The SCARP process offers a valuable means of rescue for Small and Medium Enterprises who are experiencing short term insolvency. It provides SMEs with a cost effective option to restructure through a mixture of a debt write-down and new investment. The process has limited court involvement where creditors are engaged in the process and are supportive of a Rescue Plan. The process mirrors elements of examinership but in a simplified administrative content, thus reducing court involvement, making it potentially both quicker and cheaper.
Eligibility Criteria
For a company to avail of the new process the must meet the following eligibility criteria
- Be a micro, small or medium sized company with no more than 50 employees, with turnover not exceeding EUR12m, and a balance sheet not exceeding EUR6m
- Be unable or likely to be unable to pay debts
- Not be in liquidation nor has an order been made for the winding up of the company
- Not having used the process in previous 5 years
- No examiner has been appointed in the past 5 years
Benefits of availing of SCARP
The directors keep control of the company and it can carry on trading;
SCARP’s are cheaper than other insolvency rescue procedures like Examinership;
The termination of onerous contracts as well as leases may be possible as part of the SCARP proposal;
For SCARP to be proposed it must return the company to a better position and so is a better alternative to liquidation;
The Insolvency Practitioners’ fees are included in the arrangement and are provided for in the monthly repayment obligations;
Process Involved
Step 1 In order to enter the process, the company will engage an Independent Insolvency Practitioner to act as a “Process Advisor”.
The Process Advisor must have the same qualifications for appointment as a liquidator as under the Companies Act 2014. As with other insolvency procedures, the company’s existing Auditor/Accountant cannot act as Process Advisor for reasons of independence etc. SMEhelp.ie have a team of experienced Insolvency Practitioners and Solicitors for the provision of SCARP services.
Step 2: Prepare a Statement of Affairs
Once the requirement to enter the process has been identified and a suitable Process Advisor has been appointed, the directors of the company will, prepare a Statement of Affairs in a prescribed form.
Step 3: The Process Advisors Report
The Process Advisor will then then prepare a report on whether the company in their opinion has a realistic expectation of survival and whether a SCARP should be undertaken
Step 4: The Board Meeting
The SCARP is then formally commenced by the Directors of the Company calling a board meeting within 7 days of receiving the Process Advisors report to pass a resolution to commence the process.
Step 5: Process Advisor engagement
Creditors will then be advised of the process and will be furnished with a copy of the Statement of Affairs and the Process Advisor’s Report and a Proof of Debt form which needs to be returned within 14 days.
During the 14 day period creditors can make submissions to the process advisor and disclose any information they believe may be important to the process.
Step 6: The Process Advisors Rescue Plan
The Process Advisor having considered the Company’s financial situation and engaged with participants including directors, creditors and shareholders, will prepare a draft rescue plan.
The plan will essentially be an agreement between a company and its creditors to discharge company debts. The Rescue Plan can allow for the write-down of the company’s debts provided that it is fair and equitable and:
- No creditor may be unfairly prejudiced.
- Each creditor must be provided with a better outcome than in a liquidation.
- Different classes of creditors receive different treatment.
Step 7: Rescue Plan Approval
Once the Rescue Plan has been formulated, the Process Advisor must call a meeting of members and each class of creditor within 42 days of his/her appointment. Creditors are invited to vote (having been provided with seven days’ notice) on the plan by day 49.
The Rescue Plan will be approved by 60% in number, representing a majority in value of at least one class of impaired creditors at the creditors’ meetings. If there are no objections to the rescue plan within 21 days, then it becomes binding on the company, its members, and its creditors. Such approval of one class of creditor voting in favour of the rescue plan will result in it been binding on all creditors.
| Pre-planning | Day 1 | Day 5 | Day 12 | Day 42 | Day 49 | Day 70 |
|---|---|---|---|---|---|---|
| Process Advisor engaged to complete Process Advisory Report Pre Process Planning – Statement Of Affairs, projections, conditions for survival |
File notice with CRO, Court and Iris Oifigiuil Give notices to employees, members, Revenue & creditors |
Further notice to creditors, employees, Revenue Issue notification to landlords |
Reminder notice to any creditors who have not engaged Excludable creditors have 14 days to opt-out |
Issue notices for meetings of members and creditors including a copy of Rescue Plan | Rescue Plan filed with Court once approved Process Advisor must report to DPP / ODCE if any offence relating to the Company is identified |
Rescue Plan becomes binding if no objection filed within 21 days Issue notification of approval to interested parties, CRO and Court |
