SCARP: Small Company Administrative Rescue Process
The SCARP provides a more affordable restructuring option for small and micro companies who would otherwise face liquidation. It envisages minimal Court involvement with the Process Advisor (McStay Luby) engaging directly with creditors and other stakeholders. The process involves the negotiation of a compromise with creditors e.g debt reduction or phased payments which in turn will facilitate the introduction of new investment, if necessary.
The objective is to secure a better outcome for all stakeholders by securing the survival of viable businesses.
The SCARP provides a more affordable restructuring option to Examinership for small and micro companies who would otherwise face liquidation. It envisages minimal Court involvement with the Process Advisor (McStay Luby) engaging directly with creditors and other stakeholders. The process involves the negotiation of a compromise with creditors (example) debt reduction or phased payments which in turn will facilitate the introduction of new investment, if necessary. The objective is to secure a better outcome for all stakeholders by securing the survival of viable businesses.
- Be unable or likely to be unable to debts
- Must not be in Liquidation
- Must not have appointed a Process Advisor or an Examiner within the last 5 years
- Avoid Liquidation and provide creditors with a better outcome
- Retain employees
- Retain control of the business
- Restructure Creditor debt
- Address onerous contracts
In order to start the process, the Company engages a licensed Insolvency Practitioner to act as Process Advisor (McStay Luby) and the Directors prepare a Statement of Affairs (SOA).
The Process Advisor reviews the SOA and issues a report confirming the Company has a reasonable prospect of survival.
In order to formally commence the SCARP, the Directors of the Company will call a board meeting within 7 days of receiving the Process Advisors report at which they will pass a resolution to commence the process.
The creditors are then informed of the process and are sent the SOA together with the Process Advisor’s Report. Creditors will also receive a Proof of Debt form which should be returned within 14 days. Creditors are afforded an opportunity to provide input to the Process Advisor and to disclose any facts they consider material to the process. The Process Advisor will notify excludable creditors (such as Revenue) if their debt is to be compromised.
The Process Advisor prepares a draft rescue plan which is an agreement between the company and its creditors to settle company debts.
No creditor may be unfairly prejudiced (e.g) creditors cannot do worse than in the event of the Company going into Liquidation. The plan must be in the best interest of the Creditors.
Creditors could be settled in a lump sum or paid over an agreed period of time.
By day 42 the Process Advisor must summon meetings of members and each class of creditor to vote on the plan. Creditors are invited to vote (having been provided with 7 days-notice) on the plan by day 49.
For the Rescue plan to be approved by Creditors there must be a 60% majority in number and a simple majority of value in respect of at least one class of creditors.
Just one class of Creditor needs to approve the plan for it to be binding on all creditors (this is known as cross-class cram-down)
If there is no objection to the plan and it is approved by creditors there is no requirement to obtain Court approval and the plan becomes binding 7 days after Statutory notices are filed.
After the plan is voted on there is a 21-day period in which Creditors can object to the plan. This is done by filing a notice of objection with the Process Advisor and also with the Court. The Court will then decide whether the plan is fair and equitable.
- The Company has not complied with a tax matter under the Companies Act 2014 or other legislation
- The Revenue Commissioners are conducting an audit
- The Company is party to an appeal concerning a tax matter
Excludable Creditors must notify the PA within 14 days of receiving notice of the PA’s appointment if their debt is to be excluded from the Plan.
- Creditors Voluntary Liquidation
- Informal Turnaround
- We will act as Process Advisor – We are licensed Insolvency Practitioners regulated by Chartered Accountants Ireland. We have acted as Examiner in some of the State’s largest financial restructurings and been in business for over 25 years
- Planning and Preparation – We will help you plan the SCARP prior to appointment
- Assistance to Creditors – We can advise and represent creditor companies regarding the suitability of proposed plan they may be involved in.
- We will explore the alternative options available