What is Examinership?

Examinership is referred to as the period of protection given by the Court to a company for a period of seventy days that is extendable up to 100 days.   Throughout this period of Court protection, creditors are restrained from pursuing any legal action against the company.

" The aim of this scheme is to rescue a company from ultimately being wound up "

An examiner is appointed by the Court to prepare, together with others, plans for a scheme of arrangement. Such plans are then presented at statutory meetings of all members, creditors, and eventually to the High Court for confirmation.   Once confirmed by the High Court, this scheme is binding on the company and all its members and creditors.  The aim of this scheme is to rescue a company from ultimately being wound up.   It is important to note that during the protection period, the day to day business of the company remains under the control of the directors of the company, subject to certain rights of the examiner.

What are the conditions necessary for the appointment of an Examiner?

The Companies Amendment Act 1990 sets out the conditions necessary for the appointment of an Examiner:
(a)  There must be a reasonable prospect of survival of the company as a whole or any part of its undertaking as a going concern.
(b)  The company must be insolvent.
(c)  The company must not be in liquidation.
(d)  If a receiver is appointed, he must not have been appointed for more than three days.

How are Examinership proceedings commenced?

Examinership proceedings are commenced by filing a petition in the High Court.   It must be accompanied by independent accountant’s report

Who can file a petition?

Section 3 of the Companies Amendment Act 1990 sets out who may file a petition:
(a)  The company itself.
(b)  The directors of that company.
(c)  The creditors of the company.
(d)  Members of the company representing at least one tenth of the paid up capital carrying voting rights at a meeting.

What is the report of the independent Accountant?

Pursuant to Section 3 (3A) and (3B) of the 1990 Amendment Act, the petition to the Court to appoint an examiner must be accompanied by a report of an independent accountant.   This independent accountant can be an auditor of the company or a person qualified to act as an examiner.   This report must contain information including the following:

1. Details of the directors of the company.
2. A Statement of Affairs.
3.  Opinion as to whether the company as a whole or any part of its undertaking would have a reasonable prospect of survival as a going concern together with a statement of the conditions necessary for that survival.
4.  Opinion as to whether a scheme of arrangement will offer a reasonable prospect of the survival of the company as a going concern.
5.  Opinion as to whether an attempt to continue the whole or any part of the business would likely to be more advantageous to the members and creditors as a whole with no winding up.
6.  Details of the funding required to enable the company to continue trading during the protection period and the sourcing of that funding.
7.  Recommendations as to which liability is incurred before the petition should be paid.
8.  An opinion as to whether it would be beneficial to appoint a creditors committee.

What restrictions apply during the Court Protection period?

Section 5 of the 1990 Amendment Act outline such restrictions:
1.  No proceedings for the winding up of the company may be commenced.
2.  No receiver maybe appointed.
3.  No repossession can be affected in pursuit of any mortgage, charge or lien.
4.  No proceedings maybe pursued against guarantors or others liable for the debt of the company.
5.  No proceedings of any nature any be commenced against the company without prior leave of the Court and the Court can order that any pending proceedings be stayed. 
6.  Where a receiver or a provisional liquidator has been appointed to the company the Court may order that such receiver of provisional liquidator cease to act or act only in relation to certain specified assets.  

Extra Territorial Effect of the Examinership and Schemes of Arrangement

It is important to note that the automatic stay provided by the Court Protection, and the terms of the Scheme of Arrangement once confirmed by the Irish Court, are enforceable in every EU member state except Denmark.