Corporate structuring options for COVID-19-hit businesses in Ireland

Examinership

Examinership is a debtor-inpossession process available to potentially viable companies that are unable to pay their debts or about to become so. The central feature of Examinership is the protection of jobs through the court appointment of an examiner and the placing of the company concerned under the protection of the court for 70–150 days. While the company is so protected, it may not be wound up, a receiver may not be appointed, and generally debts or security may not be enforced against it.

During the period of protection, the company may, subject to court approval, disclaim onerous contracts. Losses to third parties consequential upon the disclaimer will be treated as unsecured claims. This feature has been frequently and successfully invoked by businesses, including retailers seeking to shrink their real estate footprint and/or rental liabilities.

The Examiner is tasked with formulating a scheme in which creditors are offered a fraction of what they are owed, and the company continues to trade without those liabilities. If at least one class of impaired creditors has accepted the proposals, the court may be asked to sanction the scheme.

Schemes

As an alternative to Examinership, a Scheme is a time-effcient and nimble tool that companies can use, subject to court approval, to implement an insolvent restructuring. At least 75% in value of creditors in attendance at the required meetings must approve the Scheme, after which a confirmatory High Court application is made. It is sometimes regarded as a tool best suited to restructuring one type of creditor, e.g. financial creditors.

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