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.
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
The rule effectively states that local authorities may not serve enforcement notices for an unauthorised development after seven years since the commencement of the development. The best way to describe this is that whilst proceedings cannot be taken regarding the development, it is still a blip on title as the proper planning permission was not obtained.Text Link
Mr Justice Denis McDonald ruled in the High Court this morning that FBD Insurance are to compensate the policyholders who took court action following FBD’s refusal to provide indemnity under their policy of insurance regarding business disruption cover.Text Link
The recent rise in GameStop’s value had nothing to do with the company itself. Instead, it came about as a result of a small group of dedicated speculators in a Reddit subforum called “WallStreetBets”. These people consciously planned to buy up GameStop stocks in order to boost the value because hedge funds like Melvin Capital, which had invested a significant amount of capital in financial instruments which only rise in value when GameStop’s value declinesText Link
If you want to sell your house quickly, there are a number of items you can prepare, prior to going sale agreed, which will speed matters up substantially.Text Link