This is an extract of our Insolvency & Rescue Process document, which we sell as part of our Irish Company Law: Financing, Insolvency and Rescue Notes collection written by the top tier of University College Cork students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Irish Company Law: Financing, Insolvency and Rescue Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
INSOLVENCY & RESCUE PROCESS
Examinership is founded in Irish Legislation, through adopted legislation in 1990 based on Chapter II in the United States, which was ultimately driven by foreign direct investment strategy. Now consolidated in Part 10 of the Companies Act 2014, along with adherence to the EU Directive 1023/2019 PRD. Ireland is one of the topic countries in
Europe whom advocate the use of rescue procedures, on foot of the "(implicit) dogmas of the current trend towards a business rescue culture within Europe"-Verdoes & Verweij
(2018), and this is important in particular given the rise of companies depleting as result of the current Covid-19 Global pandemic.
Key features of examinership are to protect enterprise and job creation as opposed to the protection of creditors, in term this seems to be a concept which is fully in favour of the company in question. Major distinction here is there examinership as opposed to the other processes, appoints an examiner to work for the company and not a particular creditor.
The process is initiated by an application to the court by a creditor, director, shareholder and so far as the central bank along with the company itself, with directors being the most frequent petitioner, to have an examiner appointed, prior to the 2014 Act it concerned applications to the High Court with appeals to the Supreme Court and Court of Appeal which was quite a costly excursion. Following the introduction of the Act, it can be seen that there is more accessibility for smaller companies and to avail of the appointment of an examiner, in the sense that now an application to the Circuit Court in regards to the turnover and size of the enterprise to extend the reach of examinership across the board.
Upon bringing an application to the court, it needs to be shown that the company cannot pay its debts, but that there is a reasonable prospect of survival, the inclusion of an INSOLVENCY & RESCUE PROCESS
independent report in this regard is required to support the claim that there is a reasonable prospect of survival which is provided for in s.511 of the legislation. The court must also be satisfied that a receiver has not stood appointed to the company for 3 consecutive days because if one has then an examiner cannot be appointed, which is contained in s.522 of the Act. If the court successfully appoints the examiner, the company gets entered into the protection of the court, which is a stay moratorium for 70 days. This is valuable for the company as it means that not one can no actions can be brought against the company by any creditor to enforce any debts, but no actions in general can be brought against the company within this period. The purpose of the stay is to reach a compromise with creditors. This compromise much be presented and accepted by each class of creditors by a simple majority. There is, however, the possibility of a cram down is also available upon those creditors who dissent against the compromise so the examiner can move forward with the compromise. It thus then moves on to the court for the court approval or a 'workout' with regards to the criteria presented in the legislation which highlights the fact that it must be fair and equitable and that the scheme cannot be unfairly prejudicial to any class of creditor.
On foot of this outline of examinership it is now relevant to deal with caselaw in the area and where issues have arisen with regards to the principles mentioned and other concerns regarding the legislation. Re Goodman International, which is a landmark case concerning the first examinership appointment in 1990, with the intention of rescuing
Goodman International the holding company of Allied Irish Beef Ltd. Here European banks had lent monies to the sum of 5OO million without security on foot of the export credit insurance scheme which in term fell through, making them unsecured lendors and the opportunity of meeting a compromise all the more easier. This case illustrates where
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