Small Company Administrative Rescue Process

Smith & Williamson’s Restructuring & Recovery team has extensive restructuring experience across a range of sectors helping viable companies to continue trading as going concerns — preserving goodwill, protecting jobs and maximising returns for creditors.

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The need for a suitable rescue mechanism for small companies which is less costly than Examinership, and more practical and effective than a Scheme of Arrangement, has long been recognised. As part of the Government’s response to the economic impact of the Covid-19 pandemic, a new process has been introduced with the insertion of Part 10A “Rescue Process for Small and Micro Companies” into the Companies Act 2014.

What is SCARP?

SCARP is a statutory administrative rescue process specifically designed for small companies. Representing a true “Examinership Lite”, the process is designed to limit court involvement. It operates over a shorter timeframe than Examinership with the intention of reducing costs and facilitating the survival of insolvent but viable small companies as going concern. 

Requirements and suitability

To be considered for SCARP the company must meet a number of criteria including:

  • Small and micro companies — As defined by the Companies Act the company must meet two of the following three criteria (a) turnover less than €12m, (b) net assets less than €6m or (c) less than 50 employees.
  • Insolvent (or likely to be so) — The process is for companies in financial distress which are unable to pay their debts as they fall due.
  • Reasonable prospect of survival — A professional Insolvency Practitioner known as the “Process Advisor” is required to conclude that the company has a reasonable prospect of survival if the process is utilised.
  • Other — Including that the company must not have utilised the process or Examinership in the previous five years and that no winding up resolution has been passed.

Key features of SCARP

Key features of SCARP include the following:

  • Administrative process — As indicated by the name, SCARP is designed to be an administrative process (as opposed to a court process). It is initiated by the company, overseen by a Process Advisor and the rescue plan is presented to creditors for approval at specially convened meetings. Should no objections or disputes arise any court involvement will be very limited.
  • Process Advisor — The process is overseen by a professional Insolvency Practitioner who is suitably qualified to act. The role involves reporting on the company’s viability and suitability for the process, communicating with creditors and other stakeholders, formulating a rescue plan and arranging creditors’ meetings to secure approval of the plan prior to implementation.
  • Protection — Unlike Examinership the company is not given automatic protection from creditor enforcement action, although the option to apply to the court for such protection is available to the company or Process Advisor if required.
  • Rescue plan — The rescue plan is likely to include new investment into the company and a write down of creditors in order to facilitate its survival and return to solvency.
  • Approval/Voting — The rescue plan is binding on the company, its members and creditors if accepted by at least one class of impaired creditors. Acceptance is achieved if 60% in number and a majority in value of that class to vote in favour. Creditors may, subject to specific grounds, apply to the court to object to the plan.
  • Timeframe — Should no disputes arise the Process Advisor is required to convene meetings of creditors within 49 days, and should the rescue plan be approved and no objections are raised, the plan comes into effect 21 days later – a maximum of 70 days in total.

Other aspects

  • Excludable debts — Certain State creditors such as the Revenue Commissioners and the Department of Employment Affairs and Social Protection (in relation to employee claims) are permitted to exclude themselves from the process, so long as certain grounds for opt out exist (e.g. a poor compliance record). If no request to be excluded is received within the 14-day notice period, the liability will be included in the process in the relevant class.
  • Repudiation — It may be necessary to repudiate an onerous lease to facilitate the survival of the company. The process facilitates this through either: (a) a court application to repudiate the lease/contract (similar to Examinership) or (b) an administrative procedure to include the repudiation in the rescue plan.
  • Court involvement — As noted above the process is designed to limit court involvement. However, the court may have to be involved in certain circumstances including: (a) to replicate Examinership protections or to stay proceedings, (b) to remove a receiver (if appointed for less than three days), or (c) to rule on any objection to the rescue plan or fees. The Process Advisor is required to nominate the Circuit or High Court as the relevant jurisdiction at the start of the process. The 70-day time limit may be stayed while any matter is being adjudicated on.
  • Process failure — If at any stage the process fails, e.g. if the Process Advisor considers that the company does not have a reasonable prospect of survival or if a rescue plan cannot be formulated and approved, the Process Advisor must notify relevant parties and recommend next steps which may include winding up. Additionally, if an objection is upheld by the court, the company may be wound up.

Why Smith & Williamson?

Our Restructuring & Recovery team has extensive insolvency experience gained through managing numerous restructurings of private and public companies across a range of sectors and industries. We are regulated by Chartered Accountants Ireland to carry out insolvency assignments. Consequently, whether acting as Process Advisor or assisting creditors you can be assured each SCARP is managed in accordance with the highest professional standards.

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For more information, please contact:

Stephen Scott, Head of Restructuring & Recovery Services
t +353 1 495 9568

Harman Murtagh, Senior Manager,
Restructuring & Recovery Services
t +353 1 495 9288


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