Examinership is a legal process coming under increasing attention over the last several years, as the media noted a marked rise in the number of businesses seeking it. But what exactly is examinership? Is it right for your business? And what are the risks you need to know about? Here is your guide to examinership - a detailed view of what you need to know.
Examinership is a legal process coming under increasing attention over the last several years, as the media noted a marked rise in the number of businesses seeking it. But what exactly is examinership? Is it right for your business? And what are the risks you need to know about?
Here is your guide to examinership - a detailed view of what you need to know.
What is examinership?
Starting with the basics - what exactly is examinership? The process is uniquely found in Ireland (also recently Cyprus) and came about as a result of the Companies (Amendment) Act 1990.
You can consider examinership as a process that is court-supervised in order to aid the recovery of failing companies. When a company becomes insolvent, but there is a provable case that it could be potentially profitable, examinership allows that company to explore all available opportunities to save themselves.
A third party is appointed, often a financial professional such as an accountant, to act as the examiner. Their job is to provide a detailed review of the companies finances, future viability, and where possible to determine where potential investment or funding may be sourced. The examiner also has to ensure there are enough resources to continue trading throughout the examinership period - which can be a common stumbling block.
Why does examinership exist?
The examinership process is to allow potentially viable companies a "second chance" before going under. Generally speaking a successful business is of great value to the local community through continuing employment opportunities It also provides a revenue stream for the state in the form of taxes, etc. As a result of this, it can be argued that it is in everyone's interest that a savable business is prevented from falling into liquidation.
The examiner that is appointed will act in an advisory capacity to isolate problem areas within the company and identify potential paths to growth to ensure above all that the company has a reasonable prospect of survival after the process.
During examinership the company benefits from court protection, preventing the appointment of receivers and enforcement of personal guarantees for the examinership period. This means that the company's current financial situation and commitments can have an impact on whether or not court protection is granted.
What does the process look like?
To begin with, the High Court is presented with a petition by the company, its directors, shareholders, or creditors. A report is compiled by independent accountants to give a detailed overview of the current financial situation of the company, as well as objective projections regarding its potential for survival and viability.
The court has to determine that the company has a reasonable chance of survival, under section 5(b) of the Companies (Amendment) (No.2) Act 1999 before granting 70 days of court protection. This, however, is subject to judicial discretion and has the potential to be extended to 100 days total.
With the scheme's endorsement from company's creditors, the court can sanction the scheme.
What are the benefits?
The benefits of examinership are obvious, in as much as it offers a "second chance" for struggling companies to become financially solvent again. This means that it protects jobs, and keeps the company operating when otherwise it would have gone into liquidation. Instead it allows for new investment opportunities, credit agreements, trade relations, and avenues for trade to be explored with the benefit of court protection against liquidation or receivership.
The appointed examiner can bring a much-needed insight into improvements that can be made throughout all elements of the company's structure, both internally and externally. This can have a marked improvement on the company's financial health, post examinership.
Is there anything to be wary of?
Examinership is a great path for any company that needs to avoid liquidation, however, it doesn't come without its risks and the process is not suitable for every company. It's important that you're fully aware of those risks, before attempting to begin the process.
The first is that there's no guarantee that the process will be sanctioned by the courts. The court has to make a determination on the company's viability through information provided by an independent third-party report.
Another potential hurdle is cost. Examinership proceedings can be expensive however applicable costs can be quantified prior to the application which is hugely important for businesses that are clearly already experiencing difficulties with their finances.
Finally there is no guarantee that the Examinership process will be successful. It is merely a process that allows some breathing space for a potentially viable company to explore more options to make itself profitable again. If there are no clear paths to new profit, investment, or credit being poured into the business, then the business could still risk going into liquidation at its conclusion.
Is examinership right for you?
As with all legal processes, examinership is not suitable for every business. If your business is facing liquidation or receivership, it is definitely something to explore.
To understand whether your business could stand to benefit from the process, it's best to get in contact with a legal professional. with specific expertise in this area If your business is struggling financially, examinership could help you find the path to continuing trading. However it's a potentially expensive process that offers no firm guarantees, so you need to be fully aware of what you're getting involved in before taking the next step. To get that information, you need professional legal advice.
Our team of legal specialists can help provide you with more in-depth information about examinership, and offer alternatives if it's not suitable. To learn more about examinership and if it's suitable for your business, contact us today.
The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 was enacted on the 23rd April 2021. This piece of legislation transposed the EUs Fifth Anti-Money Laundering Directive (5AMLD) into Irish law. In terms of virtual asset service providers, more commonly referred to as VASP's, this means that they are now required to comply with Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT)obligations and must register with the Central Bank.Text Link
Non-fungible tokens (NFTs) are really taking off in mainstream markets. An NFT is, essentially, a digital collectible. They can represent things, like real-world assets, or they can be things in themselves, like music or art. Their value comes from the fact that they are digitally unique. They exist on a blockchain and, whilst music as an example can be downloaded by anyone, an NFT is explicitly recorded as having a single owner.Text Link
Planning injunctions. We at Cosgrove Gaynard Solicitors have been involved in many such applications on behalf of clients. In addition, we have recently succeeded in having an interim order removed in circumstances where it was preventing our clients from completing a development to their property for an inordinate amount of time.Text Link
Conveyancing Quotation - Questions to ask your Property solicitor. Purchasers are understandably price conscious and so often shop around for quotations when buying a home.Text Link
As part of the Digital Finance Package released regarding cryptocurrencies in Europe ,it is proposed to regulate crypto assets and markets in crypto assets (MiCA) and to provide definitions of crypto assets and token subcategories. It will also set out rules for digital asset custody and capital requirements.Text Link
A smart contract is a legally binding contract that automatically executes some or all of its obligations via a computer program. In this blog, we look at smart contracts and consider how they fit into Irish law.Text Link