Corporate Restructure & Insolvency Bill Services
Companies in financial difficulties often find that their problems can intensify more rapidly than they or their bankers could envisage.
A lack of sufficient cash resources is the reason most businesses fail, rather than a lack of profits. Cash flow shortages can quickly have an adverse effect on production, turnover and eventually goodwill.
Our insolvency team is available to advise on the extent of and the solution to a company’s problems. Where possible, we can provide a plan for the rescue of a company’s business.
We have extensive experience of the process of Examinership which can provide a vehicle for corporate recovery for certain companies in difficulties. We provide a professional, cost effective service which offers practical business recommendations and solutions in clear concise reports.
When it is clear that a company’s difficulties are insurmountable we can provide clear advice and recommendations on the most effective form of winding up, including the organisation and hosting of creditors’ meetings.
A procedure unique to Ireland, examinership is Ireland’s formal court-supervised corporate recovery process.
The appointment of an examiner is an option available to insolvent companies in Ireland since 1990. Examinership was introduced to enable insolvent companies to explore all opportunities to provide for their survival in an inclusive process that involves the appointment of an examiner (usually a practicing accountant) to shepherd an insolvent company through a recovery process involving management, lenders, creditors, suppliers and staff.
We have significant experience in recently faciliating companies through this process from the outset to conclusion with the court approving a scheme of arrangement
The Purpose of Examinership
Examinership is not about maximising return in a -asset recovery exercise. The protection of the High Court through examinations has been responsible for the saving of many thousands of jobs in Ireland in the past number of years and clearly, a credible and robust formal recovery mechanism has a crucial role to play in Ireland as the economy suffers in what appears may be a prolonged recession.
Formal Developments: The Independent Accountant
The 1999 amendments to examinership legislation in Ireland had already raised the bar considerably in relation to the types of companies that qualify for the procedure. In particular these amendments introduced the Independent Accountants Report (“IAR”) which is now a necessary part of the proofs to appoint an examiner. The IAR evidence must demonstrate to the Court the “reasonable prospect of survival” of the company.
Following the questioning of the role of the auditors in the preparation of the IAR by Justice Kelly in refusing the first Vantive / Zoe application in July 2009, it seems that the practice of a company’s own firm of auditors preparing the IAR is likely to become increasingly a thing of the past.
In the period 1990 to 1999, the information in what is now the IAR was included in the first report of the examiner to the Court, i.e. a report prepared by someone who had no prior professional relationship with the Company. Notwithstanding the provisions of the 1999 Act, a strong argument can always be made that the company’s own accountancy/audit firm is not completely independent when it comes to the petition. The reasons for this are clear: if the petition fails, at the very least that firm stands to lose their audit client and possibly whatever WIP they have accumulated in relation to ongoing work for the client. They therefore have a vested interest in the petition’s outcome and could be easily perceived to be conflicted.
The Funding of Schemes of Arrangement
Some of the most rapid developments in examinership have occurred in the funding of schemes of arrangement. The finding of fresh investment for the insolvent company is rightfully seen as a key part of the process. Indeed, it is common now at the initial petition stage of an examination for some form of evidence to be made available to assist the Court that at least one investor is considering investment to facilitate the company coming out of examination. Examinerships can also be funded from new borrowings such as invoice finance or the sale of non-core assets of the business.
Raising the Bar
A tightening of examinership practice that leads to increasing success statistics and the raising of the bar for companies to both qualify for and successfully emerge from examination should be hugely beneficial in the long run in restoring the confidence of Irish business people and secured creditors in all of the positive aspects of Irelands formal corporate recovery process.