Cosgrove Gaynard Solicitors

Examinership

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Examinership basically provides for a court enforced moratorium on any action that may be taken by a creditor for a set period of time during which the examiner will attempt to restructure the company.

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The purposes of the examinership is to facilitate the restructuring of potentially viable companies which are or are nearly insolvent.

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An examiner is appointed who is in charge of putting proposals for a scheme of arrangement in place between the company and its creditors. It should be noted that day to day operations throughout the protection period will remain with the directors and management of the company.

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The process begins by way of petition to the High Court to nominate an examiner. It is accompanied by a report from an independent accountant which will contain a statement of affairs of the company and an opinion as to whether the proposals offer a reasonable prospect of survival of the company.

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The moratorium on any creditor action, as we have called it, begins when this petition is filed in the High Court. A petition can be filed by the company, directors, shareholders (holding at least 10% share capital) or creditors and is done on an ex parte basis ie without notice to anyone.

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If
appointed, the examiner has a fixed period of 70 days (which may be extended to
100 days if required) within which to prepare a scheme of arrangement. This
must be approved by at least one class of the company’s creditors. The scheme
is then presented to the Court, which has discretion as to whether it will be
approved.

Proposals will generally involve fresh investment and/ or writing down of debt. From a creditors point of view, any writedown of debt by an examiners scheme will generally not leave them in any worse position than if the company had been liquidated or placed in receivership. The examiner requires 50% plus one in number and value of a creditors meeting in favour of the scheme of arrangement before he can seek the courts approval. At hearing the court will hear from creditors who vote against the scheme.

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If the court decides to confirm the scheme of arrangement, they become binding on the company from a date set by the court.

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Advantages of Examinership

•  The moratorium on creditor action commences on the filing of papers.

•  There is no secured creditor veto

•  The timeline is relatively fast with the maximum period being 100 days (which can only be extended in   exceptional cases)

•  The threshold for creditors approval is low ie 50% + in one class of creditors

•  If successful, the scheme is binding on all creditors whether they have voted in favour or not and whether they are secured or not.

•  Onerous contracts can be repudiated.

For further information on examinerships please contact Cosgrove Gaynard Solicitors on 01 234 0044 or by email at info@cgsolicitors.ie .