by larger companies due to the costs involved. Many smaller firms simply try to struggle on with their debts or go into liquidation /receivership.
A company itself can apply to be put into examinership, but once a firm exceeds a certain threshold of debt, its examinership case can only be heard in the High Court, meaning it is highly prohibitive on cost grounds for debt-ravaged firms.
But Jobs, Enterprise and Innovation Minister Richard Bruton is examining these thresholds which should allow more examinerships to go before the far cheaper Circuit Court. Mr Bruton is going to look at changing the thresholds in the context of the Companies Bill.
This bill will group together existing Irish company legislation dating from 1963 and introduce several company law reforms.
Mr Bruton said in a new parliamentary reply that this bill was moving through his department.
"I am positively disposed to substantially increasing this current threshold in the context of the forthcoming Companies Bill which is currently being progressed by my department in conjunction with the office of the parliamentary counsel,'' said Mr Bruton.
While the offer of a cheaper examinership process will be welcomed by small business organisations, creditors to these firms will greet the idea with some nervousness.
In most cases the senior secured creditors are banks and they may have to forgo some of the interest they are owed, while the principal they are owed is repaid via instalments.
Preferred creditors like the Revenue Commissioners are usually paid a substantial sum, but unsecured creditors usually receive very little. This group often objects to examinerships, but is rarely able to stop them if senior creditors are in favour.