Thursday 20 June 2019

Examinerships still unpopular despite efforts to cut red tape

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Gavin McLoughlin

Gavin McLoughlin

EFFORTS to boost take up for examinerships appear to have failed, with insolvent Irish firms shying away from the process despite the chance it offers them to continue trading.

Just 3pc of insolvencies were examinerships in 2018, the same figure as in 2017, according to figures compiled by Deloitte.

Deloitte said the level of examinerships was unexpectedly low. Examinership gives an insolvent firm a 100-day grace period from its creditors, within which time it can seek to come up with a scheme for survival.

"Given the overall improvement in the economy and the increased availability of risk capital, the level of examinership appointments continues to remain unexpectedly low," Deloitte said.

"This is particularly noteworthy when one considers that the mechanism has in recent years been more accessible to company directors through a less costly and more efficient circuit court application process than had previously been the case."

One of the reasons companies may shy away from examinership is that it can eat up more of the capital due to expenses. It involves having an examiner appointed by a court, and then having the court approve any survival scheme the examiner draws up, which requires legal costs.

David van Dessel, a partner at Deloitte, said that though it might be more expensive, examinership is the best way to save a business.

Michael McAteer, an insolvency expert and managing partner at Grant Thornton in Ireland, said examinership may not be suitable for all insolvent firms.

"It can't be used just to get a better return for creditors, it needs to be because the business itself has a unique selling point". PJ Lynch, of insolvency practitioners PJ Lynch & Co, said that in many cases entrepreneurs prefer to liquidate an insolvent entity and move on, rather than go through a drawn out process.

Irish Independent

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