All meetings can be held virtually, if requested by the directors
SCARP – New Rescue Plan for SME’s
The government has launched a scheme that is designed to help small companies that are in a precarious position regarding its debts due to the Covid-19 pandemic, or indeed suffering from any sudden shock affecting the viability of the company.
The Small Company Administrative Rescue Process (SCARP) mirrors key elements of the existing Examinership process, but at sharply lower costs and bureaucracy, reducing court oversight resulting in efficiencies and lower comparable costs. The key question is: Is the company viable if those pressures were dealt with?
Key benefits of the SCARP are a follows
- Partial or full write-down of trade creditors and suppliers,
- Partial or full write-down of Banking and other financial creditors
- Partial or full write-down of State creditors including the Revenue Commissioners
- The SCARP allows the directors to remain in charge of the company
- The SCARP process is designed to allow companies trade through the difficult times
- The process is far cheaper and less onerous than the Examinership route
- The company avoids liquidation.
In summary once the company has chosen its Process Advisor, usually an Insolvency Practitioner, the next job is to prepare a Statement of Affairs which should show the company in financial difficulties. The Process Advisor then examines the company and prepares a report on the viability of the company.
Once this is done, all creditors are written to and informed about the company entering the SCARP process. Creditors will also receive a Proof of Debt form which needs to be sent back within 14 days creditors at this stage can inform the Insolvency Practitioner of their circumstances.
The most important element is the Rescue Plan is that it must be demonstrated that this plan is in the best interest of creditors under the circumstances. This plan will involve a write down of creditors but crucially it must present a better return for creditors that going into liquidation. The plan if accepted will involve the company to repay the debts included in the process over a period of up to three years.
This plan is presented to the creditors for approval, and they are entitled to decide on the plan. 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. Such approval of one class of creditor voting in favour of the rescue plan will result in it been binding on all creditors.