We are delighted to see that yesterday 7 December 2021, the Companies (Rescue Process for Small and Micro Companies) Act 2021 was commenced.
The process is designed to make rescue more affordable and accessible to small/micro companies that are in distress but fundamentally viable. The Department of Enterprise, Trade & Employment has launched a dedicated web page in relation to the process. The Commencement Order, associated regulations and prescribed forms will be available in the coming days. Key features of the process are:
- Available to small and micro companies (as defined by the Companies Act 2014)
- Commenced by resolution of directors rather than by application to Court
- No automatic stay on proceedings against the debtor
- An insolvency practitioner (who must be qualified to act as liquidator under the Companies Act) called the Process Adviser, is appointed by the debtor to begin engagement with the creditors and prepare a rescue plan.
- Creditors are invited to vote on the rescue plan by day 49 of the Process Adviser’s appointment. The proceedings in relation to the required meetings of creditors are in keeping with existing provisions of the Companies Act
- The rescue plan is binding without Court approval provided at least one impaired class of creditors vote in favour of the plan and no creditor raises an objection to the plan within a 21 day cooling off period following the vote. A rescue plan shall be deemed to have been accepted by a class of creditors when 60% in number representing the majority in value of the claims in that class vote in favour of the rescue plan. As with examinership the process provides for cross class cram-down. This means that where one class of impaired creditors vote in favour of the rescue plan, it can be imposed on all classes of creditors
- Where an objection to the rescue plan is raised the rescue plan can only become binding when approved by Court. This acts as a safeguard for creditors.
- Should be concluded within a shorter period than examinership. Examinership can currently run for up to 150 days, whereas the proposed new process seeks to arrive at conclusion within 70 days, subject to extension where necessary for Court applications
- Permits repudiation of contracts by the debtor. The provisions regarding repudiation of contracts are a significant departure from the equivalent provisions in examinership. The Process Adviser can initiate repudiation of contracts without Court approval, subject to certain notice obligations and the right of claimants to object to the proposed repudiation
- Provides that State and Employment related creditors may be excludable from the process. This means that those creditors may determine to “opt-out” of the process on the basis of specified statutory grounds